Policy reforms to help Canada’s dairy industry succeed
EDITOR’S NOTE: A recent study released by the Frontier Centre for Public Policy argues that supply management policies have left Canada’s dairy industry ill-prepared to compete in an increasingly liberalized international market. This three part series provides evidence that a serious problem exists, and offers policy solutions that can help make our dairy sector competitive.
This series has examined the possibility of a liberalized market in the Canadian dairy sector in order to identify areas of competition and competitive advantage. We have seen that while Canada is currently not well prepared to succeed in this area if liberalization were to happen overnight, that our producers do have several important advantages which can be leveraged to Canada’s advantage. In this final installment, we present a series of policy recommendations that will best situate the dairy sector to compete in the event that market liberalization is imposed on the industry as a result of international agreements.
1: Pursue Multilateral Agreements. Canada should support the Doha Round by seeking a realistic resolution to disagreements over agricultural industry reform. Canada should also collaborate with other countries with common interests, specifically those involved in increased access to emerging markets. International policy should work to secure the time needed to convert the domestic dairy industry from supply management to a liberalized system before forced by international trade pacts to open the industry.
2. Liberalize the Domestic Market: Policy needs to focus on transforming the dairy industry from supply management to a liberalized system by investing money to help farmers with the transition. Funding would help farmers adopt new technologies, learn new business models and improve managerial skills. This needs to be carried out with a strict protocol to ensure funding is used to effectively position farmers to compete in a liberalized market. Industry control should gradually be given back to farmers, who should be rewarded for production efficiencies.
3. Research and Development: Government-funded research and development is not considered a subsidy under international trade agreements, so it would be an acceptable way for the government to support the domestic dairy industry. Policy should aid research and development to facilitate Canada’s continuing advantages in the areas of genetics, land fertility and low-cost feed. Investment in research and development should be coupled with concentration on international and intellectual property laws that protect domestic investment.
4. Bilateral Partnerships: Canada should seek individual partnerships with emerging markets such as India and China. Policy should also seek to promote the export of low-cost dairy products that are most suitable for these distant markets (e.g., dry milk powders).
International forces are pushing the world towards liberalized markets for agricultural products. This may well mean, in the medium-term, that Canada’s supply management system will be replaced with a freer, market-oriented model. Rapid liberalization would present challenges for Canada’s dairy industry which, in part due to supply management’s legacy, is not currently well positioned to compete effectively in global markets.
However, freer markets for agricultural products will bring important benefits to consumers. Specifically, they will bring lower prices for dairy products. Furthermore, with enough foresight and planning, moving toward a liberalized market could actually benefit the domestic dairy industry by providing freer access to global markets. If Canada’s dairy sector is to thrive in a liberalized trade environment, policymakers must enact reforms designed to leverage Canada’s comparative advantages.
Our hope is that the debate on the future of the dairy industry will continue and will be followed with action. Time is limited and the dairy industry requires direction before the international community enforces a framework for which the Canadian dairy sector is currently ill-prepared.