The Tories’ Massive Contradiction on Supply Management

Commentary, Economy, Frontier Centre


True to his name, the new International Trade Minister, Ed Fast, was quick out of the starting blocks following his elevation from the backbenches to the front line of the Harper cabinet.
In a credible debut at the Canadian Chamber of Commerce, he elaborated on the directions that the government would be following on trade matters. This was a timely and well crafted presentation, before Parliament had even reconvened, designed to show that the Harper government is dedicated to pursuing a focused trade policy.

The minister made the usual nod to completing the World Trade Organization’s moribund Doha round negotiations in Geneva but then went on to underscore the new government’s priorities in completing bilateral trade negotiations with the Europeans and moving ahead on a trade deal with India. No one can take issue with that. Canadian trade policy should pursue market openings for the benefit of Canadian goods and services exporters, particularly in major economic growth areas.

All of this looks fairly promising for the newly minted Trade Minister. As well, because the perpetual softwood lumber dispute has been temporarily settled by a side deal, he is not saddled, like so many of his predecessors, with being the minister for softwood lumber. With the consignment of this dispute to faraway arbitration panels in London, out of the NAFTA spotlight, Mr. Fast has the luxury of coming into office, as few recent trade ministers have been able, facing almost no serious Canadian trade irritants with the Americans.
That being said, there is one huge and very unsatisfactory element in the Harper government’s menu that, sooner or later, Mr. Fast should try to address. It concerns the Conservative government’s apparent unwavering commitment to Canada’s supply-managed system for dairy products, eggs and poultry. Given their mantra of less government intervention, it came as a surprise to see the Tory’s election platform listing supply management as one of the policies they would defend, come hell or high water.

It’s a massive contradiction for the Conservatives to adopt the long-cherished Alliance Party dream of dismantling the Canadian Wheat Board’s grain selling monopoly, on the one hand, while supporting massive state intervention and market distortions brought about by the tortuous and artificial combination of production quotas and price supports for dairy, eggs and poultry, on the other.

Those who benefit from supply management are mostly in rural Eastern Ontario and Quebec. In the latter case, support for the system did little for the Conservatives in the election, where they lost six of their previous 11 seats. In Ontario, with their urban breakthrough in Toronto, the Tories now may be less in debt to dairy and poultry-producing rural ridings. This may allow them to move away from their to-the-wall defence of the supply-managed system.

In pushing his cabinet colleagues for changes, Mr. Fast could rely on the support of reports of leading Canadian think tanks that have been highly critical of supply management, like the C.D. Howe Institute and the Conference Board, both of whom have said the present system distorts markets, harms consumers, inhibits innovation and reduces producer efficiency.

In terms of Canada’s outward-looking trade policy, our unyielding commitment to the supply-managed regime has put us at a disadvantage at the Doha round talks. True, the fact that the talks are now stalled takes pressure off Canada to make concessions. That may be cheered by the supply management folks, but it illustrates the limiting effect of this policy in relation to Canada’s larger interests.

With the multilateral negotiating efforts at the WTO seeming to go nowhere, the action is now turning to bilateral and regional initiatives. Among the most critical, and in which the United States is heavily engaged, are the Trans Pacific Partnership (TPP) talks. Australia, New Zealand, Indonesia, Singapore and potentially Japan are also parties. Yet Canada’s refusal to put supply management on the table is keeping us from joining in.

The negative symbolism in this is all the more ironic in Mr. Fast’s case, as not only the Minister of International Trade but also the minister for the Asia-Pacific gateway. How strange that he’s leading the Canadian government’s policy on bettering business relations with the Pacific Rim economies yet, because of our supply management policy, unable to commit Canada to the biggest trans-Pacific talks on the planet.