Maybe the time has come to scrap the government-sanctioned, cartel-like arrangement in the Canadian dairy industry known as supply management (see previous post). Australia and New Zealand have already done so. And now Europe and the U.S. appear ready to loosen the grip.
The ever-higher levels to which the Canadian Dairy Commission has pushed Canadian milk prices increasingly denies natures most perfect food to Canadian families ( per capita consumption of milk has declined 18% over the two-and-a-half decades to 2006, despite millions of dollars spent on promotion). Moreover, the steady price escalation would seem to be an unsustainable policy over the long run for the industry itself given it keeps on shrinking the market.
Because the Canadian dairy industry is protected from foreign competition, domestic dairy producers are denied the opportunity of selling their products in foreign markets — where per capita demand for milk and dairy products is rising strongly. With the comparative advantages of the Canadian agriculture sector and freer trade, the Canadian dairy sector could be making a greater contribution to job growth and wealth formation in Canada.
High milk prices are effectively a tax on milk consumers and since food is an increasing portion of family budgets at lower income levels, its a regressive one. In addition, milk prices have been rising at twice the rate of inflation, contributing to higher inflation in Canada. And continuously pushing up milk prices is at cross-purposes to government efforts to promote healthy eating through food guides and so forth.