The Canadian dairy industry warns that the impending Canada-EU free trade deal will spell doom for the nation’s artisanal cheese makers. The proposed deal will provide access to 32% of Canadian fine cheese market, to which, the Dairy Farmers of Canada president says, “We’re shocked at the volume of market access they’ve granted to the union,” and deems the deals “unacceptable”. This will come as a shock to the Dairy Farmers of Canada, since up to this point they have enjoyed a firm grip on the market, with 96% of cheese sold in Canada is produced domestically. The dairy farmers association is less enthusiastic to promote this statistic.
Quebec dairy farmers are particularly worried, as Quebec produces 50% of all Canadian cheese, and 60% of all artisanal cheeses in Canada. Cheese producers fear their products will be less competitive to European ones. Dairy producers fear that the prospective deal will impact the Canadian cheese market because European cheese is cheaper than Canadian dairy products, and that “they make better cheese than we do”.
Canadian cheese is certainly more expensive, and it isn’t hard to see why. According to the Organization for Economic Cooperation and Development, Canadian milk prices have been two to three times higher than world prices since 1986. These are prices set by the Dairy farmers of Canada. Ironically, while the Dairy farmers of Canada have expressed outrage at the free trade deal, they are most responsible for making national dairy products non-competitive.
If the Canadian Dairy Association really cared about artisanal cheese makers, they would lower their production costs that put them at an immediate price disadvantage. However, they won’t do this because the Canadian dairy association is more influenced by the large dairy corporations, the artisanal ones have little influence at all.
The large dairy associations produce their own milk to make cheese, so production costs are much lower and far more competitive than the small artisanal businesses. Realistically, the small cheese makers, most of which are community based and rural, probably won’t face much competition from foreign products. They have an established and consistent base that will remain largely intact. It is the larger corporations that will sustain financial losses, but are in no danger of going out of business.
So the real issue is not that this trade deal is unfair, but rather that large dairy producers are unhappy the sweet deal they have enjoyed for so long might be coming to an end.
The Dairy Farmers of Canada have also complained that the European farmers are heavily subsidized so that European cheese makers can produce cheaper products, putting them at an unfair disadvantage.
This complaint is laughable, because Canadian dairy farmers currently enjoy a supply management policy protecting around 20, 000 dairy and poultry farmers. The farmers are protected with production quotas and shielded with tariffs that force Canadians to pay inflated prices. The federal government also grants provincial boards monopoly powers to control the prices and production of milk, which keeps dairy at an artificially high price.
Furthermore these boards furthermore block innovation by making it extremely expensive for new domestic farmers to enter the market. In addition to the costs of starting and maintaining a dairy farm, milk producers are required to purchase a quota, which can sell for upwards of $20 000 per cow. In Ontario, the license for 100 cows will cost a new dairy farmer three million dollars.
Finally the farmers are protected by a 250% tariff on foreign dairy products, even those coming from countries with whom Canada has free trade agreements. By keeping prices artificially above the world price of dairy, these three factors block innovation and competition, which creates inefficiencies that leads to poorer quality goods at higher prices.
So lack of protection is clearly not the issue either. Especially since the government has released a statement announcing it will compensate dairy farmers that are affected by the trade deals.
The proposed agreement will not spell out doom for the Canadian artisanal cheese makers, or otherwise, if they can learn to price competitively. This will require help from the Canadian dairy lobbies to allow production to be cheaper for their farmer. Failure to do so may result in market losses, which are at the very least partially inflicted.
Claude Rochon, spokesperson for the Department of Foreign Affairs, Trade and Development says that the negotiations are on going, and that they will only sign an agreement that’s in the best interests of Canada. At least for the consumers, who make up the majority of Canada, a little competition may not prove to be such a bad thing.