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