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Road map to supply-management reform

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GUELPH -- The Conference Board of Canada presented its food strategy for Canada a few weeks ago. The strategy is lucid, coherent and ambitious for our country, which was without a true vision for our agri-food sector. Canada needs a bold strategy to alleviate nutrition insecurities and grow our agricultural economies.

What drew more attention, however, was the strategy's call for the end of supply management and the termination of our protectionist quota and tariff systems in dairy, poultry and eggs.

The Conference Board is not the first to advocate ending supply management. Many other think-tanks and research reports in the past have provided recommendations in the same vein. The 1960s-era supply-management regime set production quotas, which equated to domestic needs only. It also set tariffs on imports of up to 300 per cent, in some cases. Even if our supply-management scheme attracted much criticism by our trading partners over the years, an outright abolishment would not be desirable.

Completely eliminating quotas and tariffs would make many of our strategic agricultural sectors much more vulnerable. An open market would force Canadian dairy, for example, to contend with highly subsidized farmers in other countries such as the U.S. Even if many of our farms are cost-effective, subsidies in other countries would not offer a level trading field.

But given how global trades are shifting, change is needed. There is a way to make Canada a global player while maintaining supply management.

Let us look at dairy. Embracing excellence should be embedded in the pricing formula to set prices at the farmgate.

Instead of looking at costing averages for the entire industry, the Canadian Dairy Commission ought to only look at the top 25 per cent best-performing operations.

Many dairy farmers are good cost managers, but several others could use incentives to adjust managerial practices. Such a model would encourage less efficient farms to aspire to be at the top of their game.

Furthermore, creating a second category of production quotas to capitalize on global markets would allow our dairy industry to grow further. Federally co-ordinated, trade-based quotas would allow younger, entrepreneurial farmers to access the industry, be innovative and bring a fresher look. Compelling evidence is mounting that global dairy trades will increase. Global demand for butter, cheese and milk powder is expected to grow by almost 22 per cent, 11 per cent and 13 per cent, respectively, by 2020.

Regrettably, our inertia on trades and supply management is making Canada fall behind. Canada attempted to create a different set of quotas years ago, but the world has since changed. This time around, if argued appropriately, Canada could be successful as long as it pledges to one very important modification: reduce import tariffs.

These changes need to be coupled with an aggressive lessening of import tariffs on many products. Recent free-trade agreements with Europe and Korea are signals the federal government is redefining Canada's influence on the global stage, as it should.

A reduction in tariffs, say over 15 years, would send the right signal Canada is willing to commit to its trading partners.

The global trading landscape is changing, and fast, and our supply-managed sectors know it. We can even sense the overall tone of conversations on supply management is slowly changing. This is welcome news for all; let's hope it continues.

The Conference Board should be commended for its effort to offer a vision for one of our most important economic sectors. It clearly wanted to make a strong point that things need to change. It's a shame, though, that because of one recommendation, many will not give the strategy the attention it deserves.

Sylvain Charlebois is associate dean at the College of Management and Economics at the University of Guelph in Ontario.


Republished from the Winnipeg Free Press print edition April 14, 2014 A9

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