While the Trans-Pacific Partnership (TPP) talks have not recently been a prominent feature in the news, discussions continue to unfold with the latest round of negotiations completed August 22 to 30, 2013 in Brunei. As of July 23, 2013, Japan has joined the negotiations bringing the negotiating block to 12 counties: Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore, the United States, and Vietnam. The potential market now includes more than 792 million people and a combined GDP of $27.5 trillion.

There are concerns amongst some in the agricultural community as to what implications such a trade block would have on Canada’s supply management system. The system was established in the 1970’s to match the supply of dairy, poultry, and eggs to consumer needs. While all of Canada’s supply-managed agricultural sectors could be affected, the impacts on the dairy industry has generated the most discussion.

It is not yet clear how the trade negotiations will unfold, or whether the dismantlement of the supply management system will become a condition to Canada’s entry into the TPP. However, if such an eventuality occurs, it will become necessary to determine how to phase-out Canada’s supply management. Any changes to the system should be structured so as to accommodate producers’ reliance upon a system established by the Canadian government and all parties’ interest in the production of safe and quality food products for the Canadian market. New Zealand and Australia provide examples of two jurisdictions which have deregulated their dairy industry and may offer lessons should the Canadian industry be required to adopt similar policies.

New Zealand did not maintain a system of supply management, but rather government sponsored subsidies and compensation for costs to promote exports. New Zealand established a single-desk export agency which regulated the export of dairy products. Through the 1980’s, fiscal pressures forced these protective measures and compensation for costs to be cut as part of a broader economic deregulation movement.  The single-desk export agency was also terminated in 2001. A period of disruption followed during which many farmers were forced to leave the industry. Since that time, the industry has largely rebounded by increasing production though export to Asian markets.

Australia maintained a system of supply management for decades similar to the system currently in place in Canada. In 2001, the Australian government removed export assistance and price control measures. With consultation from producers, Australia dismantled its supply management system. To assist dairy farmers during the phase-out, Australia imposed a levy of 11 cents per litre on all milk sales for eight years. This levy was then used to fund the Dairy Structural Adjustment Program, which paid farmers in quarterly instalments to assist them transition their farm operations or prepare to compete in an unregulated market.  Dairy farmers had the option to take an exit payment if they chose to leave the dairy industry. A Dairy Regional Assistance Program was also established during a three-year period to assist dairy-dependent communities diversify their farm operations.

The Canadian industry will await the progress of the TPP discussions to discern any potential implications. While assumptions that entry to the TPP requires the end of supply management may prove incorrect, the industry may be required to adapt to policy changes.

Written by: Andrew Hentz, Summer Law Student