Trump rages against Canadian dairy, but supply management faces internal threats too

US President Donald Trump has vowed to eliminate Canada's "very unfair" dairy supply-management system.

In a speech in the dairy state of Wisconsin, Trump stated, “NAFTA has been very, very bad for our country. It’s been very, very bad for our companies and for our workers and we’re going to make some very big changes. Or we’re going to get rid of NAFTA for once and for all. We cannot continue like this, believe me.”

While it has been widely reported that Canada's ambassador to the US David MacNaughton says, “Canada does not accept the contention that Canada’s dairy policies are the cause of financial loss for dairy farmers in the United States," that does not mean that supply management isn't vulnerable during the upcoming NAFTA negotiations.

Along with the threat from the Trump administration, supply management also faces numerous opponents within Canada, some of whom have close ties or direct access to the Liberal government.

Former prime minister Brian Mulroney, who is now advising Prime Minister Justin Trudeau on NAFTA, has called on the federal government to consider a "generous" phase out of supply management.

And Derek Burney, the former NAFTA negotiator who attended a federal cabinet committee meeting earlier this month, has written, "Supply management for poultry and dairy operations in Canada is a perennial member on the U.S. hit list, but any concessions by Canada would at least be a plus for our consumers."

Furthermore, Gordon Ritchie, a senior negotiator of the Canada-US FTA, wrote in his memoir of the negotiations that he would have loved to trade away supply management, but the occasion didn't present itself at that time.

Former Liberal cabinet minister John Manley, now the head of the Business Council of Canada, also opposes supply management. He argues that the federal government should begin to buy out quotas over time or compensate farmers reliant on the system.

Another corporate-friendly lobby group, the Montreal Economic Institute, has commented, "Trade barriers have never made more than a small minority of people richer, at the expense of the vast majority. Eliminating those that persist in the agricultural sectors under supply management and in the softwood lumber sector ... would be good both for consumers and for producers... That opportunity should be seized without hesitation."

And Saskatchewan Premier Brad Wall has stated, “If you take a look at the price of dairy in most states and you think about what low-income Canadian families are paying for the same block of cheese or quart of milk, maybe there’s something meritorious about a policy that would potentially lower the cost of those staples for Canadians."

Supply management came into effect in Canada in the 1970s to regulate the supply of dairy products. The national system, managed by the Canadian Dairy Commission, means that imports of these goods are limited in areas where domestic products can meet demand. The amount of each commodity that is marketed by producers is controlled through a quota system. The system means consistent prices for both producers and consumers. The price the farmer receives is set by provincial bodies, such as the Dairy Farmers of Ontario, taking into account the Canadian Dairy Commission's study of production costs.

More simply put, Dairy Farmers of Canada says supply management literally matches supply with demand to avoid overproduction and market fluctuations.

Speculation has suggested that NAFTA negotiations could begin this summer or fall.

Former diplomat Colin Robertson has stated, “At the earliest I think the renegotiation—with or without Mexico—will take at least a year, probably 19 months. After that we have to go for ratification, which adds on another year plus. My guess is that NAFTA, or whatever we call it, doesn’t get wrapped up until spring or summer 2019, meaning it will be front and centre in our October 2019 election."