The case for reforming Canada’s supply management systems

The Canadian Council of Chief Executives believes that it is in Canada’s interest to pursue reciprocal trade and investment liberalization agreements in Europe, Asia and South America.  Such efforts will be important future sources of jobs and opportunities for Canadian workers and families.

In that context, we believe it is time to review and reform Canada’s supply management systems for dairy and poultry producers. The current restrictions on dairy and poultry imports are inconsistent with our country’s reputation as a champion of open markets. They diminish our credibility with our trading partners and limit market access opportunities for Canadian companies and workers, including the 80-per-cent share of Canada’s agricultural sector that is not subject to supply management. 

The United Nations Food and Agricultural Organization projects that global food demand will rise by 70 per cent between 2011 and 2050. More than three-quarters of this growth will come from developing economies. Higher standards of living, urbanization and the rapid expansion of the world’s middle class are driving big increases in demand for a wide variety of agri-food products, including meat and dairy.

Yet at a time when the global market for their products is growing, thousands of Canadian farmers are locked into arrangements under which they produce solely for domestic consumption. Reforming supply management would inject new dynamism into Canada’s shrinking farm population, enabling dairy and poultry producers to look beyond a mature domestic market and pursue opportunities around the world.

For proof of the benefits of more open competition, we need only look to New Zealand and Australia. Both countries began to phase out their dairy supply management programs in 2000.  Anticipating increased competition, dairy farmers expanded their herds, enlarged their farms, modernized their equipment and diversified production. 

Far from weakening the dairy sectors in New Zealand and Australia, competition has made them stronger. In both countries, dairy production has increased significantly. Dairy farmers in New Zealand and Australia are now among the most efficient in the developed world. They are responsible for almost half the world’s dairy trade, exporting to more than 150 countries. Asia in particular has proven to be a fertile market for imported powdered milk, butter and cheese.

The experience of dairy producers in New Zealand and Australia mirrors that of Canada’s wine industry a generation ago. Prior to the Canada-U.S. Free Trade Agreement, the industry was shielded from foreign competition. Many within and outside the sector warned that it would not survive the phasing out of tariff and non-tariff barriers. But instead of shrinking, it has flourished. Canadian wines are now internationally renowned. Output, exports, productivity and employment have all increased, while labour and producer incomes have doubled.

Canada’s dairy and poultry farmers, too, can compete to win.  As with the wine industry, some transitional support will be required. But in the long run Canadian producers of a wide variety of agri-food products would benefit from more open trade. It is time to reach out internationally, leverage our strengths and seize the opportunities created by growing markets.