THE TTALK QUOTES 

On Global Trade & Investment

 

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The Global Business Dialogue, Inc.

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No. 37 of 2014 

MONDAY, MAY 19, 2014     

 

   

Filed from Portland, Oregon  

     

Click here for last Wednesday's quote from Joanna Shelton
 
DAIRY: A KIWI EYES THE COMPETITION

"Fortunately for New Zealand, the anti-liberalization forces in Canada are well organized and will put up a big fight."

Keith Woodford
April 28, 2014 (publication date)
CONTEXT
The dairy sector in Canada has been shrinking and the country is a net importer of dairy products, but it doesn't have to be that way.  According to a report published in March by the Conference Board of Canada, Canada has the potential to grab a significant portion of the world's growing demand for dairy products and in the process build up its dairy industry and free itself from the high consumer prices of the current supply management system.

The report is "Reforming Dairy Supply Management: The Case for Growth."  Its authors note "There are two key trends in global dairy markets: increasing demand and more trade."  And they highlight the special role of New Zealand in the trade that already exists:

"The most significant exporter is New Zealand, which exports around 97 per cent of its milk production and accounts for close to 30 per cent of dairy products traded globally."

Not surprisingly, New Zealand experts have taken note.  One is Keith Woodford, who wrote an article for New Zealand's Sunday Star Times, describing and critiquing this Conference Board of Canada report.  Today's quote is taken from that article.

Mr. Woodford is a professor of farm management and agribusiness at Lincoln University in the town of Lincoln.  Though its name is relatively new (1990), it was established in the latter half of the 19th Century and is "the oldest agricultural teaching institution in the Southern Hemisphere."  For most of its history what is now Lincoln University was the Canterbury Agricultural College.


COMMENT
Canada's supply management system for dairy products was created in the 1970s.   With the goal of stabilizing income for Canada's dairy producers, the system sets prices, allots production quotas, and controls imports.  The Canadian Conference Board sees problems with the whole system, and one of the biggest is that it is locking would-be competitive Canadian producers out of an exploding global market. 

As one example of that burgeoning demand, the report notes that New Zealand's  exports to China grew by 30 percent between 2010 and 2012.  The fact that times have changed a lot since the system was created is underscored by this passage:

"Supply management was conceived under market and technological conditions that are very different from today.  As the key mechanisms of supply management were being formed, China was in the throes of the Cultural Revolution."

The authors of the report by the Conference Board of Canada were Michael Grant, Richard Barichello, Mark Liew, and Vijay Gill. 

Professor Woodford is not inclined to quarrel with their basic assessment of global dairy trade, namely that, for a number of reasons, including production constraints in New Zealand, the United States is likely to be the dominant trader of the future.  It is an assessment that goes a long way toward explaining the approach of the U.S. industry to the TPP negotiations.  In the words of the President and CEO of the National Milk Producers Federation, Jim Mulhern, "The U.S. dairy industry is prepared to eliminate all tariffs affecting dairy trade with Canada and Japan, as long as they do the same."

Professor Woodford also seems to agree that, given the political will to do so, Canada could join the U.S. as a strong, North American exporter of dairy products. What he doubts is the ability of Canadian producers (and the Canadian government) to let go of the supply management security blanket in anything like a timely manner.
RELATED EVENT - