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July 17, 2008
Too Chicken to End Supply-Managed Agriculture
Next week, agriculture ministers and trade negotiators from around the world will meet in Geneva. One way or another, the beleaguered Doha round of negotiations at the World Trade Organization (WTO) will lurch toward the finish line. What conclusion this will have -- a successful opening of world markets or the first failed round since the Second World War -- depends upon governments around the world.
A reasoned examination of the issues would lead a logical person to conclude that the Harper government would champion the new proposals. If implemented, the new drafts would substantially free our agriculture industry as well as open up new opportunities for our manufacturing sector.
Have our federal ministers of agriculture, industry and international trade fanned out across the globe to push for a successful outcome? Sadly, the answer is a resounding no.
The only federal response came from the minister of agriculture and agri-food, Gerry Ritz, who stated, "Canada has serious concerns" with the draft text on agriculture.
Why has this occurred? It is because 10 per cent of farmers -- those producing milk, chicken, eggs and turkey, or the so-called supply-managed sector -- have convinced politicians that elections will be lost if there are any changes to our tariff walls.
How high are these tariffs? In some cases, butter for example, Canadian tariffs exceed 300 per cent. This means the price of imported butter triples before consumers see it. Our dairy lobby maintains that dairy farmers are unable to compete and will be driven out of business if this tariff is reduced by any amount.
This has led to a ridiculous Canadian negotiation position. Canada is asking the world to make substantial cuts to all of their tariffs so our exports can flow more freely. We are asking other countries to cut their subsidy programs so our farmers can better compete. Yet, our negotiators are instructed to walk out of the room if there is any talk of lowering our protective trade barriers.
Some would argue that this really does not matter. They say Canada is a small player at the WTO, and the government can play politics at home with few, if any, consequences. This cynical outlook is dead wrong; it has damaged negotiations in the past, and it could contribute to the failure of this round of negotiations.
In the past few years, this position -- which was in place under both the Liberals and the Conservatives -- has blocked progress in the negotiations. The WTO works by consensus, and objections from one of the world's largest agriculture exporters (Canada is the world's fourth-largest agricultural exporter) can scuttle any deal.
Why should ordinary Canadians care? A successful conclusion to this round of negotiations would bring benefits to both urban and rural Canada. Research indicates that a successful agreement would result in an increase in income of more than $3 billion in agriculture alone. This would generate wealth on the farm and create processing jobs in towns and cities from coast to coast. The agriculture proposals would be undeniably good for Canada as a whole.
A successful trade deal would begin to control the obscene subsidies our competitors have dumped on their farm sectors. These subsidies have kept our farmers on the edge of bankruptcy for the last 20 years.
It is hard to see a downside. Canadian consumers would get better access to lower-priced dairy, eggs and poultry products. More than 90 per cent of farmers in Canada depend upon export markets, and these producers would get better access to foreign markets and would no longer have to compete against the treasuries of Europe and the United States.
This round of negotiations is not just about agriculture. Although removing some of the barriers to agricultural trade is a key focus, the WTO is also negotiating better access to manufactured goods.
One would think our government would welcome the opportunity to expand trade opportunities for our manufacturing sector. This is especially true because our manufacturing heartland in Ontario and Quebec is teetering on the edge of recession.
Canada should be doing all it can to diversify the customer base beyond its largest trading partner. This is even more relevant given the current economic conditions south of the border. The draft proposals put on the table on July 10 would help to accomplish this goal.
But the Government of Canada continues to, in the words of our minister of agriculture, "firmly oppose proposals for any over-quota tariff cuts or tariff-quota expansion."
Bad politics has trumped good policies. The very effective lobbying by the few farmers opposed to reform (fewer than 10 per cent of Canadian farmers are in supply management) has moved our government to profess a position that is bad for Canadian agriculture as a whole, bad for the Canadian manufacturing sector and bad for Canadian consumers.
Canada can still have a positive impact on the negotiations. There is still time for ministers to go abroad and fight aggressively for a successful deal. Failure should not be an option even though it is the preferred outcome for a vocal few.
is the founding President of the Frontier Centre for Public Policy, an award-winning western Canadian based public policy think tank. Since its founding in 1997, Frontier has brought a distinctive and influential Prairie voice to regional and national debates over public policy in areas such as core public sector reform, housing, poverty, aboriginals, consumer-focused health care performance, equalization, rural policy and much more. Of the nearly 100 recognized think tanks in Canada, Frontier is one of only 5 to make the 2008 global "Go-To Think Tanks" list published by the Think Tanks and Civil Societies Program of the Foreign Policy Research Institute in Philadelphia. Mr. Holle has worked extensively with public sector reform and has provided advisory services to various governments across Canada and the United States. His publications have appeared in various newspapers and journals including dozens of newspapers, the National Post and the Wall Street Journal. He has a Masters of Business Administration from the University of Wisconsin at Madison. He is a member of various organizations including the Mont Pelerin Society, an international organization of classical liberals.