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Canada and U.S. trade is being held up by one thing: farming.

 

Time for Canadians to stand up and tell milk, egg and chicken producers to compete like anyone else.

 

Consumers should stop paying double the price for these products to only enrich large producers or allow unproductive farming.

 

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Canada and U.S. trade is being held up by one thing: farming.

 

Time for Canadians to stand up and tell milk, egg and chicken producers to compete like anyone else.

 

Consumers should stop paying double the price for these products to only enrich large producers or allow unproductive farming.

 

Cardboard

 

 

I would agree that Canadians are being screwed by the dairy farmers and most are blissfully unaware that it's even happening.  The sad part of it is that higher dairy prices disproportionately hurt the poor and lower-middle class because they are the ones who have kids drinking milk.  It would be beneficial to 99% of Canadians to undertake domestic policy reform to eliminate supply management.

 

Now, turning to the question of trade agreements and the noise coming from the US dairy industry, I would issue my typical warning to Americans and Kiwis who lobby to open the Canadian industry:  At this point, Canada does not export a meaningful amount of dairy products because supply management is intended to balance supply and demand for Canada's domestic needs only.  Kiwis and Americans should be damned careful about what they ask for.  At the moment, the US and New Zealand are effectively the only real competitive players in world export market for dairy products.  They have that market sewn up, and with the speed at which demand from China is growing, it's a market with a pretty good future.  When the US and New Zealand industries ask that Canada dismantle supply management, they are shooting themselves in the foot.  Sure, they'll get access to a small-ish market of 35 million people, but they should think about the supply side.  Canada is a *huge* exporter of nearly every agri-food product that can be effectively produced in a cold climate.  If we take the hand-cuffs off our dairy industry, there is considerable potential for the establishment of large-scale, low cost-of-production dairy operations here and these operations would be free to export on the world market.  Production from Canada would likely *increase* after the elimination of supply management, which would actually be counter-productive for farmers in the US and New Zealand.  So, they should be careful what they ask for...

 

As a consumer, I'd love for that Stalinist system to be eliminated, but exporting countries are making a mistake if they assume it would be beneficial for them.

 

 

SJ

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Yeah, right now Canadian dairy farmers can't expand without buying quota that costs up to millions of dollars. If you gave our well capitalized dairy farmers a big capital influx (govt quota buybacks) and let them expand as much as they wanted, you'll see huge supply increases. I think it's pretty likely they would be competitive in export markets, and that Canadian dairy prices would drop.

 

 

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Ending supply management could be done. Australia did it (mixed results).

The last time I checked the value of dairy quotas was:  book value: 4-5 billion    market value: +/- 23 billion.

It is a tough political question and farmers can be efficient interest groups (think last Federal Conservative race for leadership).

 

I would say that, to make it an efficient win-win, you would need constructive discussions with our neighbors because it would be necessary to harmonize the subsidy aspect because this aspect is more "generous" south of the border. There seems to be also the question of (illegal?) immigrants working in the field earning unusually low wages. Finally some other rules would need to be harmonized. For instance, some US milk contains growth hormone whereas this is not allowed in Canada now.

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Canada and U.S. trade is being held up by one thing: farming.

 

Time for Canadians to stand up and tell milk, egg and chicken producers to compete like anyone else.

 

Consumers should stop paying double the price for these products to only enrich large producers or allow unproductive farming.

 

Cardboard

 

The US would not expect to drop its subsidies in Agriculture (corn), or Europe to drop its subsidies in dairy.

So why should Canada?

 

If the US is so competitive, why are its agricultural subsidies so high relative to the price of the product produced?

Remove those subsidies and either US farmers bankrupt, or prices rise so high (to compensate for removal) that no one can afford to eat the product. Keep the subsidy, produce only what you consume, and everyone can eat for less. Everyone else gets it, the US .... not so much.

 

Food is not a 'normal' product.

Farmers are price takers, collectively producing as much as possible to maximize revenue received. Problem is that when EVERY farmer EVERYWHERE does that, the ocean of product isn't worth anything as supply greatly exceeds demand. Farmers bankrupt until there are only a few left, grain bins empty as supply dwindles, and a loaf of bread ends up costing whatever those remaining NOW HUGE farmers dictate.

