Canada has been a closed market for dairy products for decades, but we are now approaching a turning point. Whether Canada opens up its dairy market—and who determines the future production of the cheese and milk that Canadians consume—may be the central factor for the immediate future of Canada’s global trade opportunities.
Canada has a strong stake in the Trans-Pacific Partnership (TPP) trade deal. With a relatively small, export-driven economy, Canada has a deep interest in being at the table to determine wider trade rules that affect our economy. In particular, given the importance of the U.S. market for Canadian trade, Canada ought to be inside any U.S. trade deal, lest the U.S. give others better access to its markets.
Participants in the TPP talks have long been pushing for more access to Canada’s dairy market. Canada’s existing supply management system for dairy relies on the ability to limit supply in order to maintain price levels. Canada limits dairy supply through domestic quotas (the control and allocation of individual dairy production quotas are central to the current system) and tariffs of 200 per cent or more that severely restrict imports.
The supply management system has been costly to Canadians as a whole for a long time. The poorest in our society—for which dairy products form a larger share of their budget—are the hardest-hit. Each Canadian family spends an extra $276 per year supporting dairy supply management. The cost to farmers of acquiring dairy quota—the right to produce—has created barriers to enter the dairy business.
One of the consequences of dairy supply management is that Canada is prohibited from exporting its dairy products. This limits the opportunity to export to Asia in particular, where “brand Canada” often provides a marketing advantage.
As TPP negotiations head into their final, more sensitive stages, it is becoming clear that Canada will be asked to open its markets to dairy imports—possibly as the price of being included in the deal. Thanks to TPP, Canada now has an opportunity to reform its dairy policy for the benefit of Canadian consumers, businesses, and dairy producers. Policy reform will create additional economic opportunity for Canadian dairy farmers and producers by allowing them to sell in growing global food markets.
To do so, the dairy industry will need to embrace a growth vision, instead of settling for a share of a stagnant domestic market. As The Conference Board of Canada outlines in Reforming Dairy Supply Management: The Case for Growth, successful reform will require coordinated phased action to eliminate price setting, incremental winding down of milk production quotas, and the removal of international trade barriers. Read more
Source: Conference Board of Canada
