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Canada's Dairy Supply-Management System Remains the Last of its Kind

Ottawa, October 19, 2012—Canada has maintained dairy supply-management policies long after similar countries reformed their systems or abandoned them altogether. What’s more, Canada is the only country to see its dairy production level off in recent decades, a study by the George Morris Centre for The Conference Board of Canada’s Global Commerce Centre.

“The continued presence of this policy has contributed to stagnating production, reduced Canada’s ability to negotiate for freer trade for all Canadian goods and services, and created incentives for individuals to allegedly smuggle cheese from the United States and resell at a massive profit in Canada,” said Danielle Goldfarb, Associate Director of the Conference Board’s Global Commerce Centre. “All of the evidence points to a definitive need to fundamentally examine the rationale of the supply-management system.”

The publication, Canada’s Supply-Managed Dairy Policy: How Do We Compare?, examines how the United States, the Netherlands, Australia and New Zealand dropped policies such as price supports, programs to remove surplus milk and/or production quotas.

“In all these countries, policy-makers have intervened to address dairy surpluses and increase prices for producers. Eventually, these policies were been phased back and eliminated, most commonly in the 1980s, and growth in these countries’ dairy industries has ensued,” said Al Mussell, co-author of the briefing,

This is a chart of milk production in Canada“To some extent, Canada has avoided this trend because its interventionist policy was not heavily dependent on government fiscal support. But Canada’s experience also differs in that it has not seen similar dairy market growth; milk production today is lower than it was in the early 1960s.”

The first briefing in the series described the Canadian dairy industry as in almost continuous flux since prior to the Second World War, leading to the implementation of a supply-managed system beginning in the late 1960s.

While Canada’s milk production has failed to grow since the 1970s, the other countries examined experienced growth after reducing their own interventionist policies. For example, U.S. dairy policy evolved from supports that established the price of milk to a more liberalized system. Meanwhile, U.S. milk production has grown steadily since the mid-1970s.

After Australia reformed its dairy policy in the mid-1980s with the intention of boosting exports, milk production came close to doubling within 20 years; production has since declined due in large part to severe droughts.

And milk production in New Zealand has literally tripled since the mid-1970s. Long a milk exporter, New Zealand lost its key United Kingdom market in the 1970s, and fiscal pressures in the 1980s led to the elimination of forms of protection and price supports for agricultural sectors. Although the number of farms decreased from about 18,000 in the 1970s to just under 12,000 today, the dairy cow herd has increased from about 2 million head to well over 4 million head.

Canada’s milk prices have been reliably stable, but have increased steadily since the 1980s. In comparison, prices in other countries generally stopped increasing in the 1980s, although they have also become more volatile.

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