Inkless Wells

Paul Wells on all the latest out of Ottawa—along with the occasional post about jazz. Follow Paul on Twitter: @InklessPW

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Hope you like butter, because you're going to keep paying through the nose for it: a tale of Canada-EU trade

by Paul Wells on Monday, October 19, 2009 9:21am - 41 Comments

Thirty-five — thirty-five! — European trade negotiators were scheduled to arrive in Ottawa over the weekend for the first of five scheduled negotiating sessions with a Canadian trade team, the first formal talks aimed at producing CETA — a Comprehensive Economic and Trade Agreement. The only news organization in Canada that seems to have noticed is the Globe and Mail. (UPDATE: But that’s only if you missed the editorial in the Citizen and the coverage in Embassy, as I did.) And…well, surprise, surprise:

Europe insists that its dairy industries have full access to Canadian markets without any unfair competition from within Canada. Danish, Irish and French butter can be bought in supermarkets all over Europe, and officials see no reason why that can’t be the case in Canada, too.

And for the most part, Canada’s farmers share that desire: There are beef shortages in European markets, for example, and the beef-cattle industry is lobbying for more open access, along with most other farm sectors, which see Europe’s 500 million people as a highly desirable market for farm products.

But dairy farmers in central Canada, who represent a small share of agriculture, are pushing hard for protection of the government-subsidy program known as supply management.

This is, of course, no surprise at all. “We will still defend supply management,” Jean Charest told me in May. Could that be a deal-breaker? It could: In July I wrote about comments by the lead EU negotiator, Mauro Petriccione, who said: “We have had region-to-region negotiations [between the EU and other international partners] that we have suspended because our partners would not offer us the benefits of an integrated market, equal to those that we were offering.”

The benefits of enhanced Canada-EU trade would be broad and deep, including to the great majority of Canada’s agricultural sector. The benefits of continued sandbagging to prop up some dairy farmers include a measure of gratitude in a string of rural ridings across Ontario and Quebec. I’ll leave it to you to do that math.

Tags: Canada-EU trade, it is to weep

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http://intensedebate.com/people/M_A_N M_A_N

On the plus side, Margarine Apartheid in Quebec is over. The colour barrier has been demolished!

Mellow yellow, indeed.
Darrell

Shocking that the National Post didn't have this.

They're run by a bank, after all.
http://intensedebate.com/people/jolyon jolyon

"European farmers generally not receive subsidies for the production of food …. "

I assume the Canadian authorities know that's a canard because EU has Common Agricultural Policy. From wiki: "CAP is a system of European Union agricultural subsidies and programs. It represents 48% of the EU's budget, €49.8 billion in 2006"

Thirty FIve negotiators, is that a lot? Sounds like more than necessary but I guess bureaucrats have to do something with their time. Do the 35 negotiators each represent a country/region and Canadians have to jump through hopes to get each negotiator on side? I also wonder why Canadian dairy farmers are the biggest frustration, tell them they can contribute to EU's butter mountain and maybe they will be happy with deal.

"Two years after it was supposed to have melted away for good, Europe's "butter mountain" is back. Faced with a drastic drop in the price of dairy goods, the European Union is to buy 30,000 tons of unsold butter at the taxpayers' expense – reviving one of the abiding symbols of Europe's generous farm subsidy system." NY Times, Fen 2 '09
http://www.intensedebate.com/people/jolyon jolyon

"European farmers generally not receive subsidies for the production of food …. "

I assume the Canadian authorities know that's a canard because EU has Common Agricultural Policy. From wiki: "CAP is a system of European Union agricultural subsidies and programs. It represents 48% of the EU's budget, €49.8 billion in 2006"

Thirty five negotiators, is that a lot? Sounds like more than necessary but I guess bureaucrats have to do something with their time. Do the 35 negotiators each represent a country/region and Canadians have to jump through hopes to get each negotiator on side? I also wonder why Canadian dairy farmers are the biggest frustration, tell them they can contribute to EU's butter mountain and maybe they will be happy with deal.

