As president of one of Canada’s fastest-growing restaurant chains, William Dover has everything to gain from pleasing his customers. But there is one problem that he is unable to correct. Several times recently, patrons complained after noticing that chicken dishes at the Toronto-based chain’s 75 Olive Garden and Red Lobster restaurants cost roughly 10 per cent more than at the company’s U.S. locations, even after factoring in the exchange rate. Dover says that he would like to lower his prices—but cannot afford to because wholesale chicken prices in Canada range from 25 to 100 per cent higher than in the United States. Says Dover: “All we want is a level playing field, so that we can be internationally competitive.” Dover’s problem is a familiar one to grocery shoppers, who are forced by federal and provincial agriculture policies to pay sharply higher prices than American shoppers do for such staples as milk, eggs and poultry. Now, those policies are coming under increasing attack from consumer advocates, food manufacturers and grocery retailers across the country.
The pressure for reform is a result in part of the current round of international trade talks under the General Agreement on Tariffs and Trade, scheduled to end next month in Brussels. Among other things, the 99 GATT member countries are trying to reach an agreement to reduce subsidies and protectionist measures that distort prices and discourage trade in farm products. In line with that effort, Canada is asking other countries to dramatically reduce their export subsidies on grain, a demand designed to benefit beleaguered western farmers. But other GATT members charge Canada with hypocrisy, demanding that Ottawa agree to liberalize its 25-year-old system of agricultural supply management. Prized by farmers but disliked by consumer groups, the system ensures fixed prices for egg, milk and chicken producers while limiting cheaper imports of farm products from the United States and other countries.
The process of change, however, is likely to be slow and painful. Agriculture Minister Donald Mazankowski, a supporter of the international trend towards freer trade, called last year for the reduction of all farm
supports and the overhaul of Canada’s supply-management system, which is administered by marketing boards in every province. In Winnipeg this week, he is scheduled to meet with his provincial counterparts to continue discussions on the future of Canada’s agricultural policies. Federal officials say that he is hoping to coax producers towards a more market-oriented approach to farm production—with prices that reflect the costs of only the most efficient farmers.
Canada’s 182,000 dairy, egg and chicken farmers have reacted with alarm to the prospect of sweeping changes to the boards that protect them. They claim that efforts to liberalize the country’s farm support programs would drive many small, family-owned farms out of business and leave the industry concentrated in the hands of large corporations.
To drum up public support, the 35,000 milk producers represented by the Dairy Farmers of Canada recently spent $400,000 on a television commercial that depicted the decay of a once-prosperous dairy farm. The ad, which aired on national television earlier this fall, warned that “thousands of dairy farms will die” if competitors from the United States and Europe are allowed to increase exports to Canada. According to the group’s executive director, Richard Doyle, more than 30,000 people who saw the ad telephoned a toll-free number to express their support for the farmers.
The farmers’ campaign appears to have met with at least some success. Last month, Canadian negotiators at the GATT talks in Geneva tabled a series of proposals that left untouched the supply-management system,
which controls the price and supply of dairy products, eggs and poultry. Still, the proposals did include a 50-per-cent cut in farm subsidies that distort trade and the total elimination of farm export subsidies. In addition, Canada offered to double its dairy imports ceiling, to five per cent from 2.5 per cent of domestic production. Mazankowski later termed the retention of the supply-management system “a small inconsistency” in Canada’s bargaining position. Canada also imposes an import ceiling of 7.5 per cent of domestic production for chicken and about four per cent for eggs, but neither is at issue in the GATT negotiations.
Despite these concessions, the pressure for reform remains strong. U.S. Trade Representative Carla Hills, for one, said that Canada’s offer “fails to deal with supply management, and I find that a great gap.” In the
United States, milk producers are protected by a threeper-cent ceiling on imports of cheese and other manufactured milk products, but there are no restraints on chicken and egg imports.
Canada’s offer also left it out of step with the 13 other countries that belong to the so-called Cairns group, an organization of medium-sized countries that banded together in 1986 to press for freer trade in agricultural products. That group, which includes Australia, New Zealand and Brazil, is lobbying for a total elimination of domestic programs to control prices and supplies of farm products.
Meanwhile, the prospect of changes to Canada’s agricultural policies has exposed long-standing divisions in the farm community. Grain farmers in the West support freer g trade because, they say, it js would help to end a subsidy 5 war between the United States and Europe that has resulted in overproduction and lower world prices for wheat and similar crops. Said Saskatchewan Premier Grant Devine last week: “It is imperative that Canada’s GATT negotiators are constantly reminded of the need to reach an agreement that substantially reduces the level of subsidies.”
By contrast, dairy and chicken farmers have much to fear from liberalized agricultural policies. Said Jayne Huntley, assistant executive director of the dairy farmers’ lobby group: “If we open up our markets, we will destroy the Canadian dairy industry—and the family farm.” The Canadian Chicken Marketing Agency—the organization for provincial chicken marketing boards—argues that its members need price stability to stay in business. Higher wages and benefits, more expensive machinery
and long, cold winters make farming in Canada a more costly proposition than in the United States, says Cynthia Currie, the agency’s general manager. “I’m not saying that the system is perfect,” she added. “We need to be more responsive to the demands of consumers. But the system is basically sound.”
The Consumers’ Association of Canada, however, takes a radically different view. CAC president Marilyn Lister says that her group has been fighting the supply-management system for at least 20 years, and has stepped up its campaign as the gap between Canadian and world food prices has widened. She added that the association has received reports from teachers who are concerned because children are coming to school with inexpensive soft drinks in their lunch boxes instead of milk. Said Lister: “Marketing boards have not acted in the interest of Canadians. We pay double the average world price for milk. There should be an orderly dismantling of the supply-management system in Canada.”
Food retailers and the food-processing industry also support agricultural reform. Reta Moyer, manager of business practices and government affairs for the Toronto-based Miracle Food Mart supermarket chain, said that Ontario’s chicken prices are the highest in the country because of supply shortages. “My family was in farming, and I know what it is like to dump milk because of overproduction,” Moyer says. “But there is an insufficient supply of chicken in Ontario because of the supplymanagement system. If we could get more product, we could put it out at lower prices.” Higher prices for Canadian milk, eggs and poultry are also taking a toll on retailers who operate near the U.S. border. Last spring, Robin Garvin, a family doctor in suburban Vancouver, closed two grocery stores that he owned in Surrey and White Rock, B.C., both within a 20-minute drive of the border. Garvin
says that, in the past two years, his stores experienced a 20-per-cent decline in business as more and more customers bought from U.S. outlets. Added Garvin: “We didn’t go broke, but we were losing money. We felt terrible about it because there were 55 employees who lost their jobs.”
For Ottawa, the conflicting demands of farmers, consumers and food manufacturers have created a daunting political challenge. Although the Tories say they are committed to freer trade in agricultural products, they are equally anxious not to alienate the country’s
supply-management farmers—especially Quebec’s well-organized dairy lobby, which represents half of all Canadian dairy farmers. And even if GATT members fail to reach an agreement to reduce subsidies at their meeting in Brussels next month, the world trend towards freer trade appears irreversible. In time, those pressures will almost certainly force Canada to accelerate the pace of reform—regardless of the painful consequences for farmers.
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