AIMS on Campus is pleased to announce that Victoria Nader is the winner of 3rd place in our op-ed essay contest on the subject of supply management. Victoria is a fourth-year Canadian studies student at the University of Toronto-Mississauga. See below her great submission. Thanks to all students who participated in the contest.
The need to create a proper agriculture market
By Victoria Nader
Lack of consumer sovereignty is the greatest disadvantage of a monopoly and is present in the monopoly amongst Canadian agricultural producers, namely dairy and poultry, upheld by supply management. Supply management utilizes policies based on price-setting, supply control, and protection from foreign competition, guaranteeing the stability of farmer’s profits and reducing variation in the price of their goods, but at the cost of increased prices for consumers.
The desires and needs of these producers are prioritized above those of Canadian consumers in the name of protectionism, however the only thing being protected is age-old elitism. Supply management has implications for Canada’s entry into international trade agreements, farmers trying to enter and remain in the industry, and consumers. Federal and provincial governments must abolish supply management to remove its impact and enact policy that protects Canadian farmers, while promoting a free market by emulating the discontinuation of the Canadian Wheat Board and the Australian dairy model.
In October of 2015, Canada entered the Trans-Pacific Partnership (TPP) between eleven nations surrounding the Pacific region, which is now ten since the United States’ recent withdrawal, creating the world’s largest free-trading zone. An incredible opportunity, it provides Canada access to “40 per cent of the world’s population and nearly 50 per cent of the world’s [gross domestic product].” However, Canada was initially denied entry into the agreement as a result of the supply management system’s imposition of import quotas and high tariffs that block foreign competition. Canada gained entry by giving TPP members “duty-free access to 3.25 per cent of Canada’s dairy market and 2.1 per cent of its poultry market.” The participation of 34 million Canadians in the trade agreement was nearly compromised in favour of supply management, which “benefits fewer than 14,000 Canadian farmers, mostly in rural Ontario and Quebec.”
Furthermore, “eight per cent of all farms in Canada” operate under supply management. Clearly, the interests of generationally-wealthy farmers are upheld and farmers entering the industry are excluded due to exorbitant prices of quotas that “can be up to 75 per cent of startup costs.” Supply management is often said to protect small family farms from being crowded out by large corporate farms; nevertheless, between 1971 and 2011, “the number of dairy farms in Canada dropped by 91 per cent.” The system issues a limited amount of expensive permits to producers, thus limiting the supply and options of goods to consumers. It is the “small family farms” that possess power, expelling competition to retain profits for themselves. The lack of competition they create through heavy lobbying enables them to charge consumers high prices for lower quality goods.
As the Canadian population increases, so does the demand for agricultural goods, resulting in higher prices due to lack of foreign export corresponding to high tariffs. Consequently, “189,000 Canadians are pushed into poverty because of the cost of supply management” because the burden of rising prices weighs heavily on consumers. If the agricultural sector operated as a free market and imported goods, then “the average household would save $438 per year.” Higher prices benefit the producers opposed to the consumers, thus exhibiting the lack of consumer sovereignty within the monopoly.
Canada should adopt a market system for agricultural goods, specifically dairy and poultry, thereby sending the current model the way of the Canadian Wheat Board, which was discontinued in 2012 giving market freedom to grain farmers. Then, to protect producers, they can imitate the Australian dairy model where a transition cost will be implemented and covered by the government, opposed to the consumers, since they have the funds.
Moreover, import quotas and tariffs can be significantly reduced to permit foreign competition. These changes will encourage Canada’s international trade and relations, level competition amongst existing and aspiring farmers, and reduce the price of goods for Canadians, assuring that those on the poverty line are not severely impacted. Therefore, it is recommended that the administration pursue these options within the next year as Canada would benefit from demolishing elitism and promoting equity in the agricultural sector.