"Two years after it was supposed to have melted away for good, Europe's "butter mountain" is back. Faced with a drastic drop in the price of dairy goods, the European Union is to buy 30,000 tons of unsold butter at the taxpayers' expense – reviving one of the abiding symbols of Europe's generous farm subsidy system." NY Times, Fen 2 '09
http://intensedebate.com/people/jandrewpotter andrew potter

If we get legal and unfettered access to European butter, Jacob Richler will have to find something else in his fridge to brag about.
http://intensedebate.com/people/Inkless Inkless

Oh, don't you worry. Jake has the most astonishing things in his fridge.
http://twitter.com/chromesushi Chrome Sushi

European farmers generally not receive subsidies for the production of food

This can't possibly be even remotely true.

Mulletaur

The direct production subsidies have decreased substantially. Now the subsidies are given for farming in general rather than specific types of production. There is also a lot of money paid for 'environmental' programs, restructuring, etc. which amounts to subsidies to farming in Europe. But they don't have the mountains of beef in deep freeze for 10 years like they used to.

http://intensedebate.com/people/sea_n_mountains sea_n_mountains

has anyone done solid analysis of the shifting nature (e.g., stage/location of the various subsidies; amount; total financial impact on particular products) of agriculture subsidies among EU states relative to our own? it seems most analysis relies on an overly simplified comparison.

ERB

Regardless of negotiations with the EU, supply management is a stupid economic policy that ought to be eliminated. One reasonably sized chicken farm could supply all of Canada. Why do we need 10,000 mom and pop outfits to do what a single efficient farmer could do. What makes those mom and pops so special, that they get a free ride, while the rest of us do not? There is no rocket science to producing this stuff, no technology to protect, no qualitiy advantage, nothing distinctive about it, so why have it.

SupplyMgt

Do you how idiotic that sounds ERB? There are actually 2,800 chicken farmers in Canada and they, together, raise 1 billion kg of chicken meat per year. What possible business model could there be to store 500 million chickens in one place? They already call most family farms "factories" these days. What motivation is there to go even further to the "dark side"? Yes there are lot of dairy farmers too but Canada, in case you haven't noticed, is a little on the large side and has many challenges including transport of fresh, perishable products. Unless you like your milk frozen, maybe you should take that into account. And last, "free ride". Really? Someone that works 24-7, often under a heavy debt load with loads of stress, takes care of animals (never easy, let me tell you, raises crops and feeds the cities – is getting a free ride? Most farmers are just breaking even. Now you want to take that (slight) protection away from the 20,000 farmers that don't get government handouts, that don't collect welfare and that contribute billions to Canada's rural economy? I guess you don't mind eating all your chicken frozen either. See you in the freezer section!!!

hosertohoosier

So we should deny ourselves tariff-free access to an 18 trillion dollar economy, because it will reduce the economic prospects of our economically inefficient farmers? Heck, lets ban phones to preserve all those telegraphy jobs.

BERNIE BAILEY

THE MOM AND POP SHOPS ARE GOING AS THE MARKETING BOARD IS GETTING READY FOR FREE TRADE AND THE END OF ANOTHER THOUSAND FARMERS THIS YEAR, WATCH AND SEE
I OWNED THE LAST FLUID MILK PLANT IN WESTERN ONTARIO FORCED OUT BY THE BOARD AND YOU PAY TWICE THE AMOUNT FOR A BAG OF MILK NOW

Mike514

If only we had a conservative government in power…

Doesn't this problem go beyond dairy? What about other protectionist forms of agriculture, like the Canada Wheat Board?

hosertohoosier

This is just a guess, but the CWB isn't protectionist in the classic way like a tariff or subsidy. The Canada Wheat Board is a cartel, which raises the price of Canadian wheat (and of international prices). Canada exports a large percentage of wheat worldwide (something like 12% of the total), so we actually have some market power there.

