The Premier of Quebec has started to argue that Canada should change one small part of it’s support of the domestic dairy industry in order to appease Donald Trump and the US. This is incorrect. Canada should abolish in its entirety the system of dairy support in order to please its own citizenry. For it is, as if such a thing were possible, an even more ludicrous system than even the European Union managed to enact in its heyday.
So, this is wrong:
Canada’s largest dairy-producing province said the nation should reconsider its new milk price policy to ease tensions with the U.S.
Do note what he’s saying shouldn’t happen:
Canada’s supply-management system should remain intact and it seems like U.S. trade negotiators don’t think they can dismantle the nation’s system, Couillard said. While class 7 is separate from supply management, any negotiation must involve dairy farmers and the industry to avoid a “very, very negative reaction,” he said.
That is, the head of government of the province which has the largest concentration of Canada’s dairy industry is insisting that the basic system of support should continue but there could be a small cosmetic change. Funny that, really. But it’s that whole system which requires the abolition:
Supply management is the uniquely Canadian regime that governs virtually every aspect of milk, chicken and egg production. The system depends on three “pillars” – a tariff wall to block imports, strict quotas that determine how much each farmer can produce and fixed prices paid to producers. The system was created in the 1970s to help stabilize farmers’ incomes. But as the food industry has gone global, supply management has faced mounting internal and external pressure, including persistent trade complaints from the United States, Europe, Australia and New Zealand. The World Trade Organization has ruled that the high prices paid to Canadian farmers are subsidies, making exports very difficult. For Canadian consumers, supply management also means consistently higher retail prices for dairy, chicken and eggs.
It’s state planning of that farming system. Which works about as well as we would all think really. The specific thing that Trump has been complaining about is the price offered for “ultrafiltered” milk, used to make cheese and the like. Rather than the 270% import duties on milk that Canada imposes. Making milk and dairy so much more expensive for Canadians of course.
It’s also true that the US is by no means free market when it comes to dairy:
The United States has amassed its largest stockpile of cheese in the 100 years since regulators began keeping tabs, the result of booming domestic production of milk and consumers’ waning interest in the dairy beverage.
The 1.39 billion-pound stockpile, tallied by the Agriculture Department last week, represents a 6 percent increase over this time last year and a 16 percent increase since an earlier surplus prompted a federal cheese buy-up in 2016.
That’s the free market stock but it won’t be long before there’s a call for the government to buy it up, as has happened in the past.
The thing is the North American dairy market – actually, rather a lot of agriculture – is being ruined by excessive government interference and planning. They’d all do better to just abolish the system in its entirety. As New Zealand did, something that enriched both the farmers and the people. Instead of just tinkering at the edges of its dairy support system to please Trump, Canada should lead the way by abolishing their entire system.
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I suspect right now Canadians will fight to the death to preserve their right to buy overpriced milk.
Milk is one of the items that people living near the border will buy on cross border shopping trips, to the point that Americans have complained about all the Canadians at the Costco near the border, though in this case they are forgetting the reason the Costco is there in the first place is because of the extra Canadian business not just for the small town it’s based in
Yeah, Canadians do shop a lot across the border. Medical stuff too. But the Canadian dollar is presently down to about 75-76 cents US so it's not as beneficial as it is when their dollar is higher.
I am always skeptical when someone claims that receiving a larger number of less valuable units called "dollars" is some sort of something-for-nothing. Wouldn't Canadian dairy products have been marked up since the days of parity to reflect that the local unit of measurement now has less intrinsic value?
I don't understand the question. If they are crossing the border to shop they will exchange Canadian dollars for US to buy stuff in US stores, including American dairy products. Are those not now more expensive for Canadians, reducing the benefit of crossing the border to shop?
Yes, they are. But the drift in the respective units of measurement does not change the essence of the product. All that has happened is that the Canadian government has taken action to depreciate (rob value from) its currency (faster than the US has). If Canadians were completely free, Canadian wages and prices would immediately rise (in C$) to compensate.
Likewise, no one thinks that shopping in a place where products are measured in pounds rather than kilograms means you are getting "twice as much."
Tim has repeatedly showed why this gigantic pissing contest between Trump and foreign leaders, though conducted to let Trump bray that he is winning, winning, winning, operates by seeing whether Canada can shoot its citizens in the foot faster than the US can shoot its citizens in the foot. I agree that Canada should junk its dairy racketeering, not to please Trump but to do the right thing. American dairies take the collateral damage of having their products priced out of favor, but by far the most harm is in having the Canadian government reward Canadian dairies and punish Canadian dairy consumers. This is a negative-sum game, as compliance is costly, entry into the industry is inhibited, and people flock to Ottawa for additional favors at someone else's expense.
No government program should be evaluated on its good intentions but on what it is and what it does. The good intentions here are "to help stabilize farmers' incomes." There is no reason to do this (except to buy votes). The prices for stuff should be set not based on stability versus what they were last year, but on supply and demand, and not by government.
A real leader would get Trudeau into the cloakroom and offer him a deal: Eliminate all Canadian dairy racketeering in exchange for eliminating all American dairy racketeering, and we will both blame each other when the farmers squawk.
Subsidies allow the survival of the not-so-fit.