Ottawa Citizen, Calgary Herald & Vancouver Sun: How supply management shuts out innovators
June 30, 2012 â€“ It is time to call foul – or maybe that should be fowl -Â on the arbitrary power that agricultural supply management grants to powerful interests to reward theirÂ friends and punish their opponents. In my latest Ottawa Citizen and Calgary Herald column,Â I use the case of Jimmy Lee and his partner, owners of CAMI International Poultry Inc. in Welland,Â Ontario, to explain how supply management shuts out innovators. The column also appeared in the Vancouver Sun and is copied below.
By Brian Lee Crowley, Ottawa Citizen, June 30,2 2012
Time to call foul â€” or maybe that should be fowl â€” on the arbitrary powerÂ that agricultural supply management grants to powerful interests to reward theirÂ friends and punish their opponents. Supply management restricts both domesticÂ production (through quotas and licences) and international imports (throughÂ tariffs), of things like milk, cheese, eggs and chicken, allowing producers toÂ control prices by manipulating supply.
When even a candidate for the leadership of the Liberal Party of Canada,Â Martha Hall Findlay, is promising to sweep away supply management because it isÂ in effect a regressive tax on food that harms low-income consumers to benefitÂ well-off farmers, you know that supply management is on its last legs.
Virtually every independent observer agrees Canada is losing influence inÂ international trade negotiations because of Ottawaâ€™s stubborn insistence onÂ defending supply management. Our potential trading partners in arrangements likeÂ the Trans-Pacific Partnership find unacceptable that Canada slaps tariffs (i.e.Â taxes) of 200 to 300 per cent on their exports to this country of dairy, eggs,Â poultry, etc. to protect supply management. Theyâ€™re right to be outraged. WeÂ should be seeking markets in their countries, just as they seek markets inÂ ours.
All that is damning enough. But few people understand the arbitrary powerÂ that supply management confers to harm law-abiding businesses simply carrying onÂ their trade. Like flies to honey, the power to rig the market that supplyÂ management represents draws big producers and processors together in an unholyÂ alliance to exploit their power at the expense of everyone else.
Consider the case of Jimmy Lee and his partner, owners of CAMI InternationalÂ Poultry Inc. in Welland, Ontario. Lee is a typical immigrant success story. BornÂ in Trinidad of Chinese extraction, he came to Canada to help get a familyÂ poultry business going. He started out slaughtering chickens in Torontoâ€™sÂ Kensington Market.
His entrepreneurial eye spotted an important market niche in Canada: the manyÂ thousands of Chinese immigrants who prefer fresh chicken prepared Hong KongÂ style. But of course Lee cannot just go out and buy chickens in the marketplaceÂ to keep his business supplied. Oh no. This is Canada, remember? He had to learnÂ to navigate the ins and outs of the chicken supply management system, which heÂ did remarkably successfully.
He managed to get â€śpermissionâ€ť (the mind boggles!) as a â€śnew processorâ€ť toÂ buy live chickens which he did not only in Ontario, but also across the borderÂ in Quebec. He built a large processing plant in Welland. He was buying as muchÂ as a million kilos of chicken every six weeks. He was the success that CanadianÂ freedom makes possible to so many newcomers.
But in the supply management business, freedom and success are apparently badÂ things.
He and a few other innovative processors were so successful and built up suchÂ a new clientele that they were driving up the price of chickens. Because supplyÂ management, by definition, works by restricting supply, the market could notÂ adjust by simply raising more chickens. The big established processors didnâ€™tÂ appreciate the fact that their costs were rising.
The Canadian solution? Surely it is obvious: first, you get the Ontario andÂ Quebec marketing boards to work out a deal to limit cross-border trade inÂ chicken. Yes, you read that correctly. In Canada, supposedly a single countryÂ with a commitment to free trade among Canadians, the border was slammedÂ shut.
A Quebec court gave that deal the thumbs down. Undaunted and unashamed, theÂ marketing boards, processor associations and provincial agencies that overseeÂ the industry have agreed to stop all cross-border trade in live birds as of thisÂ autumn. After that, Lee will be unable to buy chickens in Quebec. His businessÂ will be kaput.
Curiously, every other processor who was buying Quebec birds will now beÂ supplied by Ontario producers. Not Lee. The groups who have stitched togetherÂ this scandalous deal have decreed he shall not be supplied. And now, accordingÂ to agriculture journalist and blogger, Jim Romahn, the report of the committeeÂ named by the industry and the Ontario government to advise on how the industryÂ should be managed â€” including the cross-border trade ban and refusal to supplyÂ Leeâ€™s company â€” is being almost entirely censored by the provincial agricultureÂ department.
In other words, we are not even allowed to hear the arguments justifying thisÂ egregious abuse of power. Surely they must, at a minimum, have some comic reliefÂ value.
So let me see if I have this straight. Not only does supply management costÂ the country dearly in terms of lost economic output and innovation, and costÂ low-income families on average $350 a year, while depriving the country of tradeÂ opportunities. It is also handy for punishing those in the industry whomÂ established interests find disruptive.
Only in Canada you say? Pity.
Brian Lee Crowley (@brianleecrowley) is the Managing Director of theÂ Macdonald-Laurier Institute, an independent non-partisan public policy thinkÂ tank in Ottawa: www.macdonaldlaurier.ca.