NAFTA and Supply Management
Chief economist suggests no immediate danger to Canadian Ag if U.S. pulls out of NAFTA.
The eighth round of NAFTA negotiations begins on April 8 in Washington, DC. Amidst the uncertainty, predictions continue to roll in about the fate of many sectors, including agriculture.
With U.S. threats of tariffs to Canadian steel, many wonder whether Canada can hold out on its commitment to protecting our supply managed dairy sector.
Supply management is a marketing system that enables Canadian farmers in dairy, chicken, turkey and eggs to collectively negotiate prices for their products. Marketing boards for each of these groups oversee production and limit it according to consumer demands. Imports are restricted.
Though it has been criticized by economic liberalists who favour deregulation and free market access, the system helps to keep independent family farms immune from global market fluctuations.
The Canadian dairy industry has come under fire thanks to NAFTA renegotiations, but the sector continues to receive encouraging support from government.
In March, Kirsten Hillman, Canada’s Deputy Ambassador to the U.S., acknowledged that the U.S.’s goal of increasing market access to dairy remains a sticking point in NAFTA negotiations, but asserted Canada’s support of supply management.
“It’s a system that works well and the government will continue to stand up and defend it. This particular issue – this particular product – has never stopped us from concluding any high-quality agreements in the past, and I have no reason to think it would here,” Hillman told American ag news source Brownfield in Lincoln, Nebraska.
But despite government support, supply management has received its fair share of flesh wounds in recently signed trade deals, which have offered up market access.
Kelvin Heppner, from RealAgriculture.com, reported in January that commodity boards were “voicing concern about the cumulative effect of giving up incremental market access in multiple trade deals, including the Canada-EU trade deal, TPP and, potentially, a new NAFTA.”
The ink is still wet on the eleven-country Trans-Pacific Partnership (TPP) deal, signed on March 8 in Chile. Despite the departure of the U.S. last year, Canada gave remaining partners the same market access provisions offered in the original proposal.
Partnering countries now have access to small shares of the domestic market for each of the nation’s five supply managed sectors: 3.25 percent for dairy; 2.3 percent for eggs; 2.1 percent for chicken; 2 percent for turkey; and 1.5 percent for broiler hatching eggs. Many of the partnering countries hadn’t even asked for market share.
Currently, farmers and those working in the agriculture sector are generally confident in the Canadian government’s promise to defend the supply management system in Canada. But the lesson learned from the recent TPP deal has many wondering how many slivers of market share can be shaved off before the integrity of the system is lost.
Canadians concerned with keeping Canadian food on Canadian grocery shelves may want to keep a close eye on agricultural bargaining chips, both during NAFTA and in the future.