by Christopher Kelly-Bisson (@chrysbisson)Dairy Industry 04

In an interesting cross between an agricultural fair and a political protest, an estimated 70 tractors lined Wellington Street  in front of Parliament Hill on Sept. 29. There was one common message that seemed to emanate right from the drone of engines; the Canadian supply management system works and no concessions should be made in negotiations over the Transpacific Partnership (TPP).

“We are here today because Canada and US and 12 other countries are negotiating the Transpacific Agreement, and rumour has it that Canada might let go of 10 per cent of our market. We think that we don’t want to make concessions on that because that will drive the price down, and also that would bring cheap American milk into Canada,” said Phillipe Etter, a young dairy farmer who drove in from Sarsfield with his tractor. “Supply management works,” he said. Farmers get a fair price for their milk, consumers get a fair price when they buy our product.”

After a week long period of negotiations, 12 parties representing 40 per cent of global production finally signed an agreement that is expected to turn the Pacific Rim into the world’s largest free trade zone. In the press conference that followed, Prime Minister Harper spelled out the terms of the agreement: “We made a firm commitment to defend Canada’s system of supply management, we have accomplished that,” he claimed. “In our dairy sector, for example, we have limited access to just 3.25 per cent of our market.”

Harper’s claim to have saved supply management resonated well for his campaign. Later that evening, stories ran of some dairy farmers sighing relief that Harper did not give away a full 10 per cent market share. However, it didn’t take long for this deal to curdle.

Canadian dairy is a $19 billion industry that employs 214,000 people. The new 3.25 per cent concession accounts for about $600 million of this industry, a respectable amount of income that will be sunk into foreign markets as domestic markets take advantage of tariff-free imports. However, this is still better than the proposed 10 per cent concession which would have taken close to $2 billion out of Canadian domestic production. Les Producteurs de lait du Québec estimated that this market shrinkage would have resulted in a loss of 30 to 40 thousand jobs, mostly in Ontario and Quebec. No estimates are available yet as to how many jobs could be lost in the dairy sector from the agreement that was signed.

It is difficult to predict the negative impact the TPP will have on quota value, but the Conservatives have already promised a ten-year $4.3 billion subsidy to compensate for losses in farm revenues.

However, farmers have been saying that such promises are not enough. “We don’t want subsidies. In the United States, with the Farm Bill, a dairy farmer gets $20 billion in subsidies, but the price remains unstable, ” said Peter Strebel, a dairy farmer located south of Montreal.

“Most industries operate on a just-in-time schedule, but in dairy we have to plan two or three years in advance and, once it’s made, you have 48 hours to sell it or it’s lost,” Strebel explained. “So if your prices are going up and down, it makes it very difficult to plan properly.”

However, current trade agreements have raised concerns that subsidizing losses might not even be possible under a free-trade environment.

All of this puts an incredible amount of uncertainty in the hands of farmers. For young farmers like Etter, it is especially discouraging. “I just took over my family farm, so I did take on a lot of debt. If tomorrow morning my milk price goes down and I have no market for my milk, I would have to shut down.”

Food safety would also be compromised by the TPP. Canada has some of the highest health and environmental standards for milk quality in the world. Joining the partnership could compromise these standards since American producers use additives that are currently banned in Canada.

Strebel raised the concern that Canadian food safety infrastructure could not even handle an increase in imports. “With technology, processing has developed faster than inspectors can match, so there is already lots of modified milk substances coming in and wrongly labelled,” he said. “An increase in imports would only make this worse.”

Besides introducing greater risk at the consumer level, shelf prices are not even likely to decrease either. Strebel clarified that, “most often, producers get a lower price. Dairy processors get a lower price because they are the ones that kind of have to manage surplus. [It’s the] retailers and distributors mostly, they make a bigger margin on dairy products.” So even with lower prices coming out of the farm gate, the only ones likely to benefit are the largest Canadian food companies.

Canada is not the first country to experiment with deregulating its system supply management in dairy production and as Etter recounted, they had a message for Canadians.

“Other countries… that let the quota system go, they are telling us… to keep our system because we have bargaining power,” he explained. “The day that you lose supply management, you pretty much just take what the market price is going to give. And let me tell you, it’s not big processors that are going to take the loss, it’s farmers.”

For more information on the TPP, take a look at Kelly Bisson’s other article on Supply Management. 

This article first appeared in The Leveller Vol.8, No.2 (October 2015).