The media assault on supply management

Monday, January 2, 2012

Maclean's national editor Andrew Coyne has led the charge against supply management. But University of Waterloo history professor Bruce Muirhead has emerged as a defender, with George Morris Centre economist Larry Martin taking the middle ground

by DON STONEMAN

University of Waterloo history professor Bruce Muirhead points to an article published last year in New Zealand's Waikato Times and wonders why the critics of Canada's dairy supply management system look to that country as an example of how dairy trade ought to work.

"Milk's on the luxury list," says a Times headline over a Feb 16, 2011, story reporting that milk was selling for NZ$4.80 (C$3.56) for two litres at a popular discount store. The story says the same quantity sold for NZ$3.94 in June of 2009 and goes on to say that health officials are linking concerns about malnutrition to the high price of milk, because alternative soft drinks are cheaper.

The same story quoted a farmer as receiving NZ$0.80 per litre for milk sold from the farm. The farmer was a shareholder in the co-op Fonterra, which charges the same for milk sold domestically as for milk made into dairy products on mercurial world markets. Those market shifts are why milk prices change so much in New Zealand stores. The article quoted a farmer who felt badly that consumers might hardly be able to afford the milk he produced, while another farmer said he wasn't willing to subsidize consumers.

Muirhead describes the New Zealand dairy juggernaut Fonterra as a "co-op with a country rather than a country with a co-op" and cites the Kiwi economic model as an example of free markets gone awry. Local consumers are victims of the co-op's international success and pricing a food as essential as milk on the free market makes no sense, he says.

Muirhead has emerged as a defender of Canada's supply-managed dairy system. His point of view is just one in an increasingly strident debate over the future of supply management with the focus on the dairy industry.

On the other side is Maclean's magazine national editor Andrew Coyne. Thérèse Beaulieu, a spokesperson for Dairy Farmers of Canada (DFC), says Coyne's Aug. 15 opinion piece entitled "The $25,000 Cow," (referring to the value of the quota required to market a cow's milk production) was in the vanguard of a series of attacks on supply management in newspapers. Last fall, Toronto-based public relations firm Enterprise Canada sent Muirhead's name to media outlets as a possible resource in responding to what senior vice-president Brian Fox describes as "an attack" on dairy pricing by the Canadian Restaurant And Foodservices Association. DFC hired Enterprise Canada to get its message out. Neither DFC nor Enterprise Canada paid Muirhead to do research or to speak on behalf of supply management. "His research was already done," Beaulieu says.

Muirhead is part of a multinational team of researchers on a global project sponsored by the Norwegian Research Council. Norway, which Muirhead describes as mostly one generation away from being farmers, is looking for policy advice on how to approach agriculture in light of global warming.

Muirhead, who lives in Elmira, contacted DFC because he was unable to get his letters published in Maclean's and other publications that attacked supply management. "Piling on" is how Fox describes the collective assault in newspaper opinion and editorial columns that followed the Maclean's article, focusing on Trans-Pacific Partnership talks.

In late November, Muirhead and DFC vice-president Ron Versteeg faced off against Maclean's Coyne and George Morris Centre economist Larry Martin on TVO's public affairs program The Agenda. In an interview with Better Farming later, Muirhead says Coyne's figures on the cost of milk "were incorrect." Accompanying Coyne's opinion piece, Maclean's published figures from the Organisation for Economic Co-operation and Development (OECD). But, says Muirhead, "the OECD has a funny way of calculating" its numbers and shouldn't be regarded as a neutral body in any trade debate. "They talk about the perfectibility of the force of markets . . . regardless of the cost, or even whether it is sustainable," which he says New Zealand's system is not.

Perhaps not surprisingly, George Morris Centre's Larry Martin, a supply management critic, disagrees with Muirhead on a number of points. He sees the OECD "mainly as a data source." The prices Muirhead pointed to in the Waikato Times story are "one point in time," he told Better Farming. Martin doesn't have access to long-term dairy pricing information in New Zealand to disprove Muirhead's charge that consumers suffer, but if prices are out of line, he says, the market demand will balance them out.

