Final countdown on COOL tariffs

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While Canadians fall all over themselves to moan about how the recalcitrance of the US to eliminate COOL (highly-popular with US consumers) causes "staggering" losses to Canadian hog and livestock farmers, Canadians still refuse to accept the ceteris-paribus logic that our recalcitrance to admit dairy and poultry products into Canada (highly-unpopular with Canadian consumers) causes equally "staggering" losses to US dairy and poultry farmers.

Once again, and as always, the Achilles Heel of Canadian agriculture is our profound inability to see ourselves the way others see us - it's as if Canadian agriculture was permanently disabled by a nationwide Asperger's Syndrome affecting only dairy and poultry farmers and the spineless politicians and farm groups who pander to them.

Stephen Thompson, Clinton ON

You will have to come up with some kind of figurative losses the US dairy and poultry have suffered. Where is the before and after such as the case with our Beef and Pork losses, unless your going back 50 years to before Supply Management and now ?Of course your also omitting the chance that we could ship dairy south in that time, which would be almost as unbelievable as your "staggering" losses statement in itself.

All the fuss on TPP talks when the elimination of COOL has been all the Livestock Industry has wanted.The ability to ship animals freely into the US.

The $1 billion in COOL-related losses claimed by our livestock sector is actually, by definition, not a loss but income foregone because of legislative restrictions in the US. In the same way, 200% Canadian tariff barriers for dairy and poultry products represent income forgone to anyone who, like the US dairy and poultry industries, can't scale our tariff barriers.

Therefore, the burden of financial absoluteness demanded by the above anonymous poster is little more than nonsense and obtuse posturing because 200% tariff barriers create a definitional absoluteness in, and of themselves that cannot be ignored, but in this case, are being ignored by this particular poster as well as being dutifully ignored by all supply management supporters.

In the same way that Canadian exports of pork to the US are sort of a moveable feast at any time, and therefore defy accurate profitability measurement, would US imports of dairy products without supply management be 10% of Canadian dairy consumption, or 50%, or even more or, gasp, even zero? Equally importantly, what would the level of Canadian dairy consumption be without the price-gouging effect on consumers created by 200% tariff barriers in the first place? - No one knows because nobody knows how quickly, if at all, Canadian dairy and poultry farmers could adapt to a world where they are forced to live by their wits instead of living off the fat of the legislative entitlement which they have been given and which allows them to gouge consumers at any level emanating from the "all-for-me, nothing-for-you" mentality of cost-of-production pricing.

When people, like the above anonymous poster, demand absolute financial calculations in these matters, it's always an attempt to deny the existence and validity of the economic principles which are being spurned, in this case, again as always, the absolutely-deleterious effect of 200% tariff barriers.

While Canadians may relish the headlines that we "won" the WTO ruling about COOL, it is, at best, a Pyrrhic victory because we, due to the continuing obtuseness we so-proudly display and defend when it comes to our own protectionism, are still going to lose the war.

Stephen Thompson, Clinton ON

No one knows but you used the word "staggering" like as if you do !

Two things that stand out in all this,
1, We will never win any sort of trade war with the US!
2, In a SM-less environment what would stop the US from using the exact same COOL on our milk and poultry products going south ? We don't seem willing to use the same underhanded trade tactics that our close friends to the south use repeatedly.

There are reasons why the US imports far less dairy and poultry products than Canada does even with no quota's and SM and those reasons will never change.

The belief, in Canada, that the US uses "underhanded" trade tactics while at the same time maintaining supply management isn't equally, if not more underhanded, is a hallmark of the deliberate dumbness of Canadian agriculture and more evidence that Canadian agriculture suffers from sort of group Asperger's Syndrome.

The reason the US doesn't import a lot of dairy products is that they're too far away from any major dairy exporting country (except possibly Canada should we decide to do so) to make it feasible to export profitably to the US.

Stephen Thompson, Clinton ON

The reason the US doesn't import a lot of dairy products is that the level of import control restrictions it had under the previous GATT regime, just like all countries, were converted into TARIFFS under the current WTO regime. Then the idea was that access could be increased in future deals. Of course we have learned that the future tariff changes would not be equal for everyone.

The WTO deal included tariffs that gave countries about the same level of import controls as existed before the deal. The US legislatively limited dairy imports to about 2.5% under the old GATT regime and it still limits imports to about 3%. Canada legislatively limited dairy imports to about 6% under the old GATT regime and it now limits dairy imports to about 10%.

