A vocal proponent of Canada’s supply management system received an enthusiastic round of applause at the Western Canadian Dairy Seminar in Red Deer on Wednesday.
Bruce Muirhead, a professor at the University of Waterloo in Ontario, vigorously defended the practice of restricting the production and import of ag commodities like milk, eggs and poultry so that the prices earned by domestic farmers are higher.
“I’m not saying this is a perfect system, but it works so well that the disadvantages can be dealt with in the fullness of time.”
Muirhead said supply management has been the target of the neoliberalism movement since the 1970s, but those criticisms are based on ideology rather than facts. In reality, he said, the system benefits farmers and consumers.
Producers who sell their products directly to big processors and retailers are at a severe disadvantage, said Muirhead.
“In non-supply managed sectors, farmers generally are price-takers as opposed to price-negotiators.”
In the 1960s, he said, the average Canadian family spent about 25 per cent of its after-tax income on food. By 2005, that percentage had dropped to about 10, with farmers absorbing the impact of the associated price cuts.
Because supply management systems are paid for by consumers, there is no cost to government, he added. And by supporting farmers, food sovereignty and security is protected.
“What happens when — not if, but when — global food prices rise?”
Canada’s supply management system has been criticized by other countries, but they also protect their agricultural industries, said Muirhead.
American farmers benefit from insurance programs and subsidies, with the 2014 US Farm Bill expected to cost taxpayers almost $1 trillion over the next 10 years. The European Union has farm protection programs and subsidies, with nearly $10 billion a year paid out in export subsidies; and China controls imports to shelter its producers.
“Every country in the industrialized world supports its agriculture in some way or other, except one,” said Muirhead. “Australia doesn’t, and Australia is in the process of a downward spiral in dairy production and egg production and a number of other commodities as well.”
Ag commodity prices that are controlled by global markets tend to fluctuate wildly, he added.
“When prices are low, it’s absolutely devastating.”
Consumers of supply-managed products benefit from good management and governance of that sector, said Muirhead, and the system promotes local job creation and tends to get goods to market quicker.
He discounted suggestions that the system stifles innovation and creates an unfair tax on consumers.
Also speaking at the seminar was Mike Peterson, special agricultural trade envoy for New Zealand. He declined to comment on Canada’s supply management sectors but stressed the importance of an open market and free trade.
Peterson, who is a farmer, described how agriculture in New Zealand was heavily subsidized until 1985, when government supports were abruptly cut. After the initial turmoil, farmers became more innovative and lands reverted to their most profitable use.
The country’s sheep herd dropped from 70 million to about 30 million, and new industries like wine production began to prosper.
Countries like Canada will need to boost their output of food as the world’s population grows to a projected 9.6 million people by 2050, said Peterson. He noted that dairy production in Canada has remained flat since the early 1960s.
“It’s easy for us to put ourselves in a cocoon and just sit there and think that the world doesn’t matter. But I’ll tell you what, food security is a huge driver of political instability.”
The growing demand for food presents a huge opportunity for Canadian farmers, he said. In the case of dairy, it’s been projected that the world will need an additional 20 billion litres of milk every year for the next decade.
But protectionist policies will limit our ability to help fill this need, said Peterson.
“Barriers to markets are actually barriers to innovation and barriers to progress, and they’re barriers to prosperity for all.”