If you ask me . . .
B A C K G R O U N D E R / Morris W. Dorosh
"Dairy Farmers of Canada, the national milk board, should have congratulated the federal government and expressed its most heartfelt thanks for the Herculean effort that Canadian trade negotiators made to protect supply management interests at the Trans Pacific Partnership, and also for the unbelievable windfall of government compensation for losses that are highly unlikely to occur. Instead it complained that the milk displaced by imports will not be produced in Canada, with “perpetual lost revenueâ€. New subsidy schemes so lavish as to be outlandish have merely “lessened the burden.â€
Chicken Farmers of Canada was “disappointed†with the 2% additional access to the Canadian market for foreign poultry. In a distortion clever enough to have come from Moscow, it said Canada will be required to increase its mar- ket access for chicken by 28%, “a heavy hitâ€. In fact it is being exposed to imports, over a period of five years, equal to about 30 hours of chicken production annually. Even with extortionist pricing that retards consumption, natural market growth will completely subordinate that amount.
When the Crow benefit was cancelled by Goodale and the Chrentienistes in 1996, 240,000 western Canadian grain farmers and land owners were given $1.2 billion, between $7 and $33 per acre, in dribs and drabs, for the permanent loss of a grain freight subsidy worth $600 million a year. If it were today, in current dollars it would be around $1.8 billion. Since farms and land holdings have become larger, perhaps 150,000 recipients would qualify, receiving an average of maybe $12,000 each for all time. The Harper government has committed to giving a typical dairy farmer about $11,000 a year for 10 years, an average chicken producer $5,600 a year, a turkey farmer $5,900 and an egg pro- ducer $4,800. These are subsidies in addition to the monopoly privileges granted by a system that allows producer- run marketing boards to systematically undersupply the domestic market and routinely overcharge it. It is entirely within the practical authority of marketing boards to reduce production and increase prices over time to completely erase any price or profit consequence from the tiny increase in imports and this is exactly what they will do.
Supply management producers will be ‘compensated’ under three different programs. The $2.4-billion Income Guarantee Program is meant to make up income lost to dairy and poultry imports for 10 years after the trade agree- ment takes effect and on a reduced basis for a further five years. A $1.5-billion Quota Value Guarantee Program will make up any erosion in marketing board quota value attributable to imports. A Processor Modernization Program funded at $450 million will assist processors of supply-managed foods with upgrading of plants and facilities. A $15- million Market Development Initiative will assist supply-managed groups in promotion and marketing; price-setting formulas for milk, eggs and chicken already include a provision for marketing and market development costs and the boards have not been short of money for these purposes, with plenty left over for political activism.
No one will ever notice any benefit to Canadian consumers from this inconsequential import competition. Even if 3.25% of milk and 2% of chicken came onto the market completely free of charge the effect on prices would not be measurable. In reality imports might be 10% cheaper than domestic production, because exporters to Canada will have no incentive to slash prices if there is no opportunity to increase volume. A 10% discount on 3.25% of supply is one-third of 1%. Furthermore, duty-free imports will be distributed to dairy companies already processing and selling products from domestic supply-managed milk. There is no obligation or requirement that any saving in raw material cost is to be passed down in lower selling prices. It is certain that there will be no break for shoppers in Quebec, Manitoba or Nova Scotia; retail milk prices there are subject to government-set minimums, another part of this bizarre conspiracy to enrich multi-millionaire supply management farmers at the expense of poverty-line consumers.
The supply management system obviously dramatically increases farm income and prosperity, but because it cannot be extended across all Canadian agricultural production it creates a hyper-privileged class of farmers while all others struggle with the vagaries of the marketplace. Supply management is a variation on the theme of trade unionism with the difference that there is no one bargaining on the other side.
The Harper government is the friendliest to free market principles that Canada can expect for the next generation, if not lifetime. It has just capitulated to a tiny, noisy cohort, breaking every known free market principle and some here- tofore unknown, only to be repaid by sneers, derision and misrepresentation."
