CHELSEA, QUE.—Donald Trump is furious—well, acts furious—that Canada imposes tariffs of 270 per cent, and more, on some U.S. dairy products. It is clearly a burr under his saddle; he mentions it frequently. Last week, it featured in his famous Twitter diatribe against Justin Trudeau.
It is an eye-popping number, higher by significant measure than the new U.S. tariffs on Canadian steel (25 per cent) and aluminum (11 per cent), which dropped like a depth charge into NAFTA talks recently and threaten to seriously disrupt a decades-old trading relationship.
Does the president have a point? Is Canada a crafty hypocrite set on, as Trump claims, “hurting our farmers and killing our agriculture” while pleading for exemptions from Trump’s punitive counter-measures on steel, aluminum, autos? No and no. What President Trump does have is an isolated number that presents a damning, but entirely misleading, picture of Canada-U.S. trade—in dairy and overall.
Even Scotiabank, in a recent report, called it “disingenuous” to use one high tariff that “accounts for a tiny fraction of Canada’s $33-billion of U.S. imports a month” to jeopardize a gigantic trading relationship. Annual trade in dairy products amounts to about $750-million of an overall total of $628-billion in cross-border trade. Not only that, Canada imports five times as much dairy-related product from the U.S. as vice versa.
Yes, Canada protects its 12,000, or more, dairy farmers behind high tariff walls. That way, they are not undercut by larger producers to the south and driven out of business as their revenues plummet and farms fail. The much-condemned supply management system works to the same end: by limiting production of eggs, milk, cheese and poultry, it prevents over-production and guarantees Canadian producers stable prices. In as weather dependent and globally exposed a business as agriculture, that is a blessing.
Conservative MP and leadership candidate Maxime Bernier and Andrew Scheer, pictured on May 27, 2017, shortly before Mr. Scheer was elected leader. The Hill Times file photograph
However, tariffs and supply management both mean higher prices for the Canadian consumer—a constant theme for the sector’s domestic critics—including that friend of the disadvantaged, Conservative MP Maxime Bernier, who was expelled from Andrew Scheer’s caucus last week for continuing to condemn supply management. Bernier is not alone: there is an abiding, almost touching, concern for the well-being of low-income Canadians on the part of right-wing think-tanks, well-heeled lobbyists and free trade purists within Canada. (If only they would apply the same moral fervour to the lack of affordable housing.)
But there is, of course, another side—several, in fact. First, because there are no restrictions on agricultural markets in the U.S., dairy farmers there, especially in Wisconsin, produce too much milk to sell profitably. They end up dumping gallons of excess in fields. Hence the pressure on Trump, and his acolytes, to open the Canadian market to U.S. milk, which would be sold for considerably less than the domestic product.
This could be a temporary win for Canadian consumers—although there are valid questions about the comparative quality of U.S. milk and an elite-led trend towards locally grown produce. But dismantling supply management would undercut Canadian farmers and, ultimately, change the face of rural Ontario and Quebec. It would open suddenly worthless agricultural land to suburban sprawl or replace family operations with corporate agri-business.
To preserve a Canadian dairy industry at all, our governments would have to offer generous support to remaining farmers so, indirectly, we’d all still be on the hook. Indeed, American farmers, far from being the proud independents portrayed by Trump, are massively subsidized by their government. So while Canadian consumers pay more for domestic dairy and poultry, in the U.S. it is taxpayers that keep farms in business through various support programs. By some accounts, some 40 per cent of U.S. farms are subsidized. And there are high tariff walls in the U.S., too, against certain foreign agriculture products including peanuts, sugar, processed fruit and vegetables and other goods.
The small family farm, in particular, is under pressure in both countries; tariffs and support programs are one response and supply management is another—and a comparatively reasonable and effective one. And while the small portion of Canadian agriculture that is protected is a red flag for ideologues, and in every trade negotiation, it has the virtue of working in practise (if not in theory). It makes even less sense to abandon it when every country in the world has its own special departures from free trade gospel.
Supply management, which mostly affects farmers in Quebec and Ontario, also has political champions (along with enemies). These include all federal political parties and most premiers. Many, including Scheer, have backed Trudeau in defending the system in the face of Trump’s provocations. Whatever their private or political qualms, they know several Quebec and eastern Ontario ridings hang in the balance. The pending federal by-election in Chicoutimi probably explains Scheer’s decision to boot Bernier last week; the federal leader doesn’t want to imperil his party’s chances for a rare and welcome win in Quebec by having a high-profile Conservative MP slamming the very system that keeps Quebec dairy flourishing.
Those who urge Trudeau to jettison the program—believing that supply management isn’t worth risking an entire trade deal—are wrong. Canada would not be liberating its farmers to conquer the world as its critics claim—among other things, dairy products don’t always travel well—we would be putting further distance between what we produce at home and what we consume.
Nor would we mollify a president who never lets facts—except for misleading ones—get in the way of a good rant.
Susan Riley is a veteran political columnist who writes regularly for The Hill Times.
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