 

We have subsidized prices, around the world, for a reason - it mitigates against civil unrest.

When food becomes out of reach, populations riot.

 

SD

 

 

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"We have subsidized prices, around the world, for a reason - it mitigates against civil unrest.

When food becomes out of reach, populations riot."

 

I partially disagree with this.

Some people have described the development paradox.

What you describe obviously applies to developing countries.

The equation is much harder to apply to developed countries (the portion of expenses on food is relatively low, in comparison for instance to monthly cell phone bills or used car payments) and other explanations need to be sought.

Some people suggest that politicians (right and left and center) simply want to get elected.

http://people.duke.edu/~nwc8/Bellemare_Carnes.pdf

http://business.financialpost.com/news/economy/the-real-nafta-problem-is-canada-not-mexico-paul-ryan-says

https://farm.ewg.org/top_recips.php?fips=WI01&progcode=totalfarm&regionname=1stDistrictofWisconsin(Rep.PaulRyan)

 

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... (the portion of expenses on food is relatively low, in comparison for instance to monthly cell phone bills or used car payments) ...

 

For real?  This is absolutely false in my household.    As a monthly expenditure, food is beat only by mortgage, and not because of eating out.

 

Not quibbling, just surprised.

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You're correct in the sense that, even if historically lower, it is still a significant expense.

https://www.theatlantic.com/business/archive/2012/04/how-america-spends-money-100-years-in-the-life-of-the-family-budget/255475/

For poor countries and the poorest quintile in "rich" countries, the % is between 40 to 50% of expenditures.

http://wsm.wsu.edu/researcher/WSMaug11_billions.pdf

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... (the portion of expenses on food is relatively low, in comparison for instance to monthly cell phone bills or used car payments) ...

 

For real?  This is absolutely false in my household.    As a monthly expenditure, food is beat only by mortgage, and not because of eating out.

 

Not quibbling, just surprised.

You're surprised for a reason. That's because it's true. Food is not cheap.

 

It's hard to quantify my expenditure. But in my parents' case (and they're pretty thrifty ppl) they spend about $1,000 a month on food. That's 20% of their expenditure. In contrast to that, my mom's used Lexus is gonna end up coming in at $100 per month. It would be even lower if she'd hold it longer. My mom's cellphone bill comes in at $40 a month and my dad's at $25 (he doesn't use data). So yea food is a serious chunk.

 

Now you could make some argument around how much of that money goes to the food producers vs. transportation and retail. But food cost is far from a negligible expense.

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"Food is not cheap." OK.

 

"Now you could make some argument around how much of that money goes to the food producers vs. transportation and retail. But food cost is far from a negligible expense."

 

You may want to include the processor in the list.

And to link with the thread, it seems there has been growing producer to retail gap also referred to the "marketing" gap.

 

I know Saputo (SAP.TO) very well and it is fair to assume that the processor and the retailer explain a large part of this gap.

I understand that, these days, out of every dollar of milk sold, about 12% goes to the producer.

Relevant for a tariff discussion?

 

 

 

 

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The linkage is just less apparent in developed countries.

 

Much more of the population works in the gig economy, than has been the case for a very long time. While an energetic bright fellow could do very well, most people will take home less - and lose benefits such as healthcare, drugplans, etc. Costs that now have to be paid out of a reduced income.

 

Food has seldom been cheaper that it is today, but its cost has begun to rise.

For a great many people a 10% increase in food cost + a 5% increase in shelter costs (mortgage/rent) = at least one monthly visit to the foodbank. How long is a politician going to stay in power, when those foodbank users are coming from the richer neighborhoods?

 

Supposedly if food costs more - you would cut back elsewhere. But it doesn't happen this way.

Are you really going to give up that 2nd car? Sell the house and move to something smaller (mortgage you can actually afford)? Give up that coffee habit or street lunch 4+days/week? Give up some data usage on your cell phone? Or is it more likely that you're going to use debt to maintain that lifestyle that you can no longer afford? Until you're  cut off.

 

But if everyone BK's at the same time, everyone gets bailed out.

