New rules lower cheese prices but reinforce supply management

It was a defensive tweak.

dominos pizza

A sunny prospect greeted pizza lovers on June 1. It was the day the Canadian Milk Supply Management Committee introduced a new pricing scheme for a very narrow band of cheese. Henceforth, mozzarella bound for fresh pizzas, but only in restaurants, was available at a new, lower cost. But for foes of Canada’s Byzantine supply management scheme, it was a false dawn.

The new mozzarella rules seem unlikely to weaken marketing boards’ grip on dairy products or anything else, say experts. Indeed, the opposite might be true: the new scale for mozzarella, they believe, is more an effort to shore up the system than a first step toward taking it down. “This was a defensive tweak,” says Michael Hart, a professor of trade policy at Carleton University and former Canadian trade negotiator. “It was a minor technical amendment sold as if something big had been done.”

The Canadian Dairy Commission approved the new category—which applies exclusively to mozzarella used on pizzas in restaurants—only after pizzeria owners found a way around the current system, which includes strict domestic quotas and high import tariffs. By ordering pre-made ingredient packs with pepperoni and cheese from the United States, some big chains were dodging the cheese tariff. The new price for pizza mozzarella makes those packages less competitive to use and, theoretically, dulls that threat to the Canadian quota system. “This is just another hole in the dike that they’re attempting to plug,” says James McIlroy, who helped negotiate the Canada-U.S. Free Trade Agreement in the 1980s.

Max Rimaldi, who owns the two high-end Pizza Libretto restaurants in Toronto, says his cheese supplier told him he should expect 10% to 15% savings once the new pricing category is in place. That kind of discount should put restaurant owners on a more even playing field with Canadian manufacturers of frozen pizza, who long ago carved out their own special deal on cheese. What it won’t do is give Canadians anything approaching a real free market for dairy products.

For now, McIlroy believes, there’s no political will to take on supply management in Ottawa. “If you speak to politicians privately, they all agree that the system is nuts,” says Hart. But in public, the major federal parties are unanimous in their support for the status quo. That doesn’t mean the system will last forever. McIlroy believes it will eventually crumble, as enforcement gets harder and trade partners push for more access. It’s just that changes, when they do come, will come as this one did: grudgingly, one at a time and with as little regard possible paid to the interests of the Canadian consumer.