The thing is that this actually benefits EU farmers, since the effect of the CWB is to raise world prices. It is bad for consumers, but consumer interests tend not to play a big part in trade negotiations. Consumers are too diffuse, whereas production interests are highly concentrated, organized, and willing to put down a lot of cash on the side that is better for them. That is why the objections of even a fairly small interest, like dairy, can kybosh the whole thing. To which I say, Canada should be exporting canola margarine to the EU, while Canadians can buy their butter from the EU. It is production efficient and makes all consumers better off.

Is it bad for a few interests, like dairy? Yes. But we can use the additional proceeds of the trade deal to fund retraining dairy farmers. It would be an incredible shame if Canadians were denied tariff-free access to an 18 trillion dollar market for fear of damaging (not destroying, just damaging) our dairy industry, which represents 372 million Canadian in exports and employs about (stat is old – from 1995 – but gives a picture) about 13,794 production workers plus a small number of farmers.

Kate Heartfield

Don't know if it counts as a "news organization", since it wasn't in the news section, but we here at the Ottawa Citizen's editorial board wrote about this on Saturday: http://www.ottawacitizen.com/opinion/Market+princ…
Also, Embassy magazine has carried a couple of very good stories on this in recent weeks.

http://intensedebate.com/people/Inkless Inkless

Whoopsie. Fixed.

http://intensedebate.com/people/Blamo Blamo

I just spent 4 bucks at the grocery store for a piece of Danish cheese that I could easily fit in my shirt pocket.
And I've apprently got not choice: if I want that Danish cheese, I have to pauy through the nose for this to keep some farmers' pockets lined* and livelihood artificially intact.*

* Arguing that farmers don't actually make that great a living (if that is true) is NOT a defense. A freer market system would encourage efficiencies, better practises, better supply side reaction to true market signals etc etc etc.
This sort of thing peeves me off.

RDB

Farmers generally are financed to the hilt – their holdings can be quite valuable, but not particularly liquid. Also, imagining you’ll see major savings from the end of supply management is probably a fantasy. The biggest portion of cost comes from marketing and other “value-added” activities – the “middleman” would probably just suck up what’s left for the most part and farms would have to become larger and more factory-like.

Removing supply management would solve something, but I don’t know if it would solve too many consumer problems

http://intensedebate.com/people/SamDavies SamDavies

What?!?!?
Are you saying that news organizations aren't paying attention to *important* things going on in Canada?
Is that possible?

Kind of like how Maclean's has not bothered to weigh in on the current discussion regarding the health of the internet in Canada.

First, we hear:
"Canada is doing very well in broadband availability, speeds and affordability as compared to other countries, according to a new study funded by the country's largest internet service providers."

Then shortly after:
"Canada has some of the poorest high-speed internet service in the developed world and is an example of what not to do from a policy perspective, according to a study by Harvard University."

Heck – why even bother paying attention to recent CRTC activity (pertaining to the internet), or the upcoming decisions that will essentially define healthy competition for DSL services. Never-mind examining CRTC structure, and weighing off whether its commissioners are serving the public interest. Regulatory Capture, anyone?

It is extremely sad that the CBC is one of the few media outlets giving this any coverage whatsoever.
Pure proof that the CBC needs to be destroyed – how dare they!!!!
Now who own's Maclean's? Gotcha!!! Say no more……

Everything is OK people! Nothing to see here. Move along……..

We now return to your regularly scheduled squabble of Iggy VS Harper….
Fairness Seeker

Supply managment (dairy and feather farmers) accounts for a mere 10% of the value of Canada's agriculture. The 90% of agriculture which is not, is held captive by the politics of power and privelege . Grains, beef, pork, and horticulture would all benefit immensely from freer trade, but politicians only listen to the supply managed groups based in Quebec and Ontario. These groups have successfully lobbied Federal Politicians and because of the ridings in question, there hasn't been one politician from any political party who will stand up for principle and do what is right. It's time someone outed the dairy and poultry industry for what they are – a protected and privileged few who use threats and intimidation when their privileges (worth $Millions) are brought up for discussion. If Canadians knew the extent of the wealth of these "farmers" – a direct result of the protectionist policies they are provided, we'd all demand that their government sponsored privileges end.
I always thought Canada was supposed to be a kinder-gentler nation where privilege and power, particularly the government sponsored kind, were frowned on. Not the dairy and poultry farmers though……
RayK

"the government-subsidy program known as supply management"

It would help, if one is going to talk about his issue, to know what one is talking about.