The US limited imports with a variety of collective legislated entitlements and now they have dairy product tariffs averaging 90% plus many remaining non-tariff barriers. Canada limited imports with a variety of collective legislated entitlements and now they have dairy product tariffs averaging 190%. Economists calculate the relative success in limiting imports as the effective tariff rate and the US has the highest effective dairy tariff levels. Without those tariffs, all of New Zealand's milk exports and all of the EU's dairy surplus could be sold in the US.

When supply management supporters go off on their frequent speed-wobble about US tariffs and US % of domestic usage imports of dairy products in comparison to Canada, in yet another flimsy excuse to support the ability Canadian farmers have to fleece consumers via 200% tariff barriers, they always forget the important details that render their arguments in favour of supply management here, look foolish and self-serving.

As I pointed out earlier, and it is only common sense, supply management supporters always ignore the truth that the US price of milk does vary in relation to the world price, while Canada's never does, meaning that Canadian consumers always get screwed badly, US consumers only sometimes at the most, and even then only slightly, especially when compared to the fleecing received by Canadian consumers.

In addition, when "hanging their hats" on what they purport to be the absolute evil of US import controls, supply management supporters studiously ignore the point that US tariffs and/or import controls don't ham-string US consumers in the way Canadian import controls ham-string our consumers. Why else could DFO report, in late 2010 that Ontario consumers were paying almost 38% more for milk than US consumers and that the Ontario farm gate price of milk was within pennies per liter of the US retail price?

Therefore, to cite an old adage - the above anonymous poster "can't see the forest for the trees" and that applies, as always, to all supply management supporters in their attempt to smother common sense and basic shopping-cart economic truths with numerical comparisons about import levels that just don't make sense and never will.

Stephen Thompson, Clinton ON

When an economist complains about too many numbers it speaks volumes !

One of the best-known and highly-regarded economists (by training an agricultural economist) who ever lived, John Kenneth Galbraith rarely used numbers, but instead used the common sense and the Scottish idioms and aphorisms he learned in his youth on a farm in Elgin County's Dunwich Township in the first quarter of the last century.

Galbraith's stock-in-trade was skewering pompous fools who, like the anonymous poster to which I took exception, made spurious correlations between un-related numbers in order to dupe people, which is exactly what supply management has been doing for 40 years and generally succeeding because they have the time and the money to be as duplicitous and as disengenous as they can get away with, and because they know that farmers can easily be duped when it comes to basic economics, a point proven every day by anonymous supply management supporters on this site.

People generally use too many numbers when sound economics and common sense aren't on their side and that's exactly the problem with the anonymous poster who tried to exonerate supply management by citing, right out of Supply Management University's keystone course, Gibberish 101, a whole slew of numbers comparing US import levels of dairy products to Canada's without ever stopping to think (do, or even can, supply management supporters ever think about anything?) about the complete lack of economic and/or statistical relevancy of the gibberish he/she was posting.

Stephen Thompson, Clinton ON

At least Galbraith had one thing going for him . He had common sense !

The inference by supply management supporters that supply management's many, many sins are automatically washed away because Canada allows 10% of its dairy products to be imported, whereas the US limits its imports to 3%, is typical of the disingenuous and misleading "red-herring" half-truths supply management has been proffering for four decades in its continually-egregious attempts to "deny, delay, distract".

The truth is that even with a 10% import threshold, Canadian consumers and the Canadian economy are getting screwed to a far-worse degree than US consumers and the US economy with a 3% import theshold, and that's largely because Canadian consumers are getting pick-pocketed by cost-of-production formulae while US consumers are not.

In addition, it is disingenuous to compare 90% import tariffs in the US with 190% import tariffs in Canada, because the difference between the two amounts means everything to Candian consumers, especially to those Canadian consumers who are regular cross-border shoppers.

Furthermore, even a 90% tariff is meaningless unless it is effective - if US prices are 15% above world prices (and US prices are a lot closer to world prices than Canadian prices are) then, for example, lowering US tariffs to 20% wouldn't cause any increase in imports, thereby rendering the 90% figure meaningless. However, lowering the Canadian tariffs to the same hypothetical 20%, (or even only to the actual 90% US tariff rate) would cause such a cataclysmic disruption in where Canadian-consumed milk comes from, (and/or a disruption to the Canadian dairy cartel) that Canadian dairy farmers would face a "lacto-tsumami" of the sort that simply wouldn't happen in the US - this is especially the case since it has been widely reported in recent years that Canadians are very near the import thresholds of a number of dairy products

In short, the import levels allowed by US and Canadian import legislation mean completely different things (of course) than what supply management supporters try to claim it means.

