All Things Considered: February 2006

Canada’s supply-managed industries have pulled a remarkable political coup.

Canada’s supply-managed industries have pulled a remarkable political coup.

They have succeeded in getting a unanimous vote in the House of Commons in support of supply management, and have seen their system emerge unscathed (so far) from the current round of talks under the WTO.

It’s hard to decide which accomplishment is more remarkable. Getting unanimity in the Commons is a singular political achievement. While it’s likely true that many and perhaps most MPs support supply management, it’s also true that several and perhaps many have condemned the system in the past and will no doubt do so again in the future.

It’s also true that substantial forces outside of Parliament virulently oppose supply management. Least important are a gaggle of mainstream economists and the editorial writers at Canada’s largest newspapers. Much more important are Chambers of Commerce, associations representing food processors and small business, and a number of farm business groups.

If numbers and dollars were the measure of political power, supply management would be gone.

Fortunately, passion, organization and determination also count and that is where the supply-managed industries held all the trumps.

Leaders of the poultry and dairy industries fervently believe in their cause. The boards are extremely well organized, possessing the ability to effectively communicate with and inform producers. And, perhaps most important, they were determined not to lose.

Leaders of the supply-managed industries have been talking to and working with (occasionally it may have seemed they were working them over) federal and provincial politicians for years. They have spent as much or more time with government officials and the all-important political staff.

All that work paid off big time in Canada.

At the WTO, leaders stayed on top of all the issues and developments. They worked effectively with Canada’s negotiators and developed ties with nongovernmental and farm groups from other nations.

The payoff came in mid-December. While, as has been said elsewhere many times before, Canada stands alone on supply management, there are numerous countries with farm industries they want to protect and preserve.

The result was the development of a sensitive industries clause in the agreement that came out of Hong Kong. This could, and should, serve to allow Canada to protect its supply-managed system just as Japan and Korea could be able to protect their rice producers and other countries to protect their sensitive industries.

How far those protections will go and how they will be constructed are details to be worked out over the next four to six months. These details are not trifles. They are vitally important and will likely include the level of minimum access to protected markets, the nature and extent of the protections allowed (including TRQ’s) and the evolution of those protections over time.

In other words, while the leaders of supply-managed industries have successfully done yeoman’s work so far, their work isn’t done yet. The next four months could turn out to be as important as the last four years.

Producers’ work isn’t done either. The universal and staunch support they have provided their leaders and their work with politicians on the local level is paying dividends. It would be nice to take a break after all the effort. But it is too soon.

The industry leaders need to know that the producers remain firmly behind them and the politicians need to know that poultry and dairy producers expect their continued support.
In addition to allowing for sensitive products, the Hong Kong meeting also agreed to: wind down export subsidies; push for reductions in tariffs; and call for cuts in other subsidies.
The elimination of export subsidies comes 15 years too late. Through the 1980s and early 1990s these were major weapons in the U.S. and European arsenals, now they are popguns having been largely replaced by more effective internal subsidies.

While the WTO is calling for cuts to these internal subsidies it doesn’t appear much will happen on that front for five to eight years. This is unfortunate because the internal subsidies have become as production and trade distorting as the export subsidies were in the 1980s.