Trump is right about Canada’s milk ‘cartel’

By: Graham Lane
Published: April 27, 2017, Winnipeg Sun

For the third time in recent years, Canada’s dairy industry is a major issue in free trade negotiations. With the previous two times the federal government was able to protect the industry, but at high cost to consumers and taxpayers.

Recently the feds agreed to shell out $350 million to our dairy industry to allow European cheese makers access to just only 4% of the Canadian market. As Canada’s total cheese market is $4.4 billion, to protect 4% ($180 million) of that market the feds spent $350 million. The money lands mostly in Quebec. Just three producers — Saputo, Agropur Cooperative, and Kraft Canada — command 72% of the whole Canadian cheese market.

Now U.S. President Donald Trump, seeking to renegotiate the NAFTA trade agreement, targets our dairy supply management system. Our dairy industry regulates prices by restricting imports — clearly an unfair trade protection courtesy of Canadian politicians and dairy producers. The ridiculously false claim is that without government’s protectionist supply management our dairy industry would disappear.

Supporters of the current system note that our cold weather obligates our farmers to use grain and heated barns in the winter, claiming that American dairy farmers can graze their cattle outside all year. Two things are wrong with this argument. First, Wisconsin is the largest American producer and Montreal and Green Bay are pretty much on the same latitude. The average January temperature in Green Bay is -8.6C, Montreal -9C. Secondly, our weather means we cannot, for example, economically grow oranges, bananas and kiwi fruit. The only way we could would involve horrendously expensive large heated greenhouses. Overall, to insist on producing all our own food has always represented a massive imposition on consumers, both in terms of price and selection.

Ignoring the high prices to be paid by consumers, Pierre Trudeau introduced dairy supply management in 1971. For 46 years, consumers have been forced to pay high prices for less selection. Trudeau senior’s policy of substituting government regulations and price fixing for the free market has produced striking negative results, particularly for lower-income large families.

Before the market was rigged there was little price difference for dairy products between Canada and the U.S. Since then the changes gave the Canadian dairy industry the ability to restrict supply and enjoy a monopoly. Prices for milk now diverge widely. According to a recent study from the CD Howe Institute our consumers now pay up to 77% higher prices for dairy than Americans.

‘Quota’

Restricted entry into the industry severely punishes younger generations of farmers. They are faced with an exorbitant high cost to enter an industry that fairly could be called the milk cartel. Simply gaining permission to produce milk requires buying or renting “quota” — quota is effectively a licence per cow costing from $25,000 in Ontario and Quebec to $42,500 in B.C. A young person setting up a typical 70-cow farm would pay more than $3-million, before purchasing land, plant and equipment. Talk about generational inequity!

End the dairy monopoly.

Consumers, food manufacturers and restaurants pay way too much for dairy products. On this matter, Trump is correct.

So is federal Conservative leadership hopeful Maxime Bernier, and he is from Quebec. It’s time to get rid of supply management.

— Graham Lane leads Manitoba Forward (www.manitobaforward.ca)

Efficiency Manitoba inefficient

By: Dennis Woodford, Garland Laliberte and Will Tishinski
Published: April 20, 2017, Winnipeg Free Press

The Pallister government is on entirely the wrong track in advancing Bill 19 to create a new Crown corporation, Efficiency Manitoba.

The new Crown will be responsible for demand-side management of electricity (DSM). Until now, DSM has been delivered in Manitoba under Hydro’s Power Smart program.

Efficiency Manitoba will be a stand-alone agency. It is mystifying to understand why such a drastic step is being taken, apparently without in-depth expert review of the concept.

The idea of divesting the Power Smart program from Hydro was proposed formally by the Public Utilities Board (PUB) in a report issued in June 2014. The PUB proposed this action after reviewing Hydro’s development plan earlier that year. The PUB concluded in that review that Hydro was not giving sufficient priority to DSM in planning its power generation. The then-NDP government voiced its support for the idea, but took no action.

In the interim, Hydro announced that a stepped-up Power Smart program could save 1,288 MW of power in the next 15 years at a cost of $2 billion. This was a surprising action, given the announcement was made the day after the April 2016 election, well before Pallister’s transition team could begin its work.

More importantly, it revealed that DSM was far more cost-effective than proceeding with the 695-MW Keeyask generating station at a cost that is now closing in on $9 billion. Stated bluntly, the announcement signalled that Power Smart could replace two Keeyasks at a quarter of the cost of a single one.

