Andrew Richter: Keeping supply management is economic suicide
Thus a question worth considering is what accounts for this support. No doubt part of the explanation is the power of several key domestic interest groups. Both the Dairy Famers of Canada and the Egg Farmers of Canada spend heavily on ads promoting it, and they have succeeded in persuading many Canadians that supply management results in safer products and more consistent supply.
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In addition, supply management has strong support from most of Canada's media. The Toronto Star and the CBC go apoplectic at the mere mention of changes to it, and the generally centrist Globe and Mail is also quite supportive, in spite of its (supposed) commitment to free markets. Only National Post offers consistent criticism.
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And lastly, supporters have succeeded in persuading Canadians that the program's demise would decimate our dairy sector, as they argue that domestic producers could not possibly compete with larger international players.
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That last argument is particularly questionable, as there is little reason to doubt that in the absence of state-controlled quotas and prices, Canadian dairy farmers would become more efficient and innovative.
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Indeed, a similar argument was made decades ago with regards to wine. For years Canada's wine market was carefully regulated and foreign wines were heavily tariffed. Canadian producers argued that without such taxes the industry would be destroyed, as it could not possibly compete with French, Italian, and Spanish wines.
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In fact, the opposite occurred. With the opening of the market, Canadian producers were suddenly forced to offer a better product, and the result has been an explosion in both the number of domestic producers (now approaching 1,000) and the quality of our wines. Indeed, Canadian wines now routinely win international competitions, something that would have been unthinkable 40 or 50 years ago (when something called Baby Duck seemed to be the best we could do!).
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In sum, the Canada-U.S. trade talks have entered their final phase. But a familiar obstacle remains. The Canadian government seems totally committed to supply management, even if this support comes at the cost of killing a potential agreement. Such an outcome would be catastrophic, as Ottawa would literally be committing economic suicide. And yet this result is very much in play, and might be unavoidable if the U.S. decides that there will be no agreement unless Canada agrees to make dramatic changes to the program.
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