It’s looking increasingly unlikely that the Carney government will be able to end the U.S. trade dispute while keeping its grip on supply management, with some believing that the long-standing quota system will soon be a thing of the past.
Dr. Stuart Smyth, an agricultural and resource economics professor at the University of Saskatchewan, doubts that negotiations can be resolved without sacrificing the supply management system.
“July is going to be a very interesting month for trade,” he told True North.
Supply management was first developed for dairy farmers in Ontario and Quebec in the 1960s to mitigate problems of milk shortages and overproduction. It was later adopted by the remaining provinces.
It was also implemented to ensure stability for the roughly 9,400 dairy operations in Canada, nearly half of which are located in Quebec. This is in part due to government
restrictions on the Western provinces.
However, critics of the system say that today’s supply chains are far more efficient and resilient compared to when supply management was first introduced and that continued government control has only created inefficiencies.
For example, an estimated
$14.9 billion worth of raw milk was disposed of across Canada between 2012 and 2024 to prevent surpassing production quotas. That’s enough milk to serve the needs of roughly 11 per cent of Canada’s population for a year.
When Canada’s premiers travelled to Washington D.C. to
negotiate with their U.S. counterparts, Quebec Premier François Legault emphatically stated that any changes to the existing supply management agreement were “not negotiable.”
“In Quebec we are against changing the management of the offer. The reason why we have that is to protect our regions,” said Legault in February. “So for us, it’s not negotiable.”
However, with trade officials constantly in contact, it’s likely that the situation has evolved behind closed doors.
Smyth stated that the Carney government has likely been informed that if Canada begins negotiations by declaring supply management “off the table,” the Trump administration will not “engage in any dialogue.”
U.S. President Donald Trump executed a similar play last month regarding the Liberals’
digital service tax, saying that his administration would be “terminating ALL discussions” regarding trade with Canada unless the 3 per cent tax was removed.
In that same announcement, Trump also
mentioned supply management, saying that Canada has “charged our Farmers as much as 400% Tariffs, for years, on Dairy Products.”
Smyth believes that “excessively high tariffs” will be rolled back in the near term, before potentially being removed altogether.
“Legault and the Quebec government are really the only ones who continue to beat that drum and everybody else is conspicuously silent. Now, Bill 202 is working its way through but that’s really just a bunch of flag-waving.”
Bill 202 was introduced by the Bloc Québécois to make reforming the dairy industry more difficult by
restricting the foreign affairs ministry from engaging in negotiations with other countries to alter Canada’s supply management system.
The bill passed through Parliament without objection and now heads to the Senate, where it must pass before becoming law.
However, Smyth believes that trade negotiations with the U.S. will be “wrapped up by the end of summer at the very latest” and that legislation won’t “affect any of this.”
Smyth also noted that since the onset of U.S. tariffs, the federal government hasn’t demonstrated any support for Canada’s agricultural sector, instead focusing the bulk of its efforts on the auto industry.
“Based on the last six months of behaviour, I can’t anticipate any reason why that strategy would change. What’s going to matter in the trade negotiations with the U.S. is ensuring that auto is as minimally affected as possible, and if they have to throw supply management under the bus to get that, they will do it,” Smyth said.
“I think the Americans will push to have supply management ended. I think we’re going to have to make massive concessions in supply management.”
Smyth predicts that U.S. trade officials will also seek to include a five to 10-year window that allows for further negotiations to continue rolling back dairy quotas until the market becomes “free-flowing.”
“So from that perspective, it’s going to be gutted,” he said.
truenorthwire.com
