How Did Canada’s Supply Management Policy Come to be? | Part 1

Aug 23, 2012

Evolution of Canada’s Dairy Supply Management Policy

The George Morris Centre – Canada’s leading agriculture think-thank in partnership with the Conference Board of Canada released the first paper in a series that is examining Canada’s dairy supply management system. The paper entitled “Canada’s Supply-Managed Dairy Policy: How We Got Here” looks at the policy from the dairy industry’s perspective.

The study provides context into supply management, explaining how the policy came to be. The combination of historically low profit returns for dairy farmers and milk surpluses was one of the leading drivers for the creation of supply management. In the early 20th century, Canada was a major exporter of dairy products to the UK during World War II. However, after the war UK dairy production recovered and Canadian dairy products declined. This prompted a swift response from the Canadian dairy industry to begin shifting their priorities from a leading exporter to serving the domestic market. However, this proved to be a challenge for the dairy sector as it led to milk supply surpluses and poor economic returns for farmers. In the midst of these unfavorable market conditions post-war both the federal and provincial governments stepped in and intervened to stabilize the markets.

Over a period of time, the cost of surplus removal became a burden for governments, so the policy shifted to limit the production eligible for subsidy, which later led to limit production. In the 1960s the dairy policy saw fragmentation between the federal and provincial government policies. The tension caused three major things happen. First, province’s began to streamline their producer agencies that were involved in milk marketing. Second, in 1967 the federal government created the Canadian Dairy Commission which introduced quota eligibility. Lastly, in 1971 the interprovincial market-sharing agreement was established.

Since then, the supply management policy has evolved into a popular policy among many dairy farmers. However, the last 20 years has been a source of contention between the policy and free trade opportunities.

The next installment in this series will provide a comparative analysis between Canada’s supply management policy and other peer countries. The research is being produced for the Global Commerce Centre that seeks to help political leaders understand economic dynamics at the global level and often provides advice for public policies.

The link to the full paper can be found here:

http://www.conferenceboard.ca/e-library/abstract.aspx?did=4980

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