Stephen Thompson, Clinton ON

So the point was that it is NOT "that they're too far away from any major dairy exporting country" but instead that the US has effective TARIFFS and "Without those tariffs, all of New Zealand's milk exports and all of the EU's dairy surplus could be sold in the US."

Trying to defend supply management by pointing out that the US allows dairy imports of only 3% but that Canada allows the imports of 10% is exactly the sort of disengenuous logic for which supply management is notoriously-famous.

At the risk of being un-Galbraithian and offering a numerical analysis, let's assume the long-term average world price of dairy products is $1 per unit. According to the above poster, this means that it is going to cost somebody $1.90 per unit (90% tariff) to get dairy products into the US and $2.90 per unit (190% tariff) to get dairy products into Canada.

Let's say that the long-term average price of a unit of dairy product is $1.10 per unit in the US and that it takes 20 cents per unit to ship dairy product from either Europe or New Zealand to the US - this means that with a loss of ten cents per unit, nobody is even going to want to ship dairy product to the US even if the US had no tariffs at all and/or no import restrictions at all, meaning that, depending on the actual US domestic price, US tariffs and/or import restrictions can easily mean nothing.

The current low world prices caused by misplaced European farmer over-optimism and Chinese purchasing weaknesses are little more than the short-term "red herring" and/or fearmongering tactics always dredged up by supply management supporters in an attempt to defend a position that cannot be defended over the longer term.

On the other hand, let's say the hypothetical long-term average Canadian price of a unit of dairy product is $2.50 per unit (compared to the hypothetical US long-term average price of $1.10 per unit and the hypothetical long-term average world price of $1.00 per unit). We do know, if for no other reason than the DFO numbers released in late 2010 that the Canadian price of milk is a lot higher than the US price because the DFO figures showed that the farm gate price of milk in Ontario was within pennies per liter of the US retail price. There may not be as much difference in actual terms as in my illustrative terms, but any difference is relevant to my example.

Therefore, given the hypothetical long term average world price of $1 and the Canadian price of $2.50 for exactly the same thing, there is going to be a LOT more effort to get around the Canadian tariff barriers than the US tariff barriers because there's a LOT more money, on a per-unit basis, to be made by selling into Canada than into the US and therefore, while US tariffs and import restrictions can be, and I suggest are, of little or no relevance, Canada's definitely are.

We also do know from news articles that in previous years we have come close to having our tariff barriers breached because our domestic prices are so high and therefore there is a lot of money to be made by selling dairy products into Canada. This means that the Canadian price has come close to the hypothetical import barrier price of $2.90 per unit - simply stated, because of our base price, especially when it comes close to the dizzyingly-high import barrier price created by 190% tariff barriers, Canada is a far-more profitable place than the US, on a per-unit of product basis, for foreign interests to market dairy products.

Therefore, when supply management supporters compare US import levels of dairy products to Canadian levels in an attempt to defend supply management, they are being typically duplicitous and disengenuous because they are ignoring, for their own selfish reasons, the effect of the structural differences between the base domestic price in each country.

Stephen Thompson, Clinton ON

"People generally use too many numbers when sound economics and common sense aren't on their side".....yes indeed.

The point of "The short version" was simply to point out an error not defend supply management. Not every post must be.

The "short version" did not point out an error, it merely perpetuated the fallacy of protectionism by making anyonmous, and therefore unsupported and unsupportable (cherry-picking) claims based on a "point-in-time" judgement made when world prices are at a nadir thanks to the greed of European farmers and a reduction in Chinese demand.

The poor judgement on the part of European farmers can be squarely blamed on their not knowing how to be capitalists after the end of their own supply management regime - if they had never "dumbed-down" by believing in protectionism, they wouldn't have responded to the end of European supply management by over-producing without any contracts, something Ontario white bean growers have long-since learned not to do.

The same factors go a long way to explaining the lack of acuity of anonymous posters on this site - they've believed in the protectionist fallacies of supply management for so long that, in addition to forgetting who they are, they just can't think for themselves any more, something amply demonstrated by the above poster, the "short version" poster and the original poster to which I took exception.

