Canada is opening the taps to dairy from foreign competitors as part of the Trans-Pacific Partnership deal and though the new imports may just seem like a trickle right now, some say the leak could mean the beginning of the end for supply management.
Details of the TPP released Monday include allotting 3.25 per cent of annual production to foreign dairy products entering Canada, to be phased in over the next five years with an increase in exports from the 11 other TPP countries that will annually displace about 250 million litres of Canadian milk.
“There seems to be this slow erosion of our supply management principals, which is really based on one premise: producing what we need domestically, and that’s it,” said Sylvain Charlebois, a professor at the University of Guelph’s Food Institute.
“This gives dairy farmers the opportunity to shift their model in order to compete in the global market place, which is something they’ve never had to do before.”
This new deal will give $4.3 billion in federal government compensation to Canadian dairy and poultry farmers in order to offset any losses to foreign competition. For a typical dairy farmer, that works out to approximately $165,600 over the next 15 years.
“We have promised that we would keep our system of supply management and we have assured now that we will have free trade access to most of the global economy in the Asia-Pacific, in the Americas and in Europe while making sure we are able to maintain our system,” said Prime Minister Stephen Harper after the TPP was signed in Atlanta Monday morning.
Many in Canada’s dairy farming industry have reacted to the agreement with trepidation, following fierce opposition during TPP negotiations to any measure that could threaten the supply management system.
The Dairy Farmers of Canada say the milk displaced by this agreement will never again be produced domestically, and will result in “perpetual lost revenue for our farmers, and for the Canadian economy.”
“We obviously would have preferred that no additional market access be conceded in the dairy sector,” said DFC president, Wally Smith, in a news release Monday. “However, we recognize that our government fought hard against other countries’ demands, and have lessened the burden by announcing mitigation measures and what seems to be a fair compensation package.”
There are about 12,000 dairy farms across Canada, about half of which are in Quebec.
La Coop fédérée, the largest agri-food organization in Quebec, says it is “disappointed” with the deal and is calling for additional studies on the long-term affects to supply management, though it is enthusiastic about the access it will give other agricultural producers — such as pig farmers — to markets in Southeast Asia.
Before the TPP, 10 per cent of the Canadian dairy market was open to foreign markets.
Now, in addition to the 3.25 per cent more dairy being allowed into the country under the TPP, another two per cent — about 17,700 tonnes of cheese a year — would be permitted under the CETA agreement with Europe, which is currently under negotiation.
“The Canadian government had promised to fully protect supply management. This is the second time in two years we are paying the price of a free trade agreement,” said Bruno Letendre, president of the Quebec milk producer’s association, the Producteurs de lait du Québec.
“While it is too early to accurately assess the economic impact, it is clear that costs will be very high for producers, processors, for our regions and for the thousands of workers who live by these sectors.”
Aline Bélanger, the owner of the medium-sized, 60-cow Ferme de la Plaine in Ste-Françoise, Que., says that, like many farmers, she has made investments in equipment to comply to Canadian standards that aren’t necessarily applied in other countries.
Although she says having compensation will help to keep farms like hers in operation, it’s still not clear how the money will be distributed, or what long-term effect these changes will have on business and the community.
“It’s a promise of something to come,” she said. “I think autonomy is preferable.”
Charlebois said the biggest winners for the dairy sector in Canada are international producers like Laval, Que.-based Saputo Inc., which already have a strong presence in the U.S. market and will have access to cheaper inputs.
“They’re probably dancing in their boardroom right now,” he said of Canada’s largest dairy producer.
Agropur – Canada’s largest dairy co-operative – said it was not ready to comment on the deal, though it has previously said that up to 6,000 farms would not be able to cover their cash costs if supply management was simply eliminated, which is not being considered under the current terms of TPP.
Canadian consumers typically pay higher dairy prices than much of the world. Charlebois says competition from new imports could force the regional dairy industry to find ways to lower production costs and pass on the savings, though there are no guarantees.
“Prices may drop at the beginning but then actually increase afterwords. It really depends on what kind of reform we actually implement,” he said.
“The truth of the matter is that we just don’t know.”
Source: The Financial Post
