Canada’s supply management system for chicken, turkey, eggs, and milk is a highly protectionist set of policies that insulate Canadian producers from foreign competition, including American farmers, despite the North American Free Trade Agreement. Trump has made it clear that he wants supply management to end in NAFTA renegotiation. Both Americans and Canadians would benefit substantially from a deal that would end supply management tariffs and avert escalating trade war.
Abolishing supply management would open up an additional market of 36 million people to American farmers, which is approximately equivalent to adding another California to their consumer base. If supply management is dropped, it will substantially alleviate the pain of dairy glut that American farmers are currently experiencing. When there is an oversupply of any product, a simple solution is to expand the consumer base, and this is exactly what abolishing supply management will accomplish.
However, ending supply management is not just a win for American farmers, it is also a major win for Canadian consumers. The artificial burden created by supply management pushes as many as 189,000 Canadians below the poverty line every single year, according to award winning research from economists at the University of Manitoba. This research demonstrates that supply management has a tremendously regressive impact on Canadian consumers, especially poor working-class families. Canada’s supply management system inflates prices by upwards of $500 per year for each Canadian family. For low-income Canadians, this policy costs 2.3 per cent of their income. If Trump and his negotiating team hold their ground on supply management, it will allow American farmers to compete fairly in Canada while providing tremendous financial relief for low-income Canadians.
Protectionist supply management policies also cause an enormous amount of waste on both sides of the border. If a Canadian farmer produces more than their quota allows, they have to throw out perfectly good excess product. This means dumping extra eggs and milk, and for chicken and turkey, it means killing and dumping animals prohibited by supply management regulations from being sold. American dairy farmers end up wasting excess milk because Canadian tariffs make it impossible to export American milk.
Those who lobby for supply management, like the Dairy Farmers of Canada, and Conservative Party Leader Andrew Scheer, argue that getting rid of supply management could cripple the Canadian dairy industry. Luckily for farmers, there isn’t any evidence to suggest this is true. In fact, research in the Canadian Journal of Economics strongly suggests that getting rid of supply management would be a boon for Canadian supply managed farmers. If you are a Canadian chicken, turkey, egg, or milk farmer, the elimination of supply management means you no longer have government protection, but it also increases your consumer base by 325 million Americans. We already know what this type of trade relationship will look like when we compare how Canadians and Americans trade beef. Canadian beef ends up on American shelves, and vice versa for American beef on Canadian shelves.
As former member of Parliament Martha Hall Findlay noted, the dairy lobby in Canada is as powerful, if not more powerful, than the National Rifle Association in the United States. That control is the reason why Canadian policy-makers are holding up NAFTA to maintain selective benefits for only 13,500 farmers.
Canadians and Americans have the second largest trading relationship in the world. Each year over $650 billion in trade crosses the US-Canada border. Canada is the USA’s largest oil supplier, while the USA is the most popular tourist destination for Canadians. It is a major understatement to say the trading relationship between our two nations is important.
As a result of inability to compromise on NAFTA negotiations, the Trump administration retaliated by imposing tariffs on Canadian metal producers with 25 per cent for steel and 10 per cent for aluminum, which will devastate these industries. Calls to escalate this trade war have already begun, but Canada should resist this urge and offer an end to supply management to save NAFTA.
Removing supply management would help keep NAFTA intact, while benefiting farmers on both sides of the border, and providing financial relief for low income Canadians. If ever there was a time for President Trump to stand his ground, and for Canadian policy-makers to enact change, it is now. Luckily for both Canadians and Americans, change could be forced upon the Canada’s political system via President Trump and his NAFTA renegotiation team.
David Clement is the North American Affairs Manager for the Consumer Choice Center and a native of Toronto. Kyle Walker is the Senior Director of International Programs at Students For Liberty and native to a dairy producing town in Western New York state.