TPP & The Supply Management System
By Dwayne Reno
TPP will encourage competition in the Canadian dairy markets.
The TPP or Trans-Pacific Partnership may very soon be replacing the North American Free Trade Agreement, which came into effect in 1995.
What Is TPP
Trans-pacific Partnership or TPP is a trade agreement between pacific countries. The U.S. is pushing for Canada to open up its dairy markets as part of the Trans-Pacific Partnership agreement. This agreement has become a hard pill to swallow for many backers of the supply management system in Canada. For more about the TPP click here.
Why Is It Important
The Canadian government has been supporting “supply management”, a system started in 1970 that would see dairy farmers from Ontario and Quebec be protected against price fluctuations. This system has worked so well that dairy farmers have become very wealthy. And since the Canadian Dairy Council determines the prices for dairy set to become cheese, butter, ice cream and all other dairy products Canadian consumers are left paying three times as much for these products as our American counterparts.
How Supply Management Works
Dairy farmers buy and sell between themselves a system of permits and quotas to legally produce milk for sale in Canada. Say you want to herd dairy cattle; the permit for one cow would cost you $25,000. This makes it almost impossible for anyone to get in the game. This system also creates incentives for the owners of these permits, who would rather not see any expansion of production that would devalue assets.
Canada has recently come under fire from Australia, New Zealand and America for its tariffs (taxes) that favour the supply management system. Under TPP, Canadian customers would see more competitor products added to their local grocery store dairy sections.
Competition Is Good For Customers & Markets
Canadians will soon have more choice when buying dairy products; and hopefully eggs and poultry as well. TPP will not end the current supply management system, but will allow for more competitor products to be sold in Canada. This is great for Canadian consumers who are currently paying way too much for our love of dairy products created under the supply management system.
Many large corporate backed operators will have you believe that TPP will unlevel their playing field in an already struggling Canadian market place. We’ll I do agree that some industries will go through growing pains, where many others will begin to thrive once again. Also, when large players are encouraged to compete the winner is always the consumers, who will see more products on grocery store shelves and price reductions on their favorite goods.
The days before the 2015 Canadian federal election will be filled with debates about TPP, as the keepers of the supply management system scramble to deal with the potential loss in profits. There is still a lot about TPP that has not been said, rightfully so, these politicians are trying to get elected. In the meantime the outcome of Canada's position within the TPP is riding on who you vote for.
Until next time your customer want to know why they should spend money at your restaurant. So give them the goods!
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Dwayne Reno CEO & Founder
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