Undeterred, the new Hydro board decided in September 2016 that Hydro’s plans could not be changed because of the advanced stage of the work on Keeyask and Bipole III.

The creation of Efficiency Manitoba presents an interesting dilemma, given Hydro’s decision to barrel ahead with expanded generation and transmission capacity.

Bill 19 spells out that, each year for the next 15 years and beyond, Manitoba must reduce electrical demand by 1.5 per cent per year. At the same time, Hydro has been forecasting that new electrical demand, separate from any DSM measures, will grow by 1.5 per cent per year. This means that the two measures will cancel each other and the growth in the need for electricity in Manitoba will be zero over this timeline. So Manitoba will have no need for Keeyask for years to come.

Predicting electrical demand (Hydro’s responsibility) and power reduction (Efficiency Manitoba’s responsibility) will require very close co-ordination. Common sense indicates it will be more efficient if both activities are conducted within the same organization. DSM is technically complex work. It involves not only evaluating the merits of wind generation and solar power, but also complex engineering actions such as replacing conductors, aging transformers and hydraulic turbine blades, all of which reduce losses and free up new power. Only Hydro can carry out these functions.

There will be substantial administrative and operational inefficiencies with the creation of the new Crown corporation. Hydro currently has all the information, expertise and equipment to manage the Power Smart program. Transferring this function and duplicating, where necessary, will be costly. Staffing requirements will grow, which is inconvenient at a time when Hydro is downsizing.

The appointment of eight new board members will be needed to lead the new corporation along with the usual bureaucracy that follows such measures. If there is conflict in determining which DSM measure should be adopted, who will arbitrate? The common element for both Crown corporations is the minister of Crown Services, who cannot be expected to arbitrate such issues.

The claim that the new agency will mitigate the impact of rate increases on customer bills does not bear scrutiny. In an overbuilt system, every kilowatt-hour saved by a Manitoba resident will have to be sold outside the province. Right now, a residential kilowatt-hour generates revenue approaching 10 cents, a figure expected to at least double over the next 15 years. If the saved kilowatt-hour is sold today on the surplus energy market, it generates little more than three cents.

The difference will be an incremental cost to Hydro and will have to be made up by rate increases to all customer classes. At best, the initiative will redistribute the cost of electricity from those who can afford to implement DSM measures to those who cannot.

The entire process of creating a new DSM entity has not been given sufficient review. We are confident that if such a review were conducted, it would clearly establish that DSM should remain with Hydro and the creation of Efficiency Manitoba is a waste of resources.

Dennis Woodford is president of Electranix Corporation, Garland Laliberte is dean emeritus of engineering at the University of Manitoba and Will Tishinski is a former vice-president of Manitoba Hydro.

Budget ignores elephant that is Hydro

By: Graham Lane
Published: April 12, 2017, Winnipeg Sun

Brian Pallister’s second budget represents one small step forward, a reduction in departmental expenditure increases. But, his deficit is still far far too high — $849 million with further massive deficits forecast for the two years ahead. Ominously, he ignored the elephant in the room — the Hydro debacle: no word of relief coming for ratepayers.

Wisely, he took advice on two files — no carbon tax, and ending a wasteful tax credit for post-secondary graduates. And, while there are no tax increases in the budget, it brings to mind the innumerable ways government already removes us from the fruits of our labour.

Government inflicts on us income taxes; general sales taxes — GST, PST; alcohol, gasoline and tobacco taxes; land transfer, frontage, and impact property taxes; capital gains tax; education levies through property tax bills; entertainment tax; government levies on utilities funded by ever-higher rates; probate fees; Canada’s most outrageous traffic fines; and, permit and other fees and licenses. Once marijuana is legal, government will take its piece, profiteering as it now does for gambling and alcohol.

Before the First World War, governments were small and funded by tariffs on exports and imports. Income tax came in the guise of a temporary tax to fund the 1914-18 war effort. While, in 2017, the top income tax bracket takes “only” 54% of additional income, governments have expanded and diversified their streams of taxation, gaining an incredible portion of our incomes. Governments’ deficits and wanton borrowing are due to excess spending, not inadequate taxes.

