June 30, 2012 - In his latest column for the Ottawa Citizen and Calgary Herald, MLI's Brian Lee Crowley says, "It is time to call foul on the arbitrary power that  agricultural supply management grants to powerful interests to reward their  friends and punish their opponents." He uses the case of Jimmy Lee and his partner, owners of CAMI International Poultry Inc. in Welland,  Ontario to explain why. 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.