Free trade in milk, eggs, even logs?

It's becoming increasingly difficult for protected industries to cling to Soviet-style price fixing



VICTORIA – One of the rituals of life in southern B.C. communities is cross-border shopping for certain items.

Even corner store owners are known to pop down to Washington border towns to load up a van with U.S. milk, taking advantage of a price difference generated by our “supply management” system.

The recent slide in the Canadian dollar reduces this pressure in the short term, but the fact remains that dairy producers are propped up in Canada. And that’s increasingly a problem as Canada pursues entry into the Trans Pacific Partnership, the next big trade deal. With the U.S., Japan, Australia, New Zealand and other countries involved, it would form the largest trading bloc in the world.

Canada uses tariffs of up to 300 per cent to protect its dairy and poultry industries from foreign imports, and the higher domestic price on milk and eggs is a burden that falls most heavily on poor people.

The industry group Dairy Farmers of Canada and others argue that reducing or removing Canada’s import protection won’t change the huge farm subsidies paid by European and U.S. governments. The recent trade agreement between Canada and the European Union has already chipped away at this protection.

The Conservative government is tiptoeing on this issue as a fall election approaches, with rural seats across the country at stake. But the United Kingdom, Australia and New Zealand have deregulated their dairy industries and the Canadian industry is already facing increased cheese imports due to the European Union agreement.

It’s an issue to watch as the federal election heats up. The NDP has positioned itself as a defender of supply management, a particularly touchy issue in rural Quebec, while the federal Liberals are committed to keeping up with the U.S. and joining the Trans-Pacific Partnership.

The trend toward freer trade is broad and long. The Harper government ended the monopoly of the Canadian Wheat Board in 2012, and grain growers continue to compete globally. A trade deal with Korea saw tariffs come off Korean import vehicles, and life goes on.

Another controlled and protected commodity that is seldom discussed is logs. That’s changed with the push for the Trans Pacific Partnership, as Japan protests federal and provincial restrictions that push up the cost of logs for export.

Ottawa regulates the export of private land logs, but only in B.C. This is a long-standing irritant for private land owners, holding the domestic price for premium “J grade” Douglas fir logs below $80 per cubic metre while the price in Asia and Washington state has climbed above $100.

The U.S. has long complained about B.C.’s cheap Crown land stumpage and low domestic log prices in general, viewing them as a subsidy to lumber production.

Indeed, this whole protection apparatus is designed to stimulate domestic milling, although it doesn’t seem to be working. The main investment by B.C. forest companies recently has been buying southern U.S. sawmills.

The coastal industry has maintained that profits from log exports are keeping logging alive, paying for the harvest and processing of logs in B.C.

With Pacific trade talks in the background, pushed hard by U.S. President Barack Obama, the latest Canada-U.S. lumber agreement is due to expire in October. It will be more difficult to defend what University of Alberta economist Jack Mintz calls a “Soviet-style approach to price determination.”

B.C. used to do something similar to this with wine, protecting a backward industry cranking out mostly god-awful plonk. Competition made the wine industry better, and now it’s world class.

Tom Fletcher is legislature reporter and columnist for Black Press. Twitter: @tomfletcherbc

Interest in cross-border shopping may be waning in the short-term, but that could be temporary.

 

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