The unadulterated facts remain:

(A) US dairy farmers are highly-efficient and therefore, can and do sell milk for a fraction of the price received by Canadian farmers.
(B) Tariffs are on their way out, everywhere
(C) An industry in a country with 90% tariffs that are a long-way from ever being triggered is in a lot better position to not go into a tailspin when, not if tariffs are eliminated, than an industry in a country with 190% tariffs that are close to being triggered.

Fearmongering about tsunami levels of short-term dairy product imports from Europe and New Zealand is simply an attempt to distract people from focusing on the tsunami-like ability Canadian dairy and poultry farmers have to extract money from the pockets of consumers every day of the year.

Stephen Thompson, Clinton ON

OK, One last try. Sorry to everyone else.

You were simply INCORRECT. You can't conceive of that, apparently.

You said the US dairy import level was due to distance.

In a simple ag economic model - this would be true. But the effect is tiny in the real world of legislated entitlements enshrined by trade agreements.

The current world dairy market situation is also not the anomaly you describe. A 5 to 8% oversupply situation is fairly typical so the world market prices hovers below the long run average cost.

Here in the real world, the US level of imports permitted to enter tariff-free [TRQs] are always filled.

Every year.


Because the world price is virtually always much lower than the US government's guaranteed floor price administered by their Commodity Credit Corporation.

So if the US levels of TRQs was doubled to 6% - by definition, that would be new level of imports.

Distance does not keep it out.

This level would also swallow most of NZ's fairly small dairy output. There is not enough international dairy trade to cause a tsunami - New Zealand is just desperate to export in a world were almost everyone with disposable income is already self-sufficient in dairy and does not need or want their milk.

I know your deeply held ideological beliefs will not consider information that does not fit your personal economic dogma, but there we have it.

Given a choice, any country in the business of exporting dairy products would prefer to get their product around tariff barriers into Canada rather than into the US, if for no other reason than because the domestic price in Canada is, thanks to the Canadian dairy cartel, far-higher than in the US.

Secondly, all else being equal, shipping dairy products to North America from anywhere but Central America does incur significant transportation costs - something not incurred by the tsunami-like, rapidly-growing and as of now unstoppable imports of milk protein replacement coming from upstate New York into Quebec and eastern Ontario.

Thirdly, the author of the posting immediately above still refuses to recognize that the "log-jam" in international dairy trade is, as always, Canada's recalcitrance to abandon its devotion to placing the interests of the Canadian dairy cartel ahead of everything else and everybody else

Fourthly, blaming the US in an attempt to exonerate the ability of Canadian dairy farmers to screw Canadian consumers in a way that would shock and horrify US consumers, is disingenous and misleading, yet seems to be the only way supply management supporters know how to defend their gravy boat.

Finally, by anonymously calling me an idealogue and dismissively implying "Tut-tut, little boy, anonymous blow-hards who offer no proof of anything know more than you do", instead of correctly identifying me as someone who is prepared to expose the double-standards by which the Canadian dairy industry has been able to screw Canadian consumers and bully non-supply managed famers for over forty years, is, of course, and as always:

(1) the actions of a coward who, by being anonymous and by offering no proof, cannot be, and has no reason to be, believed
(2) just another vivid demonstration as to why supply management is not well-liked and will not be missed.

(519) 482 - 3244

To hopefully put "bookends" on the disengenuous and self-serving arguments proffered by the above poster, defending supply management by claiming that the US allows only 3% dairy imports while Canada allows 10%, is like a three-year-old's "deny, delay, distract" tactics of trying to avoid a spanking for taking two cookies by blaming an older sibling for taking three. The problem with this type of argument is that try as they might, supply management advocates simply cannot get around the reality that blaming someone else for a supposedly-bigger crime doesn't exonerate them from their own.

The far-bigger issue supply management supporters studiously-ignore is the huge difference in the proceeds of the two "crimes", or what happens to the "cookies" after they are "stolen" by the two siblings. If the "savings" realized by the original "theft" were passed on to the consumer, it would be one thing but, instead, the younger one sells his "stolen cookies" into a protected market of three-year-olds (Canada) for 190% more than their "mother" (the world market) would have sold them while the older sells his/hers into another protected market of five-year-olds (The US) for 90% more than what their "mother" would have sold them for.

