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Trump is right about Canada’s milk ‘cartel’

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28Apr

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)

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