June 30, 2015

Got milk? Good - now throw it away. How the TPP might stop us from crying over spilled milk

Brett FawcettRebel Blogger

Well, certainly a lot of activist types are pretty freaked out by the Trans-Pacific Partnership, but the Canadian business community certainly isn’t. John Manley - who once impertinently tried to snatch the Liberal throne from its divine appointed dauphin, Paul Martin - now heads up the Canadian Council of Chief Executives, and he wrote Prime Minister Harper an open letter urging him to “take a leadership role” in ensuring that Canada becomes a part of this “historic opportunity to provide Canadian entrepreneurs and exporters of goods and services with access to almost 800 million new customers.” 

Orwell would smack me for using such a cliché idiom, but Manley is right: We need to strike while the iron is hot. General David Petraeus, the man who was essentially in charge of the Iraq invasion, penned a piece for Foreign Policy magazine observing that as “the traditional sources of global growth are slowing”- and here he describes the economic difficulties facing China, Japan, and India - “the three North American economies are poised to accelerate.” The General goes on to recommend various methods of economic integration between Canada, Mexico, and the United States as a way of clearing out any detritus that obstructs our path to becoming the engine of the global economy.

The biggest cloud on the horizon: The dairy industry.  Ever since the 1970s, Canada has had an official policy of “supply management,” as it is delicately referred to. What it means is supply restriction. Dairy farmers are penalized for having too many cows, ensuring a scarcity that keeps prices up - prices that are, by the way, set by a “marketing board” rather than by the, y’know, market. This protectionist bramble ensures that dairy farms, including the less efficient ones (25% of Canadian dairy farms produce 50% of the milk), are safe and comfortable from the withering and rarefying winds of competition.

It also means that Canadians spend, on average, $300 more on milk per year than they need to. Given that the poorest Canadians are also subject to this kind of extortion, this seems like an issue of social justice. Yet one of the concerns about the TPP is the possibility that it might blow this cartel’s power over the consumer to smithereens, and Mr. Harper’s Machiavellianism means that he needs to try to convince Canadians that the TPP is somehow compatible with supply management. John Manley is no longer in politics, and has the refreshing freedom to bluntly call for supply management to be dismantled.

He should be careful, though.  The last Liberal to anger the dairy farmers was Eugene Whelan, Pierre Trudeau’s Minister of Agriculture and the very man who instituted supply management in the first place, creating the Canadian Dairy Commission (the price-setting board) in 1970. Not good enough; in 1976, when the government failed to grant subsidies to dairy farms during the recession, farmers from Quebec threw diluted milk all over Whelan in public.

This is what happens when you start pampering an industry like that; before you know it, suddenly they feel entitled to all sorts of special treatment. 

I’d like to say that dairy farmers are not usually so prodigal with their product as they were when they protested back in ’76 (they are usually a lot more stingy about giving out milk,) but in fact a couple of weeks ago Ontario dairy farmers admitted that they were dumping excess amounts of skim milk. There has been an unprecedented spike in the demand for butter and cream, and all the leftover milk with the butterfat extracted simply doesn’t have enough market demand for it, so, it goes to the pigs.

This should surprise absolutely no one; this is the exact “socialist calculation problem” that Mises and Hayek identified in the early 20th century. If you don’t have direct market access, you can’t be sensitive to what demand will be, and adjust your production accordingly. This leads to wastefulness, which is, by the way, a species of sin.

But needn’t we protect our own? Isn’t that, in a way, a good enough reason for supply management? Certainly George Grant, the father of Canadian nationalism, advocated protectionism for no other reason than that it showed loyalty to your nation to be willing to spend a few extra dollars on a product simply because it was locally produced. Any argument that appeals to patriotism is one that a conservative should at least give a little credit to, although it hardly seems to strengthen the national spirit to pit a few rural areas in Ontario and Quebec against the citizens and consumers in the rest of the entire country. 

But if Australia and New Zealand are anything to go by, removing supply management has done nothing but good for their local dairy industries. New Zealand is today considered the “Saudi Arabia of milk” (a phrase so amusing I invite you to pause a moment to enjoy it), and its officials have encouraged Canada to follow its lead and drop its protectionism. Similarly, the head of the Australian dairy lobby has encouraged Canadian dairy farmers to relax and try out free trade.

Incidentally, a representative of the Canadian dairy lobby responded by accusing the Australian dairy industry of languishing since their controls were removed. It takes a lot of chutzpah to tell an Australia dairy farmer how his industry is doing; but, then, probably no more than it takes to tell Canadian consumers to shill out hundreds more dollars so that you can avoid having to face the same competition that every other business faces. An interesting research project: Look into the Australian “milk wars” waged between their dairy manufacturers over who can lower their milk prices more.

A couple of final points. From a moral perspective, I submit for your consideration this quote from the Catholic Compendium on Social Doctrine:

A truly competitive market is an effective instrument for attaining important objectives of justice: moderating the excessive profits of individual businesses, responding to consumers' demands, bringing about a more efficient use and conservation of resources, rewarding entrepreneurship and innovation, making information available so that it is really possible to compare and purchase products in an atmosphere of healthy competition. (347)

Does this sound like supply management?  This is, I would argue, not merely a question of economic efficiency. It’s also a moral issue.