Politiciians are replaced in the name of change, protectionism is imposed, & locals are put back to work - to raise the money to keep servicing their debt. In different times we called this slavery, 'selling your soul to the company stole'. Same masters in place, just different generations.

 

Ultimately the cause is rising basic costs (food costs),

and inability to adapt.

 

SD

 

 

 

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Removing production quotas on milk, eggs and chicken is a no brainer.

 

We don't have them on beef, pork, cereals and what is the issue please?

 

I can understand the hormones thing but, I am sure that is something workable with the U.S. or another excuse from Canadian producers. If you saw what they feed animals with (especially chickens) with all the antibiotics and everything else in between you would consider this a farce.

 

It is a system meant to help the small, unproductive farmers to stay in business. A union type of system. And some get really rich through this.

 

Cardboard

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If Canada has decided that no hormones are allowed, then make that a rule no problem. Instead of having huge tariffs and quotas, just don't allow milk with hormones across the border. If anyone wants to export here they can so hormone free just like the locals. Locals without hormone benefits will be at an export disadvantage, but may be able to get premium pricing for a premium product.

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If Canada has decided that no hormones are allowed, then make that a rule no problem. Instead of having huge tariffs and quotas, just don't allow milk with hormones across the border. If anyone wants to export here they can so hormone free just like the locals. Locals without hormone benefits will be at an export disadvantage, but may be able to get premium pricing for a premium product.

They won't because as amazing as it might sound it is against the law in the US to say that your milk doesn't contain hormone.

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If Canada has decided that no hormones are allowed, then make that a rule no problem. Instead of having huge tariffs and quotas, just don't allow milk with hormones across the border. If anyone wants to export here they can so hormone free just like the locals. Locals without hormone benefits will be at an export disadvantage, but may be able to get premium pricing for a premium product.

They won't because as amazing as it might sound it is against the law in the US to say that your milk doesn't contain hormone.

 

In US, you can advertise your milk as "synthetic hormone free," or the equivalent.  I just confirmed that by checking the milk carton in my refrigerator.

 

To the extent you cannot say "hormone free," I believe that's because the statement is false due to milk containing natural hormones.

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There has been and there will be trade disputes but most agricultural trade between Canada and the United States is unimpeded and clearly benefits people on both sides of the border. Trade has increased ++ since the introduction of NAFTA.

 

Agriculture is different and perhaps deserves a special status but, in 2016, Canada was the world’s fifth-largest exporter of agriculture and agri-food products with the US being by far Canada’s main trading partner.

 

Canadian food exports have grown 77% over the last 10 years to $56 billion annually, with the US accounting for slightly more than 50% of this amount.

 

Both sides recognize that trade barriers can continue to go down but, to obtain/maintain a win-win, we need constructive discussions. Supply management can be phased out but one would expect that this would involve a reconsideration of how the US subsidizes its own agricultural sector.

 

Fortunately, I submit that some are ready to have these kinds of discussions.

https://www.heritage.org/trade/report/promoting-free-trade-agriculture

 

 

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Removing production quotas on milk, eggs and chicken is a no brainer.

 

We don't have them on beef, pork, cereals and what is the issue please?

 

I can understand the hormones thing but, I am sure that is something workable with the U.S. or another excuse from Canadian producers. If you saw what they feed animals with (especially chickens) with all the antibiotics and everything else in between you would consider this a farce.

 

It is a system meant to help the small, unproductive farmers to stay in business. A union type of system. And some get really rich through this.

 

Cardboard

 

Canaada is not the US. It's a deliberate choice 'by the people of Canada, for the people of Canada'.

If the US cannot export its milk, eggs, or chicken that is purely a US problem. Produce less, eat more of it, or let it rot.

 

Every country maintains strategic reserves, typical US examples are oil, certain minerals, certain technologies, etc.

Canadian family farms are strategic reserves. Relying on bigger, (primarily US) corporate farms for cheaper food, is a very dumb thing -  as anytime the US chose to restrict/cut off food supply, Canada would starve. Paying more to maintain family farms, is a lot cheaper than paying extortion money to an oligarch of food suppliers.

 

The US is whining because the targeted tarifs are biting.

