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A Sensible Solution to Supply Management

Tue, September 25, 2018   |   Author: Ron Gray   |   Volume 25    Issue 39 | Share: Facebook | Twitter   

Newspaper and broadcast commentaries—especially now, during the NAFTA negotiations—make frequent references to Canada’s supply management system, blaming it for Canada’s higher-than-US prices for milk, eggs and poultry, and for being a stumbling block in the NAFTA negotiations.

But there’s a solution to the problem that would eliminate the alleged “subsidy,” and still protect Canada’s domestic food production from gigantic, predatory producers across the line.

We need to defend domestic producers, because there are single producers in the United States big enough to supply a whole province’s market at low cost; that could drive Canadian farmers out of business, and thus make Canadian consumers dependent on foreign suppliers—who could then charge even higher prices than we now pay!

This cannot be said strongly enough: A nation that cannot feed itself is no longer a nation—it becomes a colony of the nation that supplies its food.

But the deleterious element of supply management is not the system itself, but the commodification of quota; and for NAFTA partners, tariffs to balance the prices.

Over the years, the cost of quota has risen to become one of the biggest input costs for a Canadian dairy, egg, or poultry producer. Indeed, the cost of quota can rival the cost of the cows to produce the milk, or of the land to feed the cows. In fact, at an approximate price-per-cow cost of about $25,000 to $42,000 (it varies by province) it may represent up to 75% of the start-up costs for a new dairy farmer.

Also, for producers supplying the market today, the value of their quota is often a major element in their retirement plans.

The solution is to de-commodify quota: for the marketing boards to buy back quota at current market value, and then lease it to producers at nominal cost. This single step would bring Canadian foods down to levels competitive with American producers’ farm-gate prices.

To reduce the the one-time cost of a quota buy-back, the payments could be staged over the number of years to each producer’s anticipated retirement.

But there’s another very important reason for restricting imports of American dairy products: pure Canadian milk does not contain recombinant bovine growth hormone (rBST), as much of the American product does. So there are non-tariff health reasons for retaining a quality restriction on dairy imports; with quota decommodification, this benefit can be kept in place, still at competitive prices.

Better quality; lower cost; health benefits; and protection of domestic food production: CHP’s supply management plan is a win-win-win for consumers, for farmers, and for the nation.

For Better Solutions, join, support, and vote CHP Canada.

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