Dairy Farmers or Wolves in Cow’s Clothing

FDR used to say that the American farmer was the backbone of America. Likewise in many European countries the agricultural lifestyle is considered like a cultural legacy worth protecting. Canada has not escaped this neurotic infatuation with farmers. One needs to look no further than the advertising campaigns by Quebec dairy farmers to get an idea of how important to society they believe themselves to be. In Canada a more governmentally coddled group of individuals cannot be found, nor a less politically bullying. Ever heard of a politician getting elected on a promise to tamper with Canada’s agricultural supply management schemes? didn’t think so. In Canada to produce milk one needs to purchase a milk production quota. A quota cost $25,000 dollars in Ontario giving the average dairy farm owner millionaire status based on the sole value of his quotas.

Réjean Ouimet, a general manager at St Albert Cheese in Ontario, believes that the dairy supply management is the “best thing in Canada”. ”For a small co-op it makes life a lot easier, as we don’t have to deal directly with producers, worry about transportation or even quality control standards on farms.” That is reassuring. Essentially supply management makes dairy farmers lives easier. They don’t have to compete with each other, they don’t have to compete with imports too much (given tariffs on imports rising above 300% in certain cases), they don’t have to do anything but push a button or two and voila milk is arrived. Obviously their jobs are more complicated than that but their own testimony seems to imply their jobs could not be easier under any other system. So great, the then thousand or so dairy farm owners of Canada are richer, live easier lives than they would have in a free market but at what cost?

The first to be punished by the system are actually dairy farmers themselves, or at least prospective dairy farmers. On top of buying installation, cows, equipment, land and developing relations with processors dairy farmer wannabes must purchase onerously expensive quotas to start up a farm. Forget about innovation in an industry where the middle finger is flown at the face of all prospective entrepreneurs.

The second group of people to be punished are the consumers and not just in one way but indeed twice over. Firstly they must compose with higher prices. Some will argue that the benefit of high prices is less volatility in those prices, one wonders what your average motorist would say if he was to be guaranteed a litre of gas for his car at  $2 as opposed to a price that fluctuates between $1.25 – $1.50 ? He would be outraged and so should milk drinkers. The second manner in which consumers are miffed is in terms of choice and quality. With import duties being as high as 300% on certain cheeses good luck finding cheeses half the quality as in France at anything under twice the price. While it must be admit that certain cheeses from Quebec are quite good, that should bolster the case for free trade as local fromageries could then surely compete against imports.

While the above arguments are traditional when it comes to discussing the disadvantages of restrictive trade policy their is a much more pernicious cost imposed on Canada because of supply management and that cost is diplomatic. It is virtually universally accepted in Canada that NAFTA was a resounding success. Since then Free Trade Agreement negotiation has become something of a political sport. Canada is already on the road to becoming the first nation to have FTA’s with three of the World’s four greatest economies (US, Japan, European Union). Virtually all economists (outside of academically backward countries like France et al.) agree that untampered and reciprocal free trade is in everyone’s benefit. Canada’s dairy farmers are vehemently against FTA’s that imperils their economic rentiers status. Canada has already been shut out of the Trans Pacific Partnership groupe of free trade negotiating countries on the basis of supply management. How many more FTA’s do Canadians want to deprive themselves of to protect the wealth of a small group of individuals?

Why should Canada have more rather than less dairy farmers. Their is an almost perfect negative correlation between per capita wealth and share of population in agriculture, which means the less agrarian a society is the more wealthy it is. Do Canadians really want to be less wealthy? In any case for those farmers afraid of loosing their livelihoods to a liberalized dairy product market, they can be pointed to New Zealand as an example which became a World leader in dairy product exports, since abandonnement of its supply management schemes decades ago! Few industries hurt Canada as much as dairy farming, it’s time Canadian politicians stopped kissing their butts and started kicking them instead.