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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