Supply management could become a NAFTA bargaining chip

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Source: Lethbridge Herald, Dave Mabell

Its roots go back to the Second World War. Today, supply management of some key food items has become a way of life for Canadian consumers and producers

But it could become a “bargaining chip” in the ongoing North American trade negotiations. And that, a Lethbridge audience was cautioned, could lead to a number of trade-offs and consequences.

Shoppers could see a wider selection of cheese or poultry products, for example – but there’s no guarantee they’d be paying less. At the same time, economist Danny Le Roy pointed out, some of today’s long-productive farmers could see their retirement plans dashed.

Speaking to producers as well as consumers at the Southern Alberta Council on Public Affairs Thursday, the University of Lethbridge professor of economics traced Canada’s history of government-mandated food price and production controls.

It was the urgent need for more food production, he said – for people in Britain as well as wartime weapons and equipment manufacturers in Canada – that prompted the federal government to pay farmers to increase their herds and crops.

At war’s end, the government provided transitional payments. Le Roy said the first supply management programs, providing price stability in return for an agreed level of production, came in the 1960s.

Supply management also involves steep tariffs imposed on imported foods, as high as 246 per cent on cheese and 285 per cent on chicken products. Now, he said, federal and provincial governments are involved in management programs involving milk, cheese, eggs, chickens and turkeys.

Le Roy reported about 13,500 producers across the nation are a part of the program today, with about 10,000 of them in dairy. Anyone wanting to get into the system – or grow the business – must pay an existing producer for some of their production quota.

For dairy production, he explained, that could amount to $40,000 per milking cow – or $4 million for a herd of 100. For many producers, Le Roy said, the ability to sell quota represents their retirement fund.

But during recent trade talks with the European Union, he said, Canada agreed to a slight increase in imports, allowing some European foods up to four per cent of the market.

That alone caused a drop in the value of some quotas, he pointed out – and the federal government is paying producers about $350 million as a form of compensation. Reducing tariffs levied against those imports could have a greater impact.

And now, eliminating the supply management system entirely is one of the concessions that U.S. negotiators are reportedly trying to impose on Canada.

Even so, Le Roy said, the system is at some risk from food smugglers. An Ontario police officer was convicted of smuggling food across the border, and undocumented imports have become commonplace in the Vancouver area.

For their part, he noted, Albertans think nothing of bringing back a trunkload of dairy and other food products from Montana. And opponents of supply management contend low-income families are forced to pay too much for those basic foods.

One alternative, Le Roy said, could be for producers to move toward forward contracting on a long-term basis, like some other crops.

Now that the debate has been opened, he said, it’s important for producers to get involved.

“The pressure is on.”

 


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