The final blow is that governments don’t tell us the real picture of their risks, positions and options. They play games with disclosure and unfulfilled promises, reducing our opportunity to understand what is going on. This year’s provincial budget particularly ignores the woes of Hydro, woes eventually to strip even more money off us for light and heat in cold years to come. Manitoba Hydro, if it was a private company operating in a competitive environment, would be insolvent. It isn’t only because government, and the buck stops with you Mr. Pallister, forces us to pay for mistakes made by politicians and Hydro.

By ignoring the full implications of the Hydro debacle in his budget, Pallister sets the stage to push rates up and up, draining away whatever economic advantage Manitoba ever had from once low rates. Mistakes made by government-Hydro, through an unnecessary and wasteful expansion. will increase the government’s take from the utility. Our misery, government’s gain.

The big story is that the Manitoba paradox of having the most expensive but lowest performing services drifts along unchallenged. Yes, the usual suspects in the media squawked about some tweaks in the health-care system that comes nowhere near to needed transformational policy. Same across the board. The left-wing spending coalitions couldn’t believe their luck, that what will surely be Pallister’s toughest budget was basically NDP business as usual.

Ideally Manitobans would have more serious political options — dedicated to fiscal responsibility. We need smarter, better public services, ones with serious capacity to seek better outcomes from our dollars. Recent polls reveal eroding support for our new government — even with weak opposition parties and before what turned out to be a “sad sack” budget.

— Graham Lane leads Manitoba Forward (manitobaforward.ca).

The Beginning of the End? A Contrast in Leadership: Wall vs Pallister

By: Graham Lane
Published: April 7, 2017, Winnipeg Sun

Saskatchewan was once a poor little brother to Manitoba. No longer. Today Saskatchewan enjoys substantially higher per capita incomes within a stronger economy. One marked by much higher private investment levels – new factories, more processing – predictors of future growth. Furthermore, it has achieved this without getting massive equalization payments from Ottawa. Since 2008, Manitoba has chalked up a staggering $18.5 billion in equalization transfers from Ottawa. Saskatchewan got zilch.

The usual excuse is that Saskatchewan is more blessed with resource wealth. But it’s more complicated than that.

The Saskatchewan NDP pushed through major income and corporate tax cuts in 2006. And, the earlier Grant Devine Conservatives privatized the Potash Corporation – turning it into a dominant global player, investing billions in mine expansions while generating huge provincial tax revenues.

Now, Saskatchewan’s Brad Wall remains Canada’s most popular premier, an ambassador of our neighbouring province’s expanding economy. The lonely critic of the federal government’s so-called climate action plan, Wall is a hero for vowing to fight Trudeau’s carbon tax plans – to the Supreme Court if need be.

Here, it is a safe bet that the Pallister Government will succumb to potentially fatal advice and push through a new “made in Manitoba” carbon tax. Next week’s budget will pointlessly encumber Manitoba’s economy with increased heating, driving and overall energy costs.

Both prairie provinces must deal with enormous deficits. Contrasting the Wall and Pallister governments’ approaches provide valuable clues on how they plan to stabilize their respective finances. Let’s compare the March 23rd Wall budget with what we expect from next week’s Pallister budget.

Wall’s plan is robustly pro-investment, his budget features a 3.5% cut in compensation for MLAs and Ministers, to be matched by similar reductions across the public sector. Other cuts include closing down the money-losing crown corporation bus company. Wall targets a balanced budget in 3 years.

On the revenue side, his budget shifts the tax load from income to consumption, combining income tax cuts (including an increase in the low-income tax credit) with a 1% increase in their PST. He sees income taxes as a productivity drag. Most significantly, Wall eliminates sales tax exemptions, setting the stage for a harmonized sales tax with the GST. This would eliminate sales tax on business equipment and other capital purchases – further boosting private investment and their economy.

It’s a different story here in Manitoba. Public compensation is somewhat frozen, not trimmed, and the budget is to be balanced in 8 years (2 terms!). Pallister would create a new crown corporation to promote energy efficiency – a useless but good-sounding exercise as he continues to waste even more billions on the NDP’s unneeded Hydro expansion.

On taxes, all signs say the coming budget will introduce a new PCT (Pallister Carbon Tax), without a referendum. The PCT – a new energy tax – will whack producers, farmers, and everyone else that drives or heats a building in one of the planet’s coldest places.