“As for people in isolated communities up North, they’ll probably pay even more once you factor in the mark-ups. Furthermore, I believe so strongly in high food prices that I am willing to risk the success of our export industries in international trade negotiations. Oh, one more thing, caviar and sushi prices will not be affected.”
Seem bizarre? It is.
And yet if you replace the word “wheat” with “dairy,” you would have pretty close to the policy espoused by all of the major Canadian political parties for years. Protection of the dairy industry, or “supply management” as it is euphemistically known, has long been the “third rail” of Canadian politics.
The industry has done a marvellous job at public relations. Even many Canadians who don’t get anywhere near cashing the supply management cheques tell pollsters they are in favour of the scheme.
A Martian economist would find it even stranger that the support for supply management often comes from the progressive end of the political spectrum. The world’s first major “free trade” political battle was in England in the 1840s, when urban progressives attacked the Corn Laws for keeping bread prices high to benefit landed interests at the expense of common people.
There is a weird sort of cognitive dissonance that hangs over Canadian meetings about poverty alleviation, when the moose in the room no one talks about is how the government deliberately keeps milk and cheese prices high for Canadian families.
Former Liberal leadership candidate Martha Hall-Findlay made an attempt to raise the issue in a thoughtful paper she wrote at the University of Calgary in 2012. It didn’t work. Her name is not on the ballot this time around.
The Conference Board of Canada also put out a paper no one read advocating reform. It’s their paper the $276 figure above comes from.
All three major parties were content to let the napping cow lie. However, the federal government’s hand has been forced by the 11 other countries negotiating with Canada in the Trans-Pacific Partnership trade deal. A deal was announced earlier this week after five days of around-the-clock haggling among trade diplomats.
The Conservatives are in favour. The NDP has signalled strong opposition. And the Liberals say they are pro-trade in general but will review the deal and decide what to do after a “fulsome and responsible” discussion.
The TPP is big and important. It gives Canadian exporters more access to 11 countries, 800 million consumers and 40 per cent of the world economy. But let’s keep things in perspective. Canada has fought a rear guard action against liberalization. According to the National Post, the deal will be phased in over five years and will allow duty-free access to an equivalent of a mere 3.25 per cent of Canada’s dairy production. For broiler hatching eggs, the figure is just 1.5 per cent.
This isn’t exactly Ayn Rand gone bonkers with the tariff code.
Even the much-feared changes to drug patent rules, which benefit patent owners but may cost Canadian health plans, appear relatively minor based on what we know now. Another item of note is a reduction in the local-content requirement for cars from today’s 62.5 per cent to 45 per cent.
In the weird culture of trade negotiations, these are labelled “concessions.” What they actually mean is that 35 million Canadians would get somewhat cheaper food and vehicles. In return, Canadian exporters would get access to more fast-growing Asian markets. The cost, which is real, would be borne by Canada’s 12,000 dairy farmers and their equivalents in the auto sector.
The transition costs are real and painful. However, the benefits spread across 35 million Canadians are bigger. This allows the government to fund transitional support. A typical dairy farmer will receive $165,600 over the next 15 years, for example.
If you put a regional lens on it, the Yukon does very well on the dairy and automotive liberalization given how many car factories and dairy farms are located here.
So much for the national interest. How about electoral tactics?
The federal NDP had been doing a very good job convincing people they were a reasonable choice to run the Ottawa machine. They committed to balance the budget, unlike the Liberals, and ran former Saskatchewan NDP finance minister Andrew Thomson against Tory finance chief Joe Oliver. Thomson was the Saskatchewan energy minister who reduced royalty rates to stimulate drilling. As finance minister he cut corporate tax rates by 3 points and lowered the capital tax.
Now, perhaps because they are sagging in the polls, they’ve come out hard against the TPP. It always strikes me as strange when Canadian politicians attack free trade, especially since freer trade has played such a huge role in our growing prosperity since the 1950s. Especially when the trade deal in question isn’t being pushed by George Bush, but by Barack Obama and the nice people who run the New Zealand government.
However, it may turn out to be good politics for the NDP. Hilary Clinton, who is under pressure from Bernie Sanders on the left in the Democratic primaries, made the same call this week when she broke with Obama to come out against the TPP. On most Canadian wedge issues, the blues are on one side and the reds and oranges on the other, fighting for the anti-blue vote. In this case, the oranges own the anti-free-trade issue.
I think that’s bad policy for the country, but we’ll see how that works out for them electorally.
Keith Halliday is a Yukon economist and author of the MacBride Museum’s Aurore of the Yukon series of historical children’s adventure novels. He won this year’s Ma Murray award for best columnist. You can follow him on Channel 9’s Yukonomist show.