New Zealand and U.S. fight back.
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The federal government is maintaining its dairy supply management system that officially and deliberately sets up supply chain blockades that limit the flow of cheaper goods coming into Canada, writes Terence Corcoran. PHOTO BY TERRY BRIDGE/POSTMEDIA

The Trudeau government on Monday declared that since “global food security is under threat, it is even more important that we strengthen and maintain a strong and vibrant domestic dairy industry.” Sounds worthy, but here’s what it means.

In response to global supply chain crises that limit the supply of goods coming into Canada, the federal government will continue to maintain its dairy supply management system that officially and deliberately sets up supply chain blockades that limit the flow of cheaper goods coming into Canada.

If I may adapt an economic concept recently applied in another context by former Bank of Canada governor David Dodge, and move it over to dairy economics: “That’s cows–t!”

In this case, the supply chain at issue relates to controls over milk and cheese imports that have the effect of keeping consumer prices high. With food inflation running through the economy, now may not be the best time for smarmy self-congratulation about Canada’s decades-old supply management system of dairy protectionism and consumer exploitation as an essential economic policy. But that’s the message delivered Monday by International Trade Minister Mary Ng.

Consumers will continue to carry the burden of a supply management system that benefits corporate and dairy industry players

The message is nothing but a coverup for Ottawa’s continued application of dairy trade barriers in contravention of rational economic policy and in breach of Canada’s various trade deals.

One of the trade deals is CUSMA — the Canada-United States-Mexico Agreement. Another is the CPTPP — the Comprehensive and Progressive Agreement for Trans-Pacific Partnership signed in 2018.

The U.S. launched a formal CUSMA dispute last year on the grounds that Canada has failed to live up to a commitment to begin opening up its market to American dairy products. The U.S. won the appeal, and Canada has been forced to come up with new rules that would allow more U.S. product to come into Canada at lower prices. But the new rules, announced Monday by Trade Minister Ng, fail to open up the Canadian market. Consumers who face 300 per cent tariffs on some products and routinely pay up to 30 per cent higher prices for a litre of milk will continue to carry the burden of a supply management system that benefits corporate and dairy industry players.

Ottawa’s continued protectionist tendency also damages other players in Canada’s food supply chain, such as members of the International Cheese Council of Canada, which represents Canadian importers and distributors who are locked out of the system. Patrick Pelliccione, the group’s president, said Tuesday that Ottawa’s failure to change the rules is “deeply disappointing.”

Ottawa has blocked dairy supply chains going back many decades. Recent trade deals looked like they might open the market, including one with Europe in 2015 that seemed to offer promise by allowing the import of 16,000 additional tonnes of retail cheese from Europe free of the normal protectionist 300 per cent tariff. Sounded good. Bring on more real brie!

Then came the reality. It was argued that only Canada’s giant supply-management protected corporate cheese processors would be allocated the bulk of dairy import quotas. As I wrote at the time, the consumer benefits of more imports would be gobbled up by Canada’s cheese industry. Lino Saputo Jr., head of Canada’s largest cheese maker, said then that he supported Canada’s other big cheese maker, Agropur, in asking Ottawa to allocate most of the 16,000 tonnes of cheese to such companies as Saputo and Agropur. The industry association filled in the cows–t. “The allocation of the import quota to those businesses directly involved in the industry in Canada and who understand the unique domestic marketplace would ensure orderly marketing of the new allocation in a manner that would have the least opportunity to cause disruption of the Canadian primary and processing industries while fulfilling Canada’s new obligations.”

That was in 2015. Canada’s processors got what they wanted a few years later when Ottawa signed the CUSMA deal. It seemed to allow Canada to maintain quotas on the imports of U.S. dairy products, including milk, cream, skim milk powder, butter and cream powder, industrial cheeses, cheeses of all types, milk powders, concentrated or condensed milk, yogurt and buttermilk, and other dairy products.

Last year, however, U.S. trade officials initiated a dispute settlement process on the grounds that quotas were being allocated to Canada’s big corporate dairy processors. Those processors — the Saputos and Agropurs — gobbled up the quotas and were then able to control prices and distribution. The independent panel ruled against Ottawa: “In Canada’s own official words, in 14 separate notices to importers, Canada has allocated 85 per cent or more of the amounts in each instance to processors. For each … Canada has limited access to an allocation to processors, which is inconsistent with the (CUSMA) Treaty.”

Ottawa on Monday essentially pretended to fix its trade deal transgression. U.S. officials and dairy industry groups are not satisfied.

But this is not over yet. New Zealand last week launched an identical challenge to Canada’s fake freer trade commitment under the Trans-Pacific trade agreement. A New Zealand dairy association said Canada’s system “breaks the rules” of the trade deal.

And there may be more trouble in the Canadian protectionist cow field in the months to come. Canada is negotiating a trade deal with the United Kingdom. Is the U.K. going to sign on to a trade agreement that would force Britain’s famous dairy products to slide into the hands of Canadian processors?

Maybe it’s a good time for Ottawa to end the “cows–t” and unblock Canada’s dairy supply chains.

Arla has confirmed that farmers and suppliers should expect an increase in prices paid for July milk supplies.

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