Martin and Muirhead agree that Coyne is incorrect when he asserts that dairy prices in Canada are set by the high tariff walls on processed dairy products. If there were a relationship between 300 per cent tariffs on butter imports and American prices, butter in Canada would cost nearly $9 a pound when American butter cost US$2.20 and butter clearly doesn't cost that, Martin says.

When American butter prices were at their recent low of US$1.20 a pound, a 300 per cent tariff would have pushed butter prices here to $4.80, but at the same time the Canadian Dairy Commission (CDC) set a support price of $3.16. (The CDC says support prices are used as references by provincial marketing boards to price industrial milk used to make yogurt, cheese butter and skim milk powder.) Martin's point is that the tariff wall is much higher than it needs to be to keep out butter and other dairy products and stabilize production.

Martin wants to dispel misconceptions about supply management, and its effects on trade talks. Supply management is not holding up the Doha Round of World Trade Organization trade talks. But, he adds, "it is also not helping it." 

Martin disagrees with Muirhead's assertion that the Trans-Pacific Partnership talks are irrelevant to Canadians because Canada doesn't need to trade with tiny New Zealand. Martin says a successful negotiation in the Pacific talks would gain Canadian access to markets in other countries that New Zealand trades with, such as Singapore and Japan.

(Australia, the United States, Malaysia, Vietnam, Brunei, Chile and Peru are also negotiating in the pact.)

Martin says that, while the cost of some dairy products in the United States can be measured at the commodity level, there are no good measurements for what consumers pay for milk. "I have seen all sorts of numbers," Martin says. "It is difficult to make a comparison. Dairy is not traded like grain. It's really hard to distinguish what a world price is . . . not much product is traded internationally."

Martin thinks neither Muirhead's position of keeping supply management as it is, nor Coyne's assertion that it should simply be abolished, is the answer as trade discussions evolve. He argues that tariffs could be negotiated downwards without compromising actual access to markets in Canada.

"What is wrong with giving up 23.5 per cent of the tariff protection, which is what I am told the WTO proposal would have done on dairy over five or six years . . . if it is going to give us market access to something else in other countries. In my view the rigidity of both positions is not warranted.

"Why are we having a conversation about ending supply management when there is a compromise position that would not hurt anybody and might help some people" such as meat producers. "I don't get it."

Martin says, with a chuckle, that, since the TVO debate, some supply management supporters have described him to his face as "the voice of reason" in the debate.

Unless the protagonists come around to Martin's apparently reasonable view, the arguments over supply management won't go away soon. In early December, the CDC increased the support price for skim milk powder and butter in Canada, effective Feb. 1, 2012. Increases in support prices typically trigger protests from restaurant lobbyists and more opinion pieces in newspapers and magazines.

Muirhead went to Europe for a week in early December to look at records on dairy production and trade in libraries of the OECD and the European Union. He is going to be a speaker at a DFC policy conference in February, says Beaulieu.

Muirhead looks at food trade as social policy, not just economics. In 2009, he says, the United States re-launched export subsidies to bolster food exports and the European Union reacted with their own a week later. Muirhead calls that "criminal" because Third World farmers are forced out of business and consigned to poverty, misery "and even starvation."

In the Norwegian project, Muirhead has partnered with Hugh Campbell of the Centre for Sustainability, University of Otago. They conclude that Canada's supply management system is "potentially more resilient to future shocks than is the New Zealand model" in light of global warming, increasingly high fuel costs and criticism of animal agriculture aimed at its associated environmental costs.

Muirhead and Campbell are contributors to a book about agriculture entitled "Rethinking Agriculture Policy Regimes: Climate Change, Food Security and the Future of Global Agriculture."  It will be published in the Spring by Emerald Publishing in London, U.K. BF