Canada’s oft-derided provide administration system—a persistent irritant in most of the nation’s commerce relationships—is much less centered on worth stability, as Ottawa claims, however moderately on defending the dairy sector in a single Canadian province. Canada’s future commerce negotiations with the US—or another nation with which it needs to keep up a free commerce settlement, for that matter—will probably put a highlight on this situation.
In Canada, small, inefficient Quebec-based dairy operations are the first beneficiaries of the antiquated mid-Twentieth-century provide administration technique that continues to be in power north of the border.
This technique as soon as served an financial objective. Within the Sixties and Seventies, agricultural provide chains differed enormously from at present. An absence of worldwide commerce guidelines and frequent use of tariffs considerably and adversely impacted the agricultural business. At the moment, governments all over the world legislated to manage manufacturing, searching for to stabilize home costs and farm revenue for some agricultural sectors—particularly the manufacturing of dairy, egg, and poultry merchandise.
Over the previous 50 years, provide chains have change into extra environment friendly and resilient, enabling international locations to reduce and even remove these practices. Canada, nevertheless, has persistently did not take away these mechanisms. For political causes, everybody else is paying the value—and it is pricey.
When governments management manufacturing ranges, they create unimaginable business inefficiencies. Provide-managed sectors present clear proof of this. For instance, an estimated $11 billion value of uncooked milk was merely dumped onto the bottom and wasted in Canada between 2012 and 2024 with the intention to keep away from exceeding manufacturing quotas.
There are simply over 4,200 dairy operations in Quebec out of 9,400 nationally. The targets of provide administration give attention to defending these 4,200 operations at the price of the opposite 190,000 Canadian farmers, in addition to Canada’s 40 million residents.
Though dairy operations in Alberta, Saskatchewan, and Manitoba are greater than twice as giant as these in Quebec, the federal government restricts milk manufacturing within the three western provinces to 16 % of whole home manufacturing, whereas Quebec accounts for 37 %.
The American dairy sector reveals there is a totally different path that Canada might observe. Dairy manufacturing effectivity in the US has resulted in Idaho and Wisconsin being the second- and third-largest milk-producing states. Provide chain logistics enable for the transportation of dairy merchandise to succeed in markets throughout the U.S. In Canada, market focus would probably shift to extra environment friendly producers within the western provinces if provide administration had been to finish.
Not solely would this contribute to decrease dairy costs for all Canadian shoppers, however it might additionally make a distinction for Canada on the world stage by boosting the nation’s place in worldwide commerce negotiations. So long as the system stays in place, it is going to be an irritant.
In all of its commerce negotiations over the previous decade, Canada has been required to grant concessions and permit higher volumes of tariff-free imports. In 2015, when negotiating the Trans-Pacific Partnership, Canada was compelled to make concessions on dairy merchandise value 3.25 %. It made additional concessions throughout the 2016 negotiating technique of its free commerce cope with Europe, and once more within the negotiations resulting in the 2020 Canada-United States-Mexico Settlement (CUSMA). As concessions had been made, Ottawa supplied billions to home dairy producers to compensate them for elevated competitors, additional supporting the sector’s inefficiencies.
Following the UK’s departure from the European Union, it sought to rapidly set up commerce offers with different international locations. Concluding a commerce settlement between Canada and the U.Ok. ought to have been a fast and easy matter. Nonetheless, Canada’s refusal to make concessions on provide administration has prevented an settlement from being reached.
This unwillingness to drop the outdated system leaves Canada at vital threat of by no means negotiating one other worldwide commerce settlement resulting from its adherence to preserving provide administration.
But, the home politics that protect the system persist.
In 2022, as a part of the political safety towards market inefficiencies, the Bloc Québécois—a separatist social gathering that sits within the Canadian Parliament, and solely runs candidates in Quebec—launched Invoice C-282, which might stop all future Canadian governments from negotiating concessions that might negatively have an effect on the availability managed manufacturing of dairy, egg, and poultry merchandise in Canada. This invoice died when the 2025 federal election was referred to as. Nonetheless, one of many Bloc’s first actions within the new Parliament was introducing one other invoice, now listed as C-202, with an similar goal: stopping any provide administration concessions.
The invoice’s reintroduction, and the unanimous help it acquired within the Home—together with from the governing Liberals—adopted by its swift passage by way of the Senate, signifies Canada shouldn’t be critical about renegotiating the CUSMA. The Trump Administration has clearly indicated that higher entry to Canada’s supply-managed sectors might be a key goal for them in any negotiation.
Continued inflexible adherence to out of date, anti-competitive provide administration insurance policies will imply that Canada won’t ever be capable to negotiate or renegotiate any future commerce settlement.
