Canadian agricultural prices higher than world rate, WTO says

A World Trade Organization analysis done last year has concluded that Canada's domestic agricultural producers are getting prices 11 per cent higher than world prices - due mainly to the supply management system that protects dairy and poultry producers.

That study has been cited in some of the many criticisms of Canada's protectionist policy posted by trade partners, including key participants in the Trans-Pacific Partnership trade negotiations that Canada was given permission to join this week.

"The report notes that Canada's domestic agriculture prices are 11 per cent higher than world prices due to domestic insulation from world markets," the Australian government said as part of the WTO's regular review of Canadian trade policies.

"Would Canadian consumers benefit from lower prices, and Canadian producers be more globally competitive, if Canada undertook further liberalization of the most heavily protected sectors?"

Questions about supply management were also posed at the WTO's agriculture committee during the review of Canada's trade policies by Brazil, Chile, China, Columbia, the Dominican Republic, the European Union, India, Korea, New Zealand, Thailand and Ukraine, says a Canadian government document obtained under the Access to Information Act.

Colombia, for instance, asked Canada "how it ensures that these support measures do not distort the domestic market price?"

In its replies to WTO members, the Canadian government didn't specifically address the issue of whether Canadian consumers are being gouged.

The queries at the WTO challenged the long-standing Canadian quota system for dairy and poultry producers that is supported by stiff tariffs on imports.

"Supply management is a system that ensures a stable supply of dairy, poultry and eggs to Canadian consumers and the agri-food industry," the Canadian government response states.

Agriculture Minister Gerry Ritz asked the media last November to produce a study which showed that Canadian consumers would benefit from the elimination of supply management.

He pointed out that a Canadian Tire flyer in his mailbox had four litres of milk on sale for $4.19 and a dozen eggs for $1.29.

"So I don't see this increased price to consumers," Ritz said, asking journalists to "show me an economic study where if the dairy farmers of Canada were disbanded, or the poultry farmers were disbanded, that somehow that would benefit consumers."

Ritz's office didn't directly challenge the WTO's findings but referred to reports and statements from industry groups protected by supply management which reject assertions that consumers are being gouged.

"Deregulation of the dairy systems in the U.K. and Australia has caused farm prices to come down, but consumer prices kept increasing with inflation," states the Dairy Farmers of Canada.

"The intermediaries simply increased their own margin after deregulation. Neither farmer nor consumer benefit from deregulation."

Former Liberal MP Martha Hall Findlay published a report this week in favour of dismantling supply management which cited Statistics Canada data stating that the average price of four litres of whole milk in Canada was $9.60 in Canada, compared to $3.68 in the U.S.

The Dairy Farmers of Canada, in response to Hall Findlay's report published by the University of Calgary's School of Public Policy, accused her of using "misleading" data in a "flawed" report.

The $9.60 figure is "$3 to $4 more than what most consumers pay. This misleading data does not match the experience of consumers in the Canadian marketplace," the organization stated.

However, even the $5.60 to $6.60 figure the Dairy Farmers of Canada says consumers pay for four litres of whole milk remains well above the $3.68 US figure cited in Hall Findlay's report, which is based on U.S. Bureau of Labor Statistics.

U.S. President Barack Obama announced this week that Canada and Mexico have been invited to participate in the ambitious TPP trade talks that already include the U.S., Australia, Brunei Darussalam, Chile, Malaysia, New Zealand, Peru, Singapore and Vietnam.

The U.S., Australia and New Zealand had previously resisted Canada's entry due to concerns about supply management and Canadian intellectual property law.

The Harper government has never budged from its 2011 throne speech commitment to "continue to stand up for Canadian farmers and industries by defending supply management - in all international forums and bilateral negotiations."

The government says it will continue to defend the system in the multilateral TPP talks, though it has also agreed that the matter will be the subject of negotiations.

"Canada has made clear to all TPP members that it would be prepared to discuss all issues as part of the TPP negotiations," states an October, 2011 Agriculture Canada briefing note.

"Canada has also indicated that we will not pre-negotiate or make down payments to join, and that the only appropriate place to discuss issues is at the negotiating table."

Poneil@postmedia.com

Twitter.com/poneilinottawa

Read my blog, Letter from Ottawa, at vancouversun.com/oneil

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