Supply management is not a "government-subsidy program". It involves no government subsidies of any kind. As with the Wheat Board in the grain production industry, supply management in dairy products simply allows producers to pool their marketing power and negotiate for better prices.

guest

"…allows poducers to pool their marketing power and negotiate for better prices."

I think there is a word for this type of activity: collusion. No, sorry, its: ransom. Oh wait, its actually two words: price fixing. Why can I get 2 litres of milk in the US for $0.99 while I pay $2.85 here?

guest

"…allows producers to pool their marketing power and negotiate for better prices."

Or go to jail if they don't.
Sorry, only Westerners go to jail for not following along. Easterners can sell wheat and barley to whom ever they wish.

guest

RayK, you are correct sir. There are no subsidies. Who needs subsidies when all your potential competitors are legally blocked from your marketplace?

I think Vinnie Big Nose said it all: "You need to buy our protection, otherwise we'll beat the crap out of you."

http://intensedebate.com/people/M_A_N M_A_N

I suggest that some of you may wish to look up "Milk Quota", because that's as much a subsidy to the existing farmers in Ontario as handing out boatloads of cash would be.

http://www.intensedebate.com/people/jolyon jolyon

"European farmers generally not receive subsidies for the production of food …. "

I assume the Canadian authorities know that's a canard because EU has Common Agricultural Policy. From wiki: "CAP is a system of European Union agricultural subsidies and programs. It represents 48% of the EU's budget, €49.8 billion in 2006"

Thirty five negotiators, is that a lot? Sounds like more than necessary but I guess bureaucrats have to do something with their time. Do the 35 negotiators each represent a country/region and Canadians have to jump through hoops to get each negotiator on side? I also wonder why Canadian dairy farmers are the biggest frustration, tell them they can contribute to EU's butter mountain and they will be happy with deal.

"Two years after it was supposed to have melted away for good, Europe's "butter mountain" is back. Faced with a drastic drop in the price of dairy goods, the European Union is to buy 30,000 tons of unsold butter at the taxpayers' expense – reviving one of the abiding symbols of Europe's generous farm subsidy system." NY Times, Feb 2 '09

http://intensedebate.com/people/TheRealKuri TheRealKuri

They receive subsidies, but the CAP has been shifting away from rewarding production for quite some time. Rather, it now incentivizes responsible stewardship of farmland (fallowing, etc.), as the development of quality food over sheer quantity. This isn't complete, but the CAP of today is very different from the one of the past.

http://intensedebate.com/people/Jenn_ Jenn_

So basically we are saying here that foreign policy (I assume free trade impacts foreign policy?!) is once again based not on what is good and right to do, but how many domestic votes it gets? And possibly more importantly, where those votes are located?

And perhaps the thirty-five negotiators are because Canada doesn't have thirty-five negotiators, at all, and the EU knows it?
http://www.intensedebate.com/people/jolyon jolyon

"European farmers generally not receive subsidies for the production of food …. "

I assume the Canadian authorities know that's a canard because EU has Common Agricultural Policy. From wiki: "CAP is a system of European Union agricultural subsidies and programs. It represents 48% of the EU's budget, €49.8 billion in 2006"

Thirty five negotiators, is that a lot? Sounds like more than necessary but I guess bureaucrats have to do something with their time. Do the 35 negotiators each represent a country/region and Canadians have to jump through hoops to get each negotiator on side? I also wonder why Canadian dairy farmers are the biggest frustration, tell them they can contribute to EU's butter mountain and they will be happy with deal.