Almost all trade partners have targeted the same industries, and employment in those industries is about to rapidly crash without a prompt resolution. The chump tried to bully his way at the G6+1, and lost so badly that he had to run away early (4 hours earlier than planned?). So now he's doubling down, and trying to distract wih NK instead.

 

Sadly bodies are going to have to fall before there's a change.

And it will not be until a whole lot of republicans lose their seats.

 

SD

 

 

 

 

 

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Cardboard, pre-Trump, I would have agreed with your comments. I worked in the dairy business for many years and understand the subsidies and the hidden tax it represents on consumers. Until Trump is gone there is no way I would want to make big changes to dairy, egg or poultry industries. Change is needed. However, we also need a trade partner we can trust and where the new agreement will be honoured and respected.

 

If we have learned anything from Trump in his first 18 months it is that he cannot be trusted and that it is highly unlikely he will honour any agreement that is ultimately reached. He changes his mind on important issues more frequently than most people change their underwear.

 

I also think Trump may be good as a change agent for many things. The benefits (and weaknesses) of free trade are better understood and more openly debated today. There are losers; and we can’t just assume they magically shift employment into growing industries (as most economists assume). I wonder if the MeToo movement is also due in some way to Trump (people getting so pissed of with his behaviour). There are many more examples like these two of where Trump may help create a more balanced discussion (than what existed before).

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Cardboard, pre-Trump, I would have agreed with your comments. I worked in the dairy business for many years and understand the subsidies and the hidden tax it represents on consumers. Until Trump is gone there is no way I would want to make big changes to dairy, egg or poultry industries. Change is needed. However, we also need a trade partner we can trust and where the new agreement will be honoured and respected.

 

If we have learned anything from Trump in his first 18 months it is that he cannot be trusted and that it is highly unlikely he will honour any agreement that is ultimately reached. He changes his mind on important issues more frequently than most people change their underwear.

 

I also think Trump may be good as a change agent for many things. The benefits (and weaknesses) of free trade are better understood and more openly debated today. There are losers; and we can’t just assume they magically shift employment into growing industries (as most economists assume). I wonder if the MeToo movement is also due in some way to Trump (people getting so pissed of with his behaviour). There are many more examples like these two of where Trump may help create a more balanced discussion (than what existed before).

 

Generally, it's stupid to stupid to subsidize domestic businesses (generally...).  Why?  When you trade with someone else both sides win.  The seller because they can sell above cost and the buyer because you would only buy if the thing was more valuable than how much it costs.  Subsidies are a tax on the domestic population, for the benefit of international buyers of your good (through lowering of your products price.  Thus basically you are taking money from your own citizens and giving money to other countries. 

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A lot of countries see agriculture like a strategic asset to ensure a safe domestic supply. I know that Germany sees it that way. Where some countries and the EU goe wrong is that they subside exports of agricultural goods.There, the argument of a strategic assets does not hold any more.

 

FWIW, the US has a lot of subsidies for farmers, both direct and indirect as well.

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https://farm.ewg.org/progdetail.php?fips=00000&progcode=totalfarm&page=states&regionname=theUnitedStates

 

A picture that shows:

-significance of subsidies

-unequal distribution of subsidies (states)

-how the issue of agricultural free trade will be contentious as it has a significant political component (election results map)

 

Most of the subsidies go to large farm corporations who are heavily involved in exports and who are also involved in lobbying.

 

One of the reasons why this is the case is that the general population do not "see" the unnecessary price tag associated with the support that parts of the agricultural sector gets. The conveyed message is in fact quite different.

 

What would you do if you were an elected official?

 

Potentially biased opinion: NAFTA has been a win-win overall.

The 1988 Canadian federal election was mostly based on NAFTA. The conservatives who supported NAFTA obtained 43% of the votes and formed the government. The two opposition parties who opposed the agreement gathered 52% of the votes.

Democracies can function but sometimes it's complicated.

 

 

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https://www.washingtonpost.com/news/global-opinions/wp/2018/06/11/why-trudeau-doesnt-have-the-high-ground-on-trade/?utm_term=.501b63fbca70

 

I've never heard of JJ McCullough before, and I'm strictly an amateur on trade policy, but I'm sure some of the Canadians know him.  Is this piece a predictable output based on his past opinions and ideology, or is he presenting the facts fairly?

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