A Bill to Limit Canada’s Trade Negotiators on Farm Goods Edges Nearer to Law
The measure from a member of the Bloc Québécois would ban changes to the supply management system for dairy, poultry and eggs.
Private members’ bills, particularly those from members of the Bloc Québécois, rarely make their way through the parliamentary process.
But after passing the House of Commons with strong support from members of all parties, a bill from Yves Perron, who speaks for the Bloc on farming, handily passed a second vote in the unelected Senate on Tuesday.
And perhaps even more surprising, it deals with a contentious issue: Canada’s supply management system, which controls production and sets minimum prices for dairy and poultry products as well as eggs.
Many free-market economists and politicians cast supply management as a legalized price cartel that increases Canadians’ grocery bills. And in negotiations for every one of Canada’s major trade agreements in recent decades, the supply management system has emerged as one of the final sticking points.
[Read from 2016: Safe for Now, Canadian Dairy Farmers Fret Over E.U. Trade Deal]
If Mr. Perron’s bill makes it past the few remaining legislative hurdles and becomes law, it will bar Canada’s trade negotiators from offering any changes to supply management during future trade talks.
Under the system, to avoid price-killing oversupply, farmers are assigned a production quota — effectively a license to produce milk, chicken, turkey or eggs — that they cannot exceed. Until recently, imports were effectively banned through eye-wateringly high import duties.
Dairy is the biggest and most contentious segment. Recent trade deals allowed limited amounts of dairy products to come into Canada duty free or at low tariffs. But any imports beyond those levels are hit with tariffs that can be well over 200 percent.
Despite its progress through Parliament, the legislation has divided the Conservative Party as well as Canada’s farmers.
Supply management hasn’t received as much attention as, say, grocery store profits in the recent uproar over food price increases. Perhaps that’s because figuring out exactly how much more supply management causes Canadians to pay for milk than grocery buyers in other countries is difficult.
No one disputes that Canadians generally pay more. A paper published by agricultural economists from the University of Guelph and Dalhousie University in 2021 reported that in eastern Canada, where dairy farming is largely based, the average milk price from 1997 to 2011 was 63.05 Canadian dollars for 100 liters. In New York and New Jersey, the price over the same period of time for a comparable quantity was equivalent to 44.31 Canadian dollars.
But the paper’s author’s also noted that opening the market to American imports would offer no guarantee of lower prices for milk buyers in Canada.
“Given the cost of distribution to cover the Canadian market, depending on where products are coming from, Canadians may very well pay more for dairy products, once supply management ends,” they wrote.
The economists, however, were unequivocal about the effect of an open market on Canadian dairy farmers.
“If trade were liberalized tomorrow, then American milk would likely flood the Canadian market,” they wrote. “Canada’s farmers would not be able to compete with the price of American milk and eventually the entire Canadian dairy industry would be dependent on imported milk.”
All of this is taking place at that the same time that Canadians, like most people outside Asia, continue to drink less milk each year.
Under supply management, farmers exchange not being able to export their products for the stability and high prices brought by the system. But most types of farming in Canada are not covered by supply management and depend heavily on exports.
The Canadian Agri-Food Trade Alliance, a group of farmers, food processors and related businesses, said the bill in Parliament “severely constrains Canada’s ability to negotiate the best free trade agreements for all sectors of the Canadian economy, agriculture and non-agriculture alike.”
When the House of Commons passed the bill last June, the Conservatives divided roughly in half, with 56 voting in favor of it. Most, if not all, of those members are from constituencies that include supply-managed farms. By contrast, only a single Liberal, from central Toronto, broke with his party and voted against the bill.
The proposed limits on trade negotiators are not a theoretical maybe. The United States-Mexico-Canada Agreement, the revised version of NAFTA, comes up for review in 2026. Given that the United States has already twice challenged Canada’s restrictions on dairy through the U.S.M.C.A. dispute process, it’s certain that it will again be looking for changes in supply management in two years, regardless of what Parliament decides.