Canada's milk policy costs consumers $2.5 billion
per year and is focused on helping political parties gain or
retain office rather than on the needs of consumers, according a
new electronic publication
The Politics of Milk in Canada
released today by The Fraser Institute.
This new study shows that through a combination of a
government-mandated cartel for milk and tight constraints on
imports of milk and the products made from it, Canadian milk
producers have persuaded federal and provincial governments to
create policies that forcibly transfer about $2.47 billion per
year (in 2000) from Canadian consumers to them.
This constitutes an average income transfer of about $120,000 per
"Canada's milk policy is another example of the triumph of the
well-organized few over large numbers of people by using the
power of government," says William Stanbury, Professor Emeritus,
University of British Columbia and the study's author. "It is in
the best interest of politicians to create policies that benefit
vocal groups like milk producers because it increases their
chances of election or re-election."
Stanbury shows that as a result of these political pressures,
Canada's dairy policy has become increasingly counterproductive:
industrial milk prices have risen faster than the overall rate of
inflation, produced rising prices for milk quotas, (the right to
sell a certain volume of milk to a provincial milk board each
day) and required massive efforts by the federal government in
international trade negotiations to limit changes that would open
up the market and reduce quota values.
"Canada's dairy policy is an example of a policy that may be
'bad' in economic terms but is quite successful in political
terms and so is very difficult to change," notes Stanbury.
He argues that a political leader who seizes this issue and is
able to gain sufficient political support to get into power and
dismantle the system is necessary to bring about major reform.
Stanbury points out that the increased burden of the failed milk
policy may eventually provoke a strong reaction from Canadian
consumers and taxpayers. In the first half of 2002, the value of
milk quotas rose by 18 to 19 percent in Quebec and Ontario-this
occurred at the same time the stock market was falling.
"Canada's dairy policy has not become sufficiently awful, but the
rot is becoming more and more evident," explains Stanbury.
Technological change in the industry could also make continued
regulation and government control impracticable and undesirable.
Finally, Stanbury says that a major scandal involving the
Canadian Dairy Commission or the milk board of a major
milk-producing province (like Quebec or Ontario) could help
undermine the legitimacy of the entire system and bring much
needed reform to Canada's milk policy.
"Canada's dairy policy is a very complex system which has been
motivated almost entirely by milk producers. If milk producers
wanted to end the elaborate supply management marketing scheme,
open up the border to imports, or renounce the cash subsidies
from governments, these changes would be made very quickly by
governments," according to Stanbury.