EMERGENCY RISK REDUCTION

The US, Canada, and Mexico are in several rounds of negotiations to change the North America Free Trade Agreement (NAFTA). This has been a promise in the present Trump administration, and despite views on Trump, you have to give him credit for addressing his campaign promises – which many politicians can’t claim.  NAFTA includes a myriad of products – some big ticket items like ‘free cross-border trade’ in automobiles and planes — but I wish to concentrate on an industry that is onerous, emotional, and a bit under the radar – dairy. 

Dairy products are protected in Canada under what is known as “supply management”. The core concept is that the supply is managed for milk (and poultry) products, and price of these regulated products reflect this stable supply. Therefore, free trade of these products from the US or Canada is generally not allowed. The prices are not set on the open market but by government regulatory bodies. Almost without exception, the prices are higher than comparable products in the US.  

I am torn about this issue. As mentioned in previous blogs, I grew up on a small family dairy, and we ultimately succumbed to losing money hand over fist, because the price of milk was undercut by “imports’ from other states, as our farm prices (i.e. fertilizer, fuel, utilities, feed, equipment) kept climbing. We simply couldn’t make a profit, suffered unsustainable losses, and stopped dairying.  

On the other side, government subsidies are unnatural and fragile, and often distort the market.  Here in British Columbia, dairy families work hard. But in my visit to several farms in British Columbia, they appear wealthy, because the price of milk is set by a regulatory body. Dairymen and poultry producers, among others, have powerful government lobbies.

The US wants Canada to open up its market to dairy producers from Washington, Idaho, and other border states. This would immediately present competition because of a supply increase, and very likely the price of retail milk in BC would go down. Not only would dairy profits suffer, but loans from banks, etc. to farmers would be under jeopardy. The number of farms would likely decrease and, similar to what has happened in the US, those remaining would be large or ‘mega’ dairies. Family dairy farms would be threatened with extinction.

I wish a balance could be found. Milk and cheese prices in my home state of South Carolina are approximately 50% of those in British Columbia, but at the social cost mentioned above.  I have seen first-hand the impact of high milk prices in Canada. I volunteer weekly at a soup kitchen in Victoria, and we serve milk — to put in morning coffee. However, some people stand in line only to get full cups of milk, because this is their daily source. They can’t afford to buy milk in the store. This is sad. Especially for struggling families with small children. 

The NAFTA negotiations will be challenging. I hope wiser and more informed minds than mine will prevail, thorny issues will be addressed, and outcomes will be positive for all.

Thanks for reading.