"Two years after it was supposed to have melted away for good, Europe's "butter mountain" is back. Faced with a drastic drop in the price of dairy goods, the European Union is to buy 30,000 tons of unsold butter at the taxpayers' expense – reviving one of the abiding symbols of Europe's generous farm subsidy system." NY Times, Feb 2 '09

I wonder how good the butter from EU is. I lived in England for years and the majority of butter there comes from New Zealand. If EU butter is all that, why are they importing butter from New Zealand.
http://intensedebate.com/people/s_c_f s_c_f

Let's hope they can knock down those trade barriers and eradicate supply management. Free trade is always good.

Ed R

On the issue of free trade in nuclear arms, I am generally "con". Same with trade in people, endangered species, etc.

Oops – see what happens when words like "always" are used? :-)

http://intensedebate.com/people/s_c_f s_c_f

Human bodies and organs? Chidren? Antoquities? Whales?

Free trade is always good. That does not mean everything is for sale. That simply means that trade should be allowed to cross borders, trade that is legal in both countries. You are inventing your own definition for the term "free trade", a definition that is incorrect.
http://www.intensedebate.com/people/s_c_f s_c_f

Human bodies and organs? Chidren? Antiquities? Whales?

Free trade is always good – yes, always. That does not mean everything is for sale. That simply means that trade should be allowed to cross borders, trade that is legal in both countries. You are inventing your own definition for the term "free trade", a definition that is incorrect.

Ed R

From dictionary.com: free trade (noun) – (1) trade between countries, free from governmental restriction or duties.

Hmmm… government restrictions – like those banning trafficking in persons (including "chidren"), nuclear, biological and chemical weapons, etc.

Looks like you're the one who is inventing a definition. Nowhere can I find a caveat that free trade only refers to "trade that is legal in both countries". Nice try though.

http://intensedebate.com/people/SisyphusThis SisyphusThis

Oh, those pesky people keep getting in the way …..

http://online.wsj.com/article/SB12559428244099376…

http://intensedebate.com/people/Jenn_ Jenn_

He does it again! (or she?)

It would be good if we knew the Canadian negotiators (surely we still have a couple) knew about this. I'd suggest you send the link to the foreign affairs minister, but we already know he doesn't read so that won't work.

hosertohoosier

A lot of people have been drawing a wheat board-dairy council parallel that misses an important distinction. The wheat board uses Canadian market power internationally to screw consumers of wheat. It is essentially a cartel – domestically there is free commerce in Canadian wheat. Individual farmers cannot sell wheat (except in eastern Canada, a stupid loophole) because doing so would undermine the wheat board's market power. Yes, Canada has market power – we are the world's second or third largest exporter at ~20% of the world total (US is the biggest, while Canada and Australia are similar in size – the three countries export over 70% of the world's wheat).

The dairy commission is also a cartel but it acts to gouge Canadian consumers in order to benefit the dairy industry. Canada is not a big dairy player internationally (which is precisely why our industry relies on these kinds of tactics). Supply management is bad for consumers, and if it is stopping us from accessing an 18 trillion dollar market, this only furthers the case against us…

Want to buy Canadian? Buy canola harvest margarine. It is yummier than butter, and as Canadian as can be (canola is even a Canadian invention).
Tom

How would the trade agreement b/w EU and Canada affect Canadian consumers?
Tom

How would the trade agreement b/w EU and Canada affect Canadian consumers?
BERNIE BAILEY

The Milk Boards or as they call them selves the dairy farmers have already lost this battle . The politicians are saying save the quota system but their Canadian negotiators are forcing this trade deal through as they try to legalize the four billion dollars of milk solids being imported by Kraft,Saputo and Parmalat to make Canadian cheese and announce another one thousand farmers will stop shipping milk this year as there is on sale for it. The Dairy Farmers spent the last fifteen years closing small processing milk plants in Ontario in favor of the global three and note the farmers realize that these companies do not need the Canadian farmer to make Canadian cheese .I know as they closed my plant by simply stop shipping the sixteen million liters I bought a year.
For more on this corruption in the Board system Google bovine .wordpress and search Bernie Bailey and you will find it ironic that a raw milk sight tells the story of the last legal dairy in western Ontario
still one vote
Bernie