Business & Policy
The Big Question
By Jim Knisley
Whenever an acquaintance of mine
is asked to forecast the future he replies that he isn’t a
prognosticator he is “a petty, small minded, back biting journalist
better suited to autopsy than diagnosis.” He is wise. The only thing that is guaranteed about a forecast is that it will be wrong in either large or small ways.
The usual gaggle of critics continue to honk about the inefficiencies
of supply management while offering no ideas as to what the industry
would look like without it.
Within the industry there is great worry that a World Trade
Organization agreement would strip away border protection and undermine
the industry. This is a possibility and not a happy one for either
producers or the federal government.
To date the federal government has shown stalwart support for supply
management, but I don’t believe this is because it loves the idea of
high tariffs and protected industries. This goes against the entire
economic philosophy of the current government. But it is shrewd enough
to recognize that if supply management goes it will have a hugely
expensive quota compensation problem on its hands.
For this it is instructive to look at Canada’s small tobacco industry.
Concentrated in a tiny part of southern Ontario this sort of
supply-managed industry has been shrinking for years hammered by the
decline in the number of smokers, cheap imports and high taxes.
But the producers do have production quota and are demanding the
government buy it out. They have been negotiating for more than two
years and at first demanded $900 million for their quota. That is now
down to just over $700 million and dropping.
With only several hundred active growers left the government has dug in
its heels. Meanwhile, some of the producers have gone renegade. They
have given tobacco to some First Nations Reserves where the tobacco is
turned into tax-free cigarettes, they have held rallies, the have taken
to running convoys of slow-moving pick-up trucks along major highways
and they are getting better organized.
What happens with tobacco production would pale in comparison with any
quota buyout for poultry, let alone dairy. It would involve billions of
dollars and a lot more well-organized producers who are spread
There has been some talk about doing an Australia and increasing the
consumer price of dairy and other products to finance a quota buyout.
What is ignored is that Australia is a distant island. Most Canadians
have only a short hop to the U.S. and if prices up here jump so will
they right across the border.
So even if the WTO rules change to eliminate the current border
protections, I suspect the government will look for the loopholes in
the international agreement, find a few and exploit them to protect the
industry. To do otherwise would result in a world of political and