Supply Management and the Mindthis Generation

The time has come to sacrifice Supply Management at the altar of globalism to embrace a “New Canada” that empowers youth to compete in the 21st Century.

Spilled Milk?

Why all the recent fuss about Supply Management? The Harper Government’s push for entry into the Trans-Pacific Partnership (TPP) and its critiques by thinkers like Martha Hall Findlay have put the issue at the forefront the Canadian political arena.  For some it is about pure economics or food security, while for others it is about reducing the footprint “Big Government” or ensuring the quality of what Canadians eat.  The current debate touches on all these relevant points but does not address the interests of Canadian young people in relation to the question of scrapping Supply Management.  The central issue for youth in all of this is the type of Canada they envision for the 21st Century.

Supply Management?

Supply Management is a broad term referring to the system of quotas, licences and tariffs designed to guarantee prices to Canadian dairy and poultry farmers based on regional allocations.  The lion’s share of dairy and poultry producers are concentrated in rural Ontario and Quebec.  Supply Management’s original objective in the 1970s, trumpeted by Liberal Agriculture Minister Eugene Whelan, was to create a nationally cohesive strategy from a patchwork of provincial initiatives, thereby ensuring national price and supply stability.  Thanks to its lobbyists and critical seat distributions it has been politically untouchable.  In a nutshell, Supply Management is essentially a hangover of Canada’s post-War, Laurentian-dominated nanny state.

Canada has changed dramatically since the late 1980s.  Urbanization has taken hold– once small farming operations have become huge outfits and the overall numbers of dairy and poultry farmers has drastically declined.  The Canada of today is vastly different, vastly more international and on the cusp of standing at the helm of free trade’s cause worldwide.  The continued presence of Supply Management has sullied Canada’s reputation as a nation truly committed to free trade and international openness.

Criticisms of Supply Management

Supply Management is a disaster for the growth of export-led agri-food businesses.  Many point to the example of New Zealand, a nation that removed a similar protectionist system as an example to follow.  New Zealand currently exports over $8 billion US annually in dairy products, while the entire dairy industry in Canada saw revenues of $5.5 billion as a whole (Canada is over 7 times the size of New Zealand in population and vastly larger in landmass).

Supply management stifles creative entrepreneurs and value added refining of raw agricultural products.  Potential owners of new abattoirs, processing facilities and factories must jump through regulatory sourcing hoops before they can get off the ground.   The price guarantees and retaliatory action of other nations mean that Canadian exports of poultry and dairy are rendered uncompetitive globally.  Furthermore, the tradable licenses for dairy and poultry serve to drive up already high overhead costs by hundreds of thousands or even millions of dollars to any prospective farmers.

On top of the economic consequences, critics such as Lawrence L. Herman point out that Supply Management represents the worst of a “small Canada” mindset.  For the most part he is correct– Supply Management has been “holy cow” of Canadian politics characterized by politicians tripping over one another to publicly declare Supply Management as “untouchable”.  On top of these ‘small politics’, Supply Management represents a dangerous hangover of regionalism that has marred most of Canada’s existence: Laurentian elites driving money and jobs into the centre while ignoring the periphery with the development of value-added industries.

Answering the Critics

Producer Disruption

Perhaps the biggest impediment to the removal Supply Management is the fact that an entire system has sprung up under the protection of tariffs and licences.  Its removal may cause temporary hardship amongst producers who have planned their business models behind its protectionist barriers.  Temporary measures to cover hardship and give producers a chance to adjust, such as Australia’s tax, may be a difficult political sell even if it is clearly temporary (Income Tax was a temporary measure implemented during the First World War).  Even after these temporary measures are removed consumer prices may stay the same or increase, as many critics charge.

Costs to Consumers

Other industries that do not have the protections in place still manage to deliver relatively affordable foodstuffs on Canadian tables and there is no reason why the same cannot be true for milk and poultry.  Many such as Frank Valeriote cite higher prices for milk in New Zealand but ignore the fact that chicken and milk are both significantly cheaper in the United States.  The net benefit to Australia and New Zealand, even with higher consumer prices, has been overwhelmingly positive in terms of creating new industries.  Furthermore, impacts on low-income households can be offset by changes in tax policy and redistribution.  Finally, overall costs to all Canadians may actually decrease when cheaper imports outweigh the overall costs of higher staples, should prices increase.

Supply Management, Youth and the TPP

Keeping the debate about the price of milk, poultry and eggs on Canadian tables is the epitome of Lawrence L. Herman’s “small Canada” criticism.  The issues of Supply Management and the TPP strike at the heart of issues central to youth in Canada: the need to innovate, trade internationally and play to win globally.

The TPP potentially stands to become the world’s preeminent trading block and stands at the helm of a new “Pacific Century”.  Its Asian, American, and Latin American members represent over $20 Trillion US in GDP and could balloon to over $30 Trillion in GDP if notable additions were made.  Young people around the world have become much more aware of Asia as it rises to the forefront of world affairs.

It is critical for Canada to maintain the momentum of its transformation from a European and American-focused economy to one firmly fixed on the promise of Asia’s century.  Opening the borders of Canada to trade and immigration increases the amount of new ideas innovators can draw on and forces Canadians to compete internationally.  Innovation is key for competition and job creation. In short, moving to dismantle the Supply Management system removes another impediment to unleashing the creative energies of young Canadians in dominating the 21st Century and curing the sickness of youth unemployment.

Final Say

There is no reason why the energy and dynamism of Canadians cannot be unleashed in a take-no-prisoners approach to becoming the best in the world in trade and commerce.  Canada already dominates with comparative advantage in many agricultural industries and is widely recognized as a global linchpin in food security worldwide.  Given that view of Canada, there are few reasons why the government and innovators should not be sprinting to turn Canada into a food security superpower and ensure Canadian youth inherit a Canada that is well poised for the new, globalized century.