Even worse is that the three-year-olds (Canadians) fiercely refuse to allow the five-year-olds (the US) to sell to other three-year-olds, just like a mafia family decreeing which territory belongs to each "family".

By blaming the US for supposedly bigger, albeit irrelevant "crimes", supply management supporters are trying to distract Canadians from the reality that they pay 190% more than they need to pay for dairy products, regardless whether 3% of the dairy products they consume are imported, or 10%.

Stephen Thompson, Clinton ON

Stephen , you need to back out the cost of quota from the farm gate price to come to a real comparison price to the US farm gate price . Your percentage comparison price is too complex for many to comprehend .

All that "The short version" did was to simply prove that you were incorrect about the hows and whys that determine and limit US dairy import levels.

From this, you imagine a defence or promotion of supply management when there was neither. You seem to see those things in most posts - even when they are not.

People can't understand existing trade levels if they don't really understand TRQs and tariffs. Your erroneous interpretation and examples proves that you don't either.

Ironically, your subsequent three long responses have proven the very same points as "the short version" was trying make even better than the original poster.

The difference between allowing 3% imports of dairy products or 23% means nothing unless what happens to those imports at the retail level is considered. In Canada this means that we could allow 5%, 10% or even 20% imports of dairy products without any incremental benefit to the consumer at all because these imports would be sold under the umbrella of domestic production, at the rip-off cost of production pricing - something already happening, in a highly-visible manner, with the tariff-free imports of milk protein replacement.

On the other hand, US consumers wouldn't benefit from doubling their import levels to 6% either because those imports would disappear into their food chain's already well-established price mechanisms.

Therefore, it is completely-wrong for anyone to suggest or imply that Canadian consumers are being better served by a 10% import level of dairy product imports than US consumers at 3% - yet that is exactly the duplitious and disengenuous "mantra" continually proffered by supply management supporters and to which I took well-justified exception at the start of this thread.

What's even worse is that Canadian consumers not only don't benefit from increased import levels, they get penalized because every up-tick in import percentages causes an off-setting reduction in Canadian production which, all else being equal, raises the cost-of-production which ripples through the entire food chain to the retail level.

Stephen Thompson, Clinton ON

On the surface, the U.S. seems to be very quiet about the billions of $$$$ in Canadian livestock subsidies from multiple Canadian programs that have enhanced many years of Canadian export production. Has that point ever been mentioned ?

Whenever former federal Ag Minister, Gerry Ritz, was asked to participate in Ontario's RMP program, he claimed he wouldn't/couldn't because, if adopted at the federal level, it would be countervailable by the US.

It's all circular reasoning that comes back to supply management anyway - RMP never was anything more than a supply management injury assistance program and, to a lesser extent, an ethanol injury assistance program.

In other words, if Canada didn't have supply management allowing dairy and poultry farmers to be financial bullies in the farm community, we would never have needed RMP an a slew of other programs in the first place.

Stephen Thompson, Clinton ON

Sm is not the only reason for RMP or other support programs . Our gov't here needs to be competitive with other countries farm financial support . I remember some one having and boasting about an "Equity Trailer" and taking it to demonstrations .
Comment edited.

Absolute half truth Rubbish, the Ritz RMP comment was specifically alluding to RMP Livestock subsidies added to.... Agristability to livestock, AgriInvest to livestock, buyout programs plus the old NISA to livestock, plus ASRA and CAIS to livestock and the list goes on and on and on.... which the U.S. livestock producers received none of. Suspect the U.S. would be very interested in seeing the total of all the above program payments used to subsidize Canada's livestock vs U.S. Livestock. Explains why it so difficult in getting RMP transparency for RMP livestock payments.

I'd be delighted to see proof or even any inference that Gerry Ritz was "specifically alluding" to only livestock RMP with reference to countervail.

Any, and all, statements I have seen from Ritz on the matter referred to RMP and that includes both livestock and grains.

Indeed, what is the difference between livestock RMP and grains RMP that would qualify any sort of difference when it comes to countervail?

And again, and as always, all of the so-called Canadian livestock "subsidies" pale in comparison the the colossal hog-trough subsidy of supply management which still is the biggest trade irritant Canada pokes in the eyes of the US

In short, the above anonymous comment is the logical result of the combination of a bad idea, anonymity and access to a computer.

Stephen Thompson, Clinton ON

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