Dairy Protection Costing You Money
Canoe – Nov 9, 2010
Have you ever wondered why the cost of dairy products are
so high in Canada, when south of the border you pay about
40% less for a litre of milk?
It’s a topic that’s likely to get an airing as trade officials from
Ottawa seek to thrash out free-trade agreements from the
European Union to India. High tariffs on the import of dairy
products and effective subsidies to dairy farmers may be
harming Canada’s ability to negotiate at the global table,
think tanks and consumer associations say.“It is a barrier to
trade,” said Danielle Goldfarb, associate director at the Conference Board of Canada who
has written a study on the issue. “There are other sectors which want access to global
markets who feel their opportunities are in jeopardy because we are not able to offer
reciprocal access on dairy and poultry.”
Canada has controlled dairy production and management since the early 1970’s. The
policy shuts out cheaper foreign products by imposing tariffs of between 200% and 300%
on imports and sets prices and production levels through a highly complex mechanism.
The result is that consumers here pay more for the dairy products they put on the table.
According to the Conference Board that translates into roughly 60 cents more per litre of
milk than in the U.S. where the market is partially regulated and 64 cents more than in
Australia where it’s open.Last year, a 454-gram stick of butter set you back 94 cents
more here than the U.S. and $1.50 more than Australia.
“There is no question that quotas and import restrictions put up prices,” said Mel
Fruitman, vice-president of the Consumers’ Association of Canada. “If supply
management was removed the Canadian consumer would benefit.”“These are basic
groceries as even the poorest people have to buy milk,” Goldfarb said. “They are getting
penalized.”
According to the Paris-based Organisation of Co-operation and Development the system
results in a transfer of wealth of more than $2.4 billion annually from consumers and
food processors to dairy farmers.There are nominal amounts of dairy products that can be
imported at a low tariff rate. They work out at about one teaspoon per Canadian of
yoghurt. Also some food producers competing with other imports that use dairy, such as
frozen pizza, can import cheese at cheaper prices.
There’s a lot at stake. Canada is touting free trade as essential for the country’s future
growth and prosperity. The government estimates that the agreement with the EU, now in
its fifth round, could give a $12-billion boost to the economy here.The Indian accord,
which is at a much more preliminary stage may be worth between $6 billion and $15
billion, a joint Canada-India study found.However, the EU, where farm subsidies are also
a thorny issue, wants its dairy products to have access to Canada on an equal footing.
The Conference Board argues that Canada should be preparing its industry to take
advantages of the potential of free trade and exports, rather than protecting it, much as
Australia and New Zealand have done with their highly successful dairy industries.
“They are missing out on huge global opportunities,” Goldfarb said. “At the moment
there is little incentive to change or innovate and that’s not in the best long-term interest
of the Canadian farmer.”So far, calls to dismantle the current system have fallen on deaf
ears.“It’s an impossible lobby to break down because of the political impact,” Fruitman
said. “The dairy farm vote is extremely important to politicians.”