Commentary
Canadians collectively breathed a sigh of relief when President Trump offered a reprieve on the proposed 25 percent tariff on Canadian trade goods. The trade war is not over, however. It has been put on pause for 30 days. As the deadline approaches, or a later one as U.S. officials review existing trade relations, the Trump administration will make new demands, and Canada’s dairy supply management system will be targeted.
Is this a reasonable stance to take?
There are several reasons why it may be time for Canada to shed its supply management system.
Many of Trump’s cited grievances with Canada are based upon
mischaracterizing a trade deficit as a form of American subsidy to Canadians. But he has a valid point when taking issue with Canada’s dairy supply management system.
Canada imposes tariffs as high as 325 percent on American dairy products such as butter. Credibility in trade negotiations is essential, and it’s difficult to call Trump’s threat of 25 percent tariffs unfair when insisting on maintaining Canadian tariffs that are 10-fold higher in this specific sector.
Canada’s supply management system has caused trade grievances with other nations as well. A major trade deal with the UK was scuttled in
2024 when Canada slapped a 245 percent tariff on UK cheese.
Both Australia and New Zealand have accused Canada of dumping dairy products on the international market, threatening the Comprehensive and Progressive Agreement for Trans-Pacific Partnership. Canada’s intransigent stance on protecting dairy supply management is harming trade for many other industries.
How is it that Canada can afford to dump dairy products on the world market below cost, anyway?
Well, it’s because Canada already literally dumps hundreds of millions of litres of milk down the drain every year due to supply management. Dairy farmers have quotas assigned to them, and if they produce milk beyond that quota, it is illegal to sell the products. They are forced to dump it either down the drain or in offshore sales. They can’t sell it to Canadians as it would lead to a reduction in domestic dairy prices. While many Canadians are struggling with a growing cost of living, an estimated
6.8 billion litres of milk has been dumped down the drain in Canada between 2012 and 2021. The waste involved in this practice is abhorrent. In any other industry, such price-fixing would be illegal.
The trade war has led to calls for Canada to reduce interprovincial trade barriers on products and services. Improving domestic trade within Canada would reduce reliance on foreign products. But Canada’s supply management greatly hinders interprovincial trade, as provincial dairy boards set local quotas and control the movement of products between provinces to ensure prices remain high.
In the end, it’s Canadian consumers who are stuck with the bill for dairy supply management. Canadian households
pay an extra $300 to $444 annually due to the system, and the costs continue to rise.
Canada’s dairy supply management has decimated small, family-run dairy operations as larger, corporate dairy operations have bought up and jealously hold onto government-issued dairy quotas. In 1991,
Canada had 60,495 dairy producers. Today, there are
fewer than 10,000. Smaller, creative dairies across the country could diversify the market and offer new products and opportunities for citizens. Unfortunately, they are illegal without the purchase of quotas, which could cost millions.
The bulk of Canada’s large dairy operators have concentrated in Quebec. While Quebec accounts for 23 percent of Canada’s population,
it accounts for 37 percent of the country’s dairy production. Canadian politicians are always averse to taking policy stances that may upset Quebec. This problem is more acute now as an election looms.
Supply management systems were implemented in other nations in the 1960s and 1970s. Since then, most countries phased out the systems as they recognized it harmed the citizens and industries it was supposed to protect.
New Zealand got rid of supply management in 1984 and
Australia in 2000. The dairy industries in both countries have flourished in response. The model to extricate a nation from supply management already exists. Canada can follow it.
Canada is heading into some of the toughest trade negotiations it has ever seen. President Trump is mercilessly wringing concessions from countries in all directions as he pursues his mandate. If Canada has 25 percent tariffs applied to exports to the USA, it will drive the nation into recession. Not only would dismantling supply management offer a ready concession to Trump, which may help stave off tariffs, but it would benefit consumers across the country.
Canada’s dairy supply management system is costly and outdated. It isn’t a hill worth dying on in a trade war. Now is the perfect time to move on from it.
Views expressed in this article are opinions of the author and do not necessarily reflect the views of The Epoch Times.
