Phase Out Government-mandated Cartels that Impose High Food Costs and Limited
Choice on Consumers: C.D. Howe Institute

TORONTO, April 8 /CNW/ - Government-mandated cartels in eggs, dairy and poultry products impose high costs on consumers and harm Canada's standing in international trade, according to a study released today by the C.D. Howe Institute, which recommends phasing out Canada's controversial supply management system through sales of new quota for the production and sale of these products.

In "Freeing up Food: The Ongoing Cost, and Potential Reform, of Supply Management," authors William B.P. Robson and Colin Busby offer compelling evidence of the high costs to Canadian consumers and limited benefits to farmers arising from the supply management system. The cartels control the price and supply of these basic foods: production quotas limit what leaves farms' gates, and large tariffs block the entry into the country of similar goods.

The aggregate value of production quotas in Canada reached $28 billion in 2008, up three-fold from 1995, say the authors. The benefit to producers from selling their goods for higher-than-free-market prices comes at the expense of domestic consumers, new entrants and robust competition. In international trade negotiations, Canada's position is becoming all the time more cumbersome: it aggressively defends supply management barriers while demanding improved access to foreign markets for other domestically produced goods.

The authors say a move to a more market-oriented system would offer benefits for consumers, a more competitive food industry - and new revenue for fiscally challenged governments.

Using dairy as a model, they suggest that Ottawa and the provinces collaborate on regular auctions of new quotas, gradually expanding the supply of milk over a time horizon of 20 years. This should be coupled with the immediate elimination of direct producer price administration.

Eventually, increased supply from new domestic production would bring domestic prices into line with competitive world prices. While the proposal would protect above-market producer profits for a 20-year period, it would eventually phase out the quota system, and give a modest boost to the bottom lines of the governments involved.

For the study go to: http://www.cdhowe.org/pdf/backgrounder_128.pdf

For further information: William B.P. Robson, President and CEO; Colin Busby, Policy Analyst, C.D. Howe Institute, [phone]