Stop crying over free market milk

Worth A Look, Agriculture, Frontier Centre

When Canada’s dairy farmers announced that they would rally this week in Ottawa, many of us in the restaurant industry assumed it was to thank the Canadian Dairy Commission for approving yet another generous increase in the price of industrial milk. After all, the farmers’ own figures show that it costs less and less each year to produce the milk (and they are to be congratulated on their efficiency), but the CDC keeps on pushing the prices higher — $316-million higher for the restaurant industry alone over the past five years.

As it turns out, however, the dairy farmers were actually protesting in Ottawa. Not only do they want dairy prices to be even higher, they also want the federal government to further protect them from that free-market phenomenon known as competition. Dairy farmers want the government to stop prepared food products made with lower-priced U.S. ingredients from crossing the border into Canada. These include popular food products such as ice cream made with non-dairy ingredients. Because consumer demand for these products is growing, Canadian dairy sales are suffering, say the dairy farmers.

One has to admit, it’s a novel approach. When consumers turn to new products that eat into your market share, simply get the government to ban those products! Of course, this strategy won’t work for every industry, or even for most other agricultural sectors. The dairy producers have a distinct advantage when it comes to dictating consumer choice: They are one of a small minority of farm groups protected by the anachronism known as supply management. This gives them the power to control supply and prices and, apparently, to tell consumers what’s good for them.

There’s a lot more at issue here than what kind of ice cream is available in your local grocery store. Short-sighted demands by the dairy farmers threaten their future viability as well as opportunities for other farm groups that are ready, willing and able to compete in a global market.

Why does the restaurant and foodservices industry care about this issue?

Because we spend more than $14-billion a year on food and beverage inputs, and depend on a strong Canadian agricultural industry for our success. For example, restaurant operators purchase $2-billion a year in Canadian dairy products alone. In addition, they invest millions of dollars each year to develop new menu items that build demand for these products. If Canada’s dairy sector is unwilling and therefore unprepared to make a successful transition to more open markets, it will be our loss too.

Following the World Trade Organization agriculture round of talks in Doha last year, Canada’s International Trade Minister and his counterparts from more than 140 other countries issued the following declaration: “[The objective of the current agriculture negotiations] is to establish a fair and market-oriented trading system through a program of fundamental reform.” In other words, the issue isn’t whether trade barriers will be reduced, the issue is when and how the transition to more open markets will occur. Trade negotiators from around the globe have not been working for the past three years to keep things the way they are today.

Indeed, Canadian agricultural negotiators at the WTO are working to open up new markets for Canadian agricultural products. But under pressure from dairy farmers, the Canadian government has refused to put supply-managed commodities on the table at either the WTO negotiations or the African development agenda. As a result, Canada’s negotiating power is considerably diminished when it seeks improved market access for Canadian agricultural products, but refuses to discuss Canada’s market access barriers for dairy products. These barriers take the form of tariffs of up to 245% on dairy products entering Canada. To put this into perspective, beef import tariffs sit at about 18%. It is both naive and hypocritical to expect our trading partners to open their markets to our products, while Canada maintains selective triple-digit tariffs.

This untenable trade position has worrisome ramifications for Canada’s agricultural sector and, by extension, the country’s $42-billion foodservice industry. By caving in to dairy farmer demands to defend the status quo,
Canada is shutting the door on opportunities for other Canadian farmers and exposing the dairy industry to unfavourable, last-minute compromises at the WTO, including the possibility of an immediate dismantling of market barriers. This would inevitably lead to a serious disruption of domestic production of dairy products — a situation that is of enormous concern to Canada’s foodservice companies, which require a reliable domestic supply of these fresh ingredients.

Rather than marching on Ottawa, Canadian dairy farmers would do far better to proactively negotiate the timetable for a manageable transition from supply management to freer trade. Yes, it will be a challenge to relinquish their monopoly and compete in an open market. Yes, it will be a challenge to build successful export markets.

But as an exporting nation, Canada should be encouraging all of our industries to be globally competitive. Many other agricultural sectors have already demonstrated that they are efficient and innovative enough to successfully compete with the world. Dairy farmers can do it too.

Stephanie Jones is vice-president of food supply for the Canadian Restaurant and Foodservices Association.

© Copyright 2002 National Post