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Sylvain CharleboisOur highly protectionist supply management system is under threat by the Trans-Pacific Partnership (TPP) talks. But rather than rebel against change, dairy farmers should see this as an opportunity.

Supply management in Canada is supported by a quota system, a price-fixing mechanism, and high tariffs on imports. As a result, anyone beyond our borders who wishes to sell dairy products to Canadians are subject to incredibly high tariffs.

The supply management system was established in 1966 to protect vulnerable rural family owned operations from foreign suppliers. Dairy farmers across the country claimed for decades that supply management was essential to safeguarding the family farm. Fifty years on, that claim is unsupported by the facts.

In 1970, there were 122,914 dairy farms in Canada; in 2006, there were 14,660 and today there are closer to 12,000. The United States declined by about the same rate. Given that the agricultural policy landscape in the U.S. is very different than Canada’s, this statistic may be shocking for some.

It is not known whether supply management policy was in fact successful in slowing the decline in family dairy farms in Canada. However, if this trend continues, Canada could lose almost half of these farms by 2030. The industry’s lot is gloomy, to say the least.

This is a challenge that the Dairy Farmers of Canada rarely convey to consumers when promoting Canadian milk, but it needs to be said. As a nation, we seem to be strategically incapable of mitigating the risk of losing precious dairy operations in this country. Our dairy farms can certainly compete, but they appear to choose not to, as the supply management system does not allow for the sector to achieve greater levels of success.

To counter this problem, hardworking dairy farmers need a different focus. Genetics, enhanced animal science and even robotics, for example, have allowed dairy operations to become more efficient, establishing a high ratio of useful output to total input. Consequently, Canadian dairies are not more productive, as costs per litre remain extremely high. Indeed, Canada’s costs of production in dairy are among the highest in the world.

We do not have the economies of scale to give our dairy sector the chance to compete, innovate, and subsequently develop new markets. According to a study published in 2014 by a research group in Quebec, technological advancements are helping larger farms to effectively manage costs.

Since we cap opportunities with a quota system based on domestic demand for milk and dairy products, smaller farms get discouraged and opt out, while larger outfits remain unproductive. Pressures on smaller operations will only increase as domestic demand for milk in Canada is set to decrease by eight percent over the next five years, resulting in fewer quotas.

Supply management provides no incentive to become more productive; this is the kiss of death for any economic sector, and can only lead to the shuttering of farms with otherwise great potential for our dairy sector – many of those family owned. Our sector could compete, given the right approach. An alternate supply management scheme, for example, could have dairy farms operate at optimal sizes.

In the meantime, many wonder what would happen to our TPP commitments following the federal election. Let us hope all parties have a plan in place. Interestingly, the Green Party of Ontario, where dairy is a major industry, is favourable to a gradual phasing-out of dairy supply management. It is a position more leaders should take.

Canada has finally placed the future of supply management on the table in TPP trade talks. With the election call, what’s at stake is not just the future of supply management, but our nation’s reputation. Our dairy sector deserves a comprehensive vision for its future, regardless of who is in power.

Regardless of whether dairy farmers realize it, many more years of production under supply management will only bring greater uncertainty and grief.

Dr. Sylvain Charlebois is senior director of the agri-food analytics lab and a professor in food distribution and policy at Dalhousie University.

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