Canadian dairy is not a sacred cow

It's looking increasingly likely that Canada will have to abandon its perennially contentious supply management system for its dairy trade if it wants to cut any kind of reasonable deal in the NAFTA renegotiation. I have gone into the subject in some detail in the past, and concluded that the system is probably unjustifiable, and that abandoning it would not be the end of the world for Canada or even for its farmers.

The issue continues to be highly divisive, though, and not even necessarily along party lines. Quebec Premier Philippe Couillard is an example of the-sky-is-falling persuasion, as he warns, nay, almost threatens, Justin Trudeau that any move to leave behind supply management would be political suicide ("serious political consequences"), at least in the dairy-heavy province of Quebec. Actually, there are only 11,000 dairy farms in the whole of Canada, and these are split between many different electoral ridings, so this particular warning seems overblown at best. It should also be remembered that the dairy industry represents just a tiny proportion of our overall trade mix, a $6 billion industry of which just $150 million goes in exports to the USA (we already import about $470 million in dairy products from the US).

But an increasing number of articles (this one in the Globe and Mail, and this one in Macleans, being just two among many) are also concluding that maybe the time has come, and that the Canadian dairy industry's multi-decade free ride has run its course, and that, actually, that may not be such a bad thing.

Among other benefits of abandoning supply management are: the fact that Canada's terminally inefficient dairy sector will finally have to shape up and look for efficiencies as the competition breathes down their necks; lower prices for Canadian consumers of dairy products, especially the poor, who spend a disproportionate percentage of their incomes on food (the Canada West Foundation estimates that the system costs the average Canadian family about $600 a year, and another study estimates that poorer families are paying $339 a year more because of supply management); and, oh, just in passing, it might just get us a renegotiation of NAFTA and avoid 25% tariffs on auto exports among many other bad things.

So, Philippe Couillard's warnings notwithstanding, I think we could quite easily conscience an end to dairy supply management in the interests of the greater good. And we might even reap substantial local benefits at the same time. Other big dairy producers and exporters like Australia and New Zealand have shown that a supply management system is not a necessary part of a thriving dairy industry, and there is no reason why Canada cannot join them. If deemed necessary, a temporary compensation system for dairy producers could be introduced, in order to ensure an orderly transition. But it can be done. Dairy production is not an untouchable sacred cow.