One last thing: One of the concerns that has been raised about the TPP is the possibility that it would allow pharmaceutical companies to prevent cheaper drugs from reaching Third World nations, and thus enable them to keep the price of their own products artificially and unreasonably high. This is a legitimate concern well worth discussing, but if artificial price inflation is wrong for the pharmaceuticals working in the global South, why is it acceptable for dairy farmers selling to their own countrymen? 


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commented 2015-11-18 22:22:44 -0500
@sylvia, I realize you were pre-election trolling, but please stop spreading obvious lies. There was not one piece of legislation introduced by the Cons with respect to abortion or homosexuality that effectively became law. Harper specifically stated he would not reopen the abortion debate. You are approaching the lunatic fringe. With respect to his support of Israel, versus rapture… I never heard him quoting scripture, did you? I thought so, there you go reaching again. Your loaded statements are typical Liberal anti-Jewish hogwash. Your anti-Christian bigotry is truly shining through. I doubt Harper ever called his pastor for advice on foreign policy. Time to losen that tinfoil hat of yours. A society without morals is exactly what you got on election day, feel free to wallow in it.
commented 2015-10-09 11:27:28 -0400
I recall while living in Ottawa in the mid ’70’s the dumping of tanker trucks of milk into the Ottawa river was a regular practice to ensure we consumers had to pay the absolute highest price possible for our diary products. This cartel is not practicing supply management it is supply mis-management and nothing more than a mafia like operation,which should be disbanded just like the Wheat Board. I will go out of my way to boycott these products and welcome the much needed competition from other Countries. We have been held hostage and have been paying grossly artificially inflated prices for to long.
commented 2015-10-07 10:55:20 -0400
HARPER NEEDED TO MAKE ANOTHER INSTALLMENT ON THE RAPTURE Dear Editor: In Canada we have the right to religious freedom and to worship who we please, even if we believe that the moon is made of blue cheese or that there is no God and we’re just an alien experiment. HOWEVER, when you mix that religion with politics and start making policies based on your religious beliefs, then it becomes MY business.

The Christian Alliance Church, Evangelical Christians, believe that the earth is only 6,500 years old and all scientists are liars.

They believe that without Israel there can be no Armageddon and therefore no Rapture. Therefore Israel must be protected at any cost.

They do no support abortion or homosexuality and believe that those who aren’t born-again are “lost.”

WHO is the most PROMINENT member of the Christian Alliance Church in Calgary, Alberta? Canada’s Prime Minster, Stephen Harper.

Does this help you to understand where a lot of the policies that have been made in Canada stem from?

I am NOT against ANYONE’S religious beliefs, but religion and politics don’t mix and what is happening in Canada right now is a perfect example of why it doesn’t.
commented 2015-10-07 10:54:38 -0400
WAKE UP CANADA! Harper has been selling off Canada one piece at a time for 10 years. This was just another chunk of it. Won’t hurt you until it comes on YOUR doorstep. Will their be anyone left to help YOU.
commented 2015-07-02 18:24:43 -0400
ROBERT BARNES. I wasn’t paying those prices – it was a quote from a guy on another blog who lives near Hinton Alberta. He made his point.
commented 2015-07-01 18:33:22 -0400
The Dairy boards are just a price support front for another form of consumer funded gifts that pusillanimous politicians can spread among the noisy rent seekers who thrive in this country. The dairy crowd has had a good long run on our money and it is time for the party to end.
In addition to the financial waste, there is the small item that a substantial portion of the Quebec contingent are long term pur laine separatists. Let them do whatever they like minus our financial subsidies.
commented 2015-07-01 14:52:02 -0400
Jaime, if you are paying 4.99,for butter, $4.49,for milk and $2.99 for eggs, you can thank Safeway for gouging you. These prices are far in excess of the actual market rates for these commodities. Safeway is sticking it to you. Supply management changes are not going to change that. At my local grocer I am paying $3.29 for butter, $4.69 for 4L of 2% milk, and $1.89 for a dozen large grade A’s. It’s still too much and should be less – but you can see where Safeway is taking advantage of you, and where mine is taking advantage of me.
commented 2015-06-30 17:08:37 -0400
The thing tax-payers have to worry about is the amount of “compensation” for quota that the federal government will promise dairy farmers in the event that supply-management falls by the wayside as a condition of signing on to the TPP….after all, this is an election year. A commenter over on the Canadian Landowner Alliance blog put it this way:

“My wife and I rented a little RV in May and motored down through Montana. We stopped in Browning and we picked up a few groceries and my wife just dug up the receipt. Butter was $2.49 a pound, milk was $1.99 per gal, eggs were $1.29 per dozen. In our local Safeway this week butter is $4.99 a pound, milk is $4.49 for 4 liters, and a dozen eggs cost $2.99.

I guess what I am trying to say is that as far as I am concerned the dairy farmers and egg producers have already been well paid for their quotas."