Changes to Canada's Dairy System Sought

MONTREAL - Jan 27/06 - SNS -- Changes to Canada's dairy supply management system need to take place argues the Montreal Economic Institute (MEI). Instead of waiting for the WTO to impose reform at some future date, Canada should follow the Australian example, eliminating milk support prices and production quotas.

"With the milk price rise taking effect on February 1, the price calculation method used by the Canadian Dairy Commission expires and will have to be modified," the MEI's January Economic Note states. "The time is ripe to consider a more fundamental reform of supply management in the dairy industry, similar to what Australia did in 2000." MEI research director Valentin Petkantchin, the author of the study, has anticipated - and is challenging - the objections to this type of reform in Canada.

"The argument heard most often from defenders of supply management is that, even if prices go down at the farm gate, this reduction would penalize dairy producers without benefiting consumers because processors and retailers would increase their margins. This fear is unfounded."

Following the Australian reform, retail prices for fluid milk dropped considerably. Taking account of inflation and not counting a new 11-cent per liter tax, the decrease was 18% for brand-name milk and 29% for "no-name" milk. According to estimates from the Australian Competition and Consumer Commission, savings to Australian consumers on milk purchased in supermarkets are Aus$118 million annually.

Subscribers can read the full text of the article by Clicking here