Deregulation looms as possible outcome of new trade talks

You could almost hear their knives sharpening -- if it weren't for the howls of glee -- at the news Canada wants in on the upcoming round of Trans-Pacific Partnership talks.

Finally, the critics chortled, supply management would be a thing of the past. If they're to be believed, Canada's system of protecting its domestic dairy, egg and poultry sectors is the only issue up for negotiation.

That's partly because there isn't much detail on what is actually on the table, possibly because the more the general public knows about such things, the more likely these talks are to be bogged down by silly protests, as the WTO negotiations were a few years back in Seattle.

Apparently there's a lot more on the table than supply management, including intellectual property, copyright, government procurement, labour, cross-border services, e-commerce, environment, financial services, rules of origin, sanitary and phytosanitary standards, technical barriers to trade, telecommunications, temporary entry of foreign workers, textiles and apparel and trade remedies.

That's quite a mouthful. It's much easier to zero in on the price of milk in Canada. We're led to believe consumers here are paying too much and producers are either a) making out like bandits; b) depriving their fellow farmers who are dependent on export trade from making a living by keeping Canada out of lucrative trade deals; or c) being deprived themselves of the opportunity to participate in global marketing opportunities.

"With so little known about how the TPP negotiations may proceed, it is remarkable how unequivocal some have been in asserting Canada will simply need to give up supply management," noted Al Mussell, an economist with the George Morris Centre in Guelph.

Better deals are always welcome, but it's not as if Canada isn't already trading with members of the TPP.

As well, no one bothers to mention some of the other partners in these talks also help out their farmers. The United States administers milk-marketing orders that regulate the price processors pay. And when the international dairy market collapsed in 2008-09, the U.S. moved in with supplementary supports of around $350 million.

New Zealand farmers sell their milk through a co-operative their government enticed them to join, which in all practicality is a monopoly. Sure, producers can sell through another competitor if they want to -- except there isn't one.

Since the 1970s, Canada has controlled its production of dairy, eggs and poultry products to meet domestic needs. Farmers are protected from import competition and prices they are paid factor in costs of production.

The system has its faults. The production quota farmers require is exorbitantly expensive in some provinces. There is regional squabbling over market-share allocations and processors grumble about high prices.

But the system has its advantages, too, chiefly it ensures a reliable supply of Canadian product. These commodities are among the few in Canadian farming in which producers receive most of their income from the marketplace.

In a report released last year, University of Laval agricultural economist Maurice Doyon recommended major changes to Canada's supply-managed dairy sector, but notably not its dismantlement.

Just last month, he came out swinging at the recent attack on supply management by Liberal Sen. Martha Hall Findlay, suggesting among other things she had her math wrong when she concluded milk in Canada costs almost $10 for four litres.

While milk prices are on the high side of the range paid internationally, Doyon said a cross-Canada comparison of retail prices averages $5.20 for four litres.

Besides, if supply management was dismantled, what would replace it?

"More importantly, will the alternative be better for consumers, taxpayers, processors and producers?" Doyon asked. "Deregulation does not always bring benefits, especially in the long run. As an illustration, the deregulation of the banking system in the U.S. is at the root of the recent financial crisis, as opposed to the heavily regulated one in Canada that is now our pride."

For his part, Mussell said the focus shouldn't be on debating supply management, which he predicted would be even more divisive and disruptive than the Canadian Wheat Board debate, but rather to what extent Canada is willing to offer market access in those sheltered commodities. Currently, a foreign importer wishing to reach the Canadian consumer pays tariffs of two to three times the value of the product.

Some would argue reducing or eliminating those tariffs is the same as dismantlement. But Mussell said the changes would be phased in, giving the sector time to reorganize.

Laura Rance is editor of the Manitoba Co-operator. She can be reached at 792-4382 or by email: laura@fbcpublishing.com .

Republished from the Winnipeg Free Press print edition July 14, 2012 B8