August 29, 2018 4:35 pm

Dairy prices could drop if Canada loosened supply management terms: experts

WATCH: Demands to get rid of supply management 'not acceptable,' Trudeau says

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Prime Minister Justin Trudeau is holding firm that his government will not budge amid NAFTA talks when it comes to supply management.

But if it does, some experts say Canadian consumers could see a drop in dairy prices at the grocery store.

WATCH: Donald Trump ‘optimistic’ Canada will sign on to trade deal with U.S., Mexico

As Trudeau promises to “defend” supply management, pressure is mounting on Canada to cave in on demands that the system be opened up to allow U.S. dairy exports into the country at a lower cost.

Canada’s supply management system, which sets production quotas and prices for domestic dairy products while imposing steep tariffs on imports, was very much on Trump’s mind on Monday.

READ MORE: Phase out supply management? Tories’ debate a ‘healthy exercise,’ expert says

“You know, they have the tariffs of almost 300 per cent on some of our dairy products,” Trump said referring to Canada.

And media reports have suggested that Canadian negotiators may be preparing to open up the dairy market if everything else in the revised trade deal is to their liking.

WATCH: Freeland says Maxime Bernier ‘entitled to opinion’ on supply management, but position unchanged


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Bill Robson, the CEO of C.D. Howe research group, explained to Global News that prices for dairy will likely go down if the regulations are loosened.

“I think in the near term, the increase in supply from the U.S., that we are expecting if the deal goes through, would have some beneficial effect on prices,” Robson said.

But Robson added that there would be significant pressure from Canadian dairy farmers to regulate prices.

“It’s a totally controlled market, so there are ways of preventing increased U.S. access from affecting prices, and I’m sure that that will create a lot of tension within the managers of the supply management system,” he said.

READ MORE: The world wants Canada to scrap supply management, but does it make sense?

Sylvain Charlebois, dean of Dalhousie University’s faculty of management and agriculture, added that while prices may fall in the short-term, it’s hard to predict exactly what will happen in the longer term until a clear deal is made.

What Charlebois says is clear, however, is that supply management is a contentious issue politically — but one that needs to be discussed rather than skirted.

“We’ve never actually had a discussion, because the debate has been so polarized,” he said.

“Some people say the system is perfect, and other people have been saying the system is flawed and should be abolished. I think the solution is somewhere in between.”

And pressure is mounting north of the border for the Trudeau government to stick to its word that supply management won’t be loosened.

READ MORE: Canadian dairy Saputo criticizes supply management system, siding with U.S. in ongoing dispute

Quebec Liberal Leader Philippe Couillard is warning there would be “serious political consequences” to allowing any further dismantling of Canada’s supply management system in order to strike a NAFTA deal.

Without mentioning the current Trudeau government directly, Couillard suggested the country’s second-largest province will make its disapproval heard if Canada gives in to American demands and grants greater access to its dairy market during tough NAFTA renegotiation talks.

WATCH: Trudeau pushes back against Trump’s NAFTA threat

And dairy farmers have long been outspoken on the issue.

Ron Sleeth, whose family runs a dairy farm in Battersea, Ont., says he is worried his family farm would be decimated if Canada abandons supply management in a new free trade agreement with the U.S.

READ MORE: Couillard warns against softening stance on supply management in NAFTA talks

“It would be the end of the family farm here in Ontario and in Canada,” Sleeth said.

Robert Wolfe, a former Queens University policy professor, told Global News that what the U.S. wants is free trade with dairy.

Yet, if Canada said, “Alright, we will give away all of our subsidies, all of our tariffs, all of our tariff barriers, but only if you do the same,” the American response would be simply, no, Wolfe explained.

— With files from The Canadian Press and Global News reporter Kraig Krause

© 2018 Global News, a division of Corus Entertainment Inc.

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