Maintaining Supply Management during Trade Negotiations

To maintain supply management working well in Canada, we need to maintain the predictability of imported products.

Maintenance of Over-quota Tariffs

A predictable level of poultry, eggs and dairy products is imported in Canada at very low or no tariff. Over-quota tariffs are duties applied to prevent imports above the pre-determined level. Knowing the level of imports allows the Canadian production to fill the most part of Canadian demand for poultry, eggs and dairy products, without producing them in excess. In essence, this matching of agricultural supply to consumer demand is supply management. Import control is an essential pillar. The other pillars are producer pricing and production discipline.

Dairy, poultry and egg trade position

The dairy, poultry and egg producer groups advocate no cuts to over-quota tariffs. Effective over-quota tariffs are the only way to ensure imports remain at their current levels and that production matches consumer demand.

Effectiveness of tariffs

Several factors affect the effectiveness of over-quota tariffs, such as the strength of the dollar and the level of world market prices. It is true that a weak dollar normally encourages exports; it is also true that a strong dollar encourages imports.

In our analysis, we find that a reduction in over-quota tariffs and a strong Canadian dollar have similar impacts: the effectiveness of over-quota tariff is reduced, and this can jeopardize the whole supply management system.

Subsidies and tariffs

Over-quota tariffs are the only defence Canadian producers have against foreign subsidies. Huge subsidies in the United States and Europe allow agricultural industry to export at prices below what would normally be required to cover operating costs. Lowering over-quota tariffs makes it easier for these products to circumvent tariffs and flood our market. Lowering over-quota tariffs renders our import control pillar inefficient, makes Canadian production more vulnerable to displacement, and plays havoc with Canada's ability to manage production.

The three pillars of supply management are equal and interdependent

The three pillars of supply management (import control, producer pricing and production discipline) are closely interconnected. If one pillar – in this case, import controls – is weakened, it has an impact on the other two pillars. Lowering over-quota tariffs would take away the ability to plan production efficiently (production discipline) and would also affect producers' ability to receive a price based on their cost of production.

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