On October 5th, the government of Canada announced that the members of the Trans Pacific Partnership (TPP) had successfully concluded negotiations.
The TPP lowers or removes tariffs on a significant number of commodities and improves market access of Canada’s good to markets such as Japan, Malaysia, Singapore, and Vietnam.
While the full details of the Trans-Pacific Partnership have yet to be revealed, it appears that the three pillars of supply management (price setting; production control; and import control) remain secure.
Canada agreed to permit limited new access to foreign suppliers of milk, eggs, chickens and turkeys which is to be phased in over a five year period. The amount of new access permitted is calculated as a percentage of Canada’s current production. The following levels of imports will now be permitted: Imports of dairy products up to 3.25 percent; imports of eggs up to 2.3 percent; imports of chickens up to 2.1 percent; imports of turkey up to 2 percent; and imports of broiler hatching eggs up to 1.5 percent. Fluid milk is included in the increased market access, however, 85 percent must be directed to Canadian processors.
Furthermore, the government has announced new programs to compensate producers and processors for the new market access. The Income Guarantee Program, valued at $2.4 billion over 15 years, will provide income protection to producers. The Quota Value Guarantee Program, valued at $1.5 billion over 10 years, will protect producers against reduction in quota value when the quota is sold. The Processor Modernization Program, valued at $450 million, will provide assistance to processor modernization efforts. Finally, the Market Development Initiative, valued at $15 million, will provide assistance to supply-managed industries in marketing and promotion activities.
Preceding the announcement, there was much speculation regarding the impact that the TPP would have on Canada’s supply management program. In late summer, it was reported that Canadian negotiators offered concessions in which Canada would permit a greater amount of tariff-free imports of fluid milk, butter, and cheese. Some commentators observed that the U.S. and New Zealand would continue to push for greater market access and that the days of supply management may be numbered. However, it appears that those predictions were inaccurate. While the increased market access for foreign suppliers has weakened supply management to some extent, for the near term supply management remains largely intact.