Sunday, April 12, 2015

Agriculture Supply Management - Addicted Folly

Supply Management & the Trans-Pacific Partnership (TPP)

Supply Management is showing as an inhibiting factor in Canada’s participation in the TPP, it has been an inhibiting factor in the DOHA trade talks and it played in our trade talks with the EU and it has been a bane at the WTO. Tallying the overall cost to our economy due to lost trade opportunity is outside the scope of this discourse; however, it is substantive, because the reduction in trade due the presence of Supply Management (SM) in the agriculture sector reaches beyond just agriculture. It is reported, for example, the SM is threatening Canadian participation in the TPP, which represents access to a market of 800 million people. At other international forums, SM has been an inhibiting factor – third world countries want access to our the “rich” West's food market and the West is being stubbornly obstructive; paradoxically, now, the expanding middle class in the “third world” countries is one of Canada’s biggest opportunities.

It is worth noting as well, that if you're unwilling to support the end SM for access to trade internationally, then do it for domestic reasons.  Each Canadian household subsidises the dairy industry in the amount of $260 / year, for most households, this is an imposition, for low-income people it is a burden.  Please also, support the end of SM so that we can have a healthy, vibrant primary food sector that is rationalised to the market and that is accessible to everyone.  The present SM regime in Canada is very obstructive to new entrants, and as such, retards the innovation for the respective sectors.  In the case of the BC Dairy Milk Marketing Board, for example, access to the industry for innovative production, process or new markets is grossly retarded – worse, however, is that the market share for primary dairy products has stagnated and is losing ground against products that are unaffected by SM.  All are better off if the industry operates in response to the market.

There is no question that SM regimes must go, they simply are burdensome to manage, please examine any of the SM regimes. I have examined the Milk SM regime, my conclusion is that, domestically alone, the SM regime is detrimental – TO THE INDUSTRY – as well as the rest of Canadians; it is clear that on the world trade front they are an inhibiting factor and very costly to our economy. The question if SM should go, but, how.

The Government of Canada & the provincial governments have developed, in most cases, a quota system – quota is, in essence, a permit to produce a given amount of product for a predetermined sale price. Quota when originally allotted to producers was allotted for free and was never met to accrue value – of course, the right to access a market garnered value and of course quota began to be traded. Eventually, many boards set up quota exchanges to manage the trade of quota, this was done under a government legislated regime.  There is no argument that quota has value, there is no argument that government has recognised that value and there is no argument that government legislated and by extension, forced participation in the system. Farmers have invested heavily in the system, for many, quota represents more than 50% of their net worth – government has an obligation to ensure that farmers have a transition strategy the recognises this reality.

We have quantified the cost to each household of $260 per household per year to support SM now. We can quantify the degree of benefit we will garner from free trade; we can quantify the net benefit to the taxpayer that flows from fee trade agreements. In that mix is a means to fairly remunerate farmers for relinquishing an asset and facilitating an orderly transition to a free market operation. THIS IS RIGHT AND FAIR, a byproduct of a clearly published policy on the transition that has Quota market value at the heart of it is, farmers will offer less resistance.  Conversely, there needs to be a clearly communicated benefit to the public, that shows how they benefit from the arrangement.

The time for hesitation is through, we need to act, we need the change – let’s get on with it.    

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