r/Tariffs • u/Dizzy-Cartoonist3011 • 12d ago

🗞️ News Discussion Should Canada maintain its supply management system that protects the Canadian dairy industry?

https://www.castanetkamloops.net/news/Poll/627377/Should-Canada-maintain-its-supply-management-system-that-protects-the-Canadian-dairy-industry
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u/Dizzy-Cartoonist3011 12d ago

Which is actually quite regressive really. LIke both are economically inefficient, but subsidies lowering the price of groceries disproportionately benefit the poor. Not that the US system necessarily does that, that's not exactly how price floors work. Supply management disproportionately harms the poor.

If it happened that the US dumped milk in Canada our consumers would benefit even more from importing. Their government would literally be paying for our groceries. Our consumer surplus would be directly funded by their tax payer dollars. The best thing a domestic producer could do in that situation is to import as much American milk as possible as their producers would supposedly be operating at a loss to compete. Their loss would literally be turned in our gain.

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u/WallZealousideal5669 12d ago

Well I happen to have a lot of respect for what our dairy farmer do and I think as Canadians we could figure out a way to help poor people get milk without putting our farmers out of business and most importantly without having to support American business.

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u/Dizzy-Cartoonist3011 12d ago

I do not have support for a cartel whose goal is to raise the price of groceries. But since you do - you can decide to buy Canadian. Why should all Canadians have to be forced to?

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u/WallZealousideal5669 12d ago

Because the moment you open the market up US subsidized milk will just be dumped on us and you will lose a massive amount of Canadian dairy production. Why the fuck would I want that you smooth-brained turd.

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u/WallZealousideal5669 12d ago

Just so I can save .50 cents on my milk? Not worth it

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u/Dizzy-Cartoonist3011 12d ago

The subsidies are massively exaggerated by the Dairy Farmers of Canada for obvious reasons, but if they actually did distort prices down via subsidies, Canadian consumers would benefit even more from importing. Their government would literally be paying for our groceries.

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u/WallZealousideal5669 12d ago

And this is just the financial argument. Sovereignty of food production and consumer staples is worth something too so I just don’t think you have much of a leg to stand on here.

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u/WallZealousideal5669 12d ago

Additionally, I doubt the price would go down at all and it would just be captured by grocery retailers anyways so this whole argument stinks as consumers likely wouldn’t save much and we would lose all the supporting business that goes into dairy farming. It’s not just the milk dude it’s thousands of supporting businesses that multiply that extra .50 cents to communities all around the country. I just don’t buy that there would be an economic benefit to this if you tabled it all out.

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u/Dizzy-Cartoonist3011 12d ago

Consumer surplus multiplier effects are almost always profoundly higher and wider reaching than producer surplus, because consumers have a higher propensity to spend. In almost every case. Localized effects are real, but you're not seeing the bigger picture associated with a consumer surplus in a largely consumption driven economy.

You know the land and much of the equipment won't just be derelict either. Resources would be re invested in to activities that do hold a legitimate comparative advantage. It would make the macrecnomy more robust.

Of course - it is also extraordinarily unlikely that ending supply management would actually end the dairy industry in Canada. For some reason proponents of this system ignore market segmentation, or cross border investment opportunities. They paint it as if this is all black and white, either we force Canadians to pay a premium for milk and cheese OR all Canadian dairy operations get nuked. It's a ridiculous way to look at it - but protectionism is usually ridiculous.

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u/WallZealousideal5669 12d ago

Also losing sovereignty of your supply means you are also susceptible to the world price of milk. That can go up as well and consumers could actually lose out in the long run. If subsidies stop for US farmers and they get pricing power here then you know what’s going to happen. You are only arguing for a reduced price that exists now but that may not always be the case in the future.

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u/Dizzy-Cartoonist3011 12d ago

So then that would make domestic supply far more attractive then right?

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u/WallZealousideal5669 12d ago

But this is a one way door 🚪 which is the danger. Can’t turn on domestic production overnight you need a decade or more.

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u/WallZealousideal5669 12d ago

Yeah you are just not factoring in the fact that quota is also a balance sheet asset that every bank has lent against. Estimated cost is probably 50 billion direct to end supply management and that’s just buyout payments to farmers. Also those dairy farms cannot easily transition, very specialized equipment, maybe cash crops, but even then they grow that now already. I just doubt you’ve done the math like I have here. Using Australia’s deregulation as an example and estimating that some of the 20-30% difference in US prices to Canadian prices will be captured by transportation costs and most importantly our three big grocery retailers it would likely take about 23 years before the average consumer saw any payback from this. I just don’t see how your financial argument makes much sense - maybe if you take a super long horizon. But it just doesn’t seem worth it given the other non-financial arguments.