Saturday, 22 April 2017

Canadian Milkroad Trilogy

Three great reads on the insanity of Canada's dairy supply management system:

Trevor Tombe explains the consequences of supply management:
According to recent estimates from the OECD, the artificially high agricultural prices in Canada transfer $3.5 billion from consumers to producers annually — nearly $3 billion from milk alone. Spread over the 8 billion litres of annual production, it’s effectively a hidden milk tax of 37 cents per litre.

For producers, this is a big deal. At the end of 2015, there were just under 11,500 dairy farms in Canada. The $3 billion that supply management allows them to extract each year is equivalent to $260,000 per farm. Much of this is capitalized into the value of the quotas they are required to hold. A single one in BC and Alberta, for example, is currently worth roughly $40,000; in Ontario and Quebec, they go for $24,000. With nearly one million dairy cows in Canada, quotas are collectively worth tens of billions of dollars, an important cause of our country’s higher production costs.

This kind of system is highly regressive. The average dairy farmer had a net worth of more than $3.7 million in 2015, according to data from Statistics Canada, and poultry and eggs farmers were typically worth nearly $6 million. Meanwhile, low-income consumers face a heavy burden.

In recently published research, University of Manitoba economists Ryan Cardwell, Chad Lawley, and Di Xiang show that supply management costs the typical household the equivalent of $450 per year—and nearly $600 per year among households with children. For the poorest 20 per cent among us, that’s roughly 2.4 per cent of income; for the richest 20 per cent, it’s barely 0.5 per cent. Let that sink in. Those concerned about poverty, inequality, or living standards of the middle class (every politician’s favourite group) should oppose Canada’s milk tax.
Tombe sees an opportunity in Trump's push to level the playing field for American dairy farmers. So does Andrew Coyne:
That governments have been so unwilling to set aside a policy that is responsible for Canadian families paying two and three times the world price for basic food items, all to benefit a dwindling number of wealthy and aging, farmers (young farmers face a formidable barrier to entry, in the form of the cost of quota: more than $25,000 per cow) is one of the great dilemmas of public policy. If we have to enlist Trump to save us from ourselves, so be it.

We should not be too eager, however, given Trump’s view of trade: not as win-win but I win-you lose. To satisfy his need for conquest — and to show the domestic industry how doggedly it had fought for its interests — the government should protest in the most extravagant terms how much it would pain it to give it up. I envisage Canada’s negotiating stance here as resembling that of the submissive partner in an S&M role-playing game: “Oh, NOT supply management, Mr. Trump! You brute! Anything but THAT! No, DON’T ask that of us again, we BEG you…”

If we are very clever, we might pair this with a proposal for an offsetting “concession” on the American side. For example, the Montreal Economic Institute has suggested a deal (I see Maxime Bernier has lately taken up the same idea) in which, in return for Canada giving up supply management, the U.S. would cease its endless campaign of harassment of our softwood lumber exporters, including the threatened 25-per-cent tariff.
Finally, Colby Cosh finds some use for Canada's anachronistic 1970s system: reminding the kids about the horrors of socialism.
I hasten to add that I am not seriously playing the “Won’t someone think of the children” card so beloved of politicians, newspaper columnists, and other shameless scum. The four-year-old will get over it [not getting better yogurt to which she'd grown accustomed while abroad]. She’ll grow up in a free-trade Canada in which she does not have to accept a world of consumer second-bests, simulacra, and make-dos, except possibly in the dairy section. She can have no personal memory of Seventies Canada — never know what it is like to switch from Eaton’s to The Bay just to buy slightly different versions of the same low-quality, unfashionable crap. The question I grew up with was “Why does Canada have seemingly permanent poorer living standards than the U.S.?”; now it is just “Why are the cheese sections in our grocery stores so pathetic?”

It is almost enough to make one wonder: is there a political utility to keeping the ’70s dairy supply management system in place? Does it serve as a useful reminder — a subconscious warning — of what awaits us if we turn back to quotas and protectionism in our other industries? The cheese section may induce despair, but imagine, young folk, if the whole grocery was like that, and every other store too.
Cosh may be onto something. There's far too little appreciation in New Zealand of the 1980s reforms - all the benefits are taken for granted.

A gratuitous piece of non-dairy Canadiana as chaser:

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