OTTAWA: The polarized debate on the future of Canada’s supply management system is ignoring current challenges on imports, exports and international subsidies – issues that “pose a significant threat” to the Canadian dairy sector, a new policy report warned.
In a new report released, the Canadian Agri-Food Policy Institute, an independent Ottawa based think-tank, said Canada’s dairy sector is being “seriously squeezed and faces a growing trade deficit.”
High levels of milk protein imports, thanks to surging consumer demand for yogurt and protein drinks, coupled with restricted dairy exports pose a “significant threat” to the current system, the report reads.
“This is hardly a growth formula for one of Canada’s largest agri-food sectors” the report notes, a challenge made more difficult because “Canada can’t unilaterally expand its dairy exports.”
Under a 1995 World Trade Organization agreement, Canada’s export potential is restricted.
While Canada’s supply management system allows for exports, CAPI’s report notes “the current structure of (Canada’s) production and pricing arrangements was found to create an export subsidy on dairy products.”
Addressing the pressing import/export issues, which CAPI says will be further strained when the Canada-EU agreement is finalized, isn’t the only concern raised in the three-page policy report.
Under the Canada-EU agreement, which has yet to be ratified, the federal government granted more than 17,000 tonnes of additional fine cheese quota to the European Union. The federal government has promised compensation to the dairy industry if it’s needed.
Canadian industry and government officials should also “become a global advocate for the elimination of foreign government subsidized agricultural practices,” said the report.
“We need to start paying attention and start advocating for transparency and assessment of these global subsidies, indirect and direct,” said David McInnes, president and CEO of CAPI.
Canada’s ability to compete globally depends on it, he added.
International competitors, McInnes said, can use this “complex array of subsidies to produce, if not overproduce” goods. The surplus, is then used to “win export markets around the world.” Since Canada doesn’t have the same “level of of subsidies, nor have the same indirect subsidies,” it becomes a difficult environment to compete in, he said.
“No wonder we have a challenge in processing here to get access to lower-cost ingredients,” McInnes said. Canada’s global competitors, such as the United States and New Zealand, “are tilting the debate against us.”
Attention should also be brought to indirect subsidies that are not reflected in current world milk prices, the report notes.
“The American dairy sector in areas of high drought are tapping into the aquifers to supply feed and water for the dairy sector, but that’s not priced into the product,” McInnes said.
CAPI’s paper, which also considered issues around sustainability in the global dairy markets, comes as Canada’s dairy sector continues to face heavy international and public scrutiny.
Australia, New Zealand and the United States are demanding more access to Canada’s domestic dairy markets under the proposed Trans Pacific Partnership (TPP) currently under negotiation.
Meanwhile, Canada’s dairy industry, along with both the Liberal and NDP agriculture critics, is worried TPP could significantly undermine Canada’s supply management system.
Agriculture Minister Gerry Ritz has said Canada will not be bullied into making agriculture concessions, while International Trade Minister Ed Fast has pledged to defend the system at the negotiating table.