B A C K G R O U N D E R / Morris W. Dorosh
"Dairy Farmers of Canada, the national milk board, should have congratulated the federal government and expressed its most heartfelt thanks for the Herculean effort that Canadian trade negotiators made to protect supply management interests at the Trans Pacific Partnership, and also for the unbelievable windfall of government compensation for losses that are highly unlikely to occur. Instead it complained that the milk displaced by imports will not be produced in Canada, with “perpetual lost revenueâ€. New subsidy schemes so lavish as to be outlandish have merely “lessened the burden.â€
Chicken Farmers of Canada was “disappointed†with the 2% additional access to the Canadian market for foreign poultry. In a distortion clever enough to have come from Moscow, it said Canada will be required to increase its mar- ket access for chicken by 28%, “a heavy hitâ€. In fact it is being exposed to imports, over a period of five years, equal to about 30 hours of chicken production annually. Even with extortionist pricing that retards consumption, natural market growth will completely subordinate that amount.
When the Crow benefit was cancelled by Goodale and the Chrentienistes in 1996, 240,000 western Canadian grain farmers and land owners were given $1.2 billion, between $7 and $33 per acre, in dribs and drabs, for the permanent loss of a grain freight subsidy worth $600 million a year. If it were today, in current dollars it would be around $1.8 billion. Since farms and land holdings have become larger, perhaps 150,000 recipients would qualify, receiving an average of maybe $12,000 each for all time. The Harper government has committed to giving a typical dairy farmer about $11,000 a year for 10 years, an average chicken producer $5,600 a year, a turkey farmer $5,900 and an egg pro- ducer $4,800. These are subsidies in addition to the monopoly privileges granted by a system that allows producer- run marketing boards to systematically undersupply the domestic market and routinely overcharge it. It is entirely within the practical authority of marketing boards to reduce production and increase prices over time to completely erase any price or profit consequence from the tiny increase in imports and this is exactly what they will do.
Supply management producers will be ‘compensated’ under three different programs. The $2.4-billion Income Guarantee Program is meant to make up income lost to dairy and poultry imports for 10 years after the trade agree- ment takes effect and on a reduced basis for a further five years. A $1.5-billion Quota Value Guarantee Program will make up any erosion in marketing board quota value attributable to imports. A Processor Modernization Program funded at $450 million will assist processors of supply-managed foods with upgrading of plants and facilities. A $15- million Market Development Initiative will assist supply-managed groups in promotion and marketing; price-setting formulas for milk, eggs and chicken already include a provision for marketing and market development costs and the boards have not been short of money for these purposes, with plenty left over for political activism.
No one will ever notice any benefit to Canadian consumers from this inconsequential import competition. Even if 3.25% of milk and 2% of chicken came onto the market completely free of charge the effect on prices would not be measurable. In reality imports might be 10% cheaper than domestic production, because exporters to Canada will have no incentive to slash prices if there is no opportunity to increase volume. A 10% discount on 3.25% of supply is one-third of 1%. Furthermore, duty-free imports will be distributed to dairy companies already processing and selling products from domestic supply-managed milk. There is no obligation or requirement that any saving in raw material cost is to be passed down in lower selling prices. It is certain that there will be no break for shoppers in Quebec, Manitoba or Nova Scotia; retail milk prices there are subject to government-set minimums, another part of this bizarre conspiracy to enrich multi-millionaire supply management farmers at the expense of poverty-line consumers.
The supply management system obviously dramatically increases farm income and prosperity, but because it cannot be extended across all Canadian agricultural production it creates a hyper-privileged class of farmers while all others struggle with the vagaries of the marketplace. Supply management is a variation on the theme of trade unionism with the difference that there is no one bargaining on the other side.
The Harper government is the friendliest to free market principles that Canada can expect for the next generation, if not lifetime. It has just capitulated to a tiny, noisy cohort, breaking every known free market principle and some here- tofore unknown, only to be repaid by sneers, derision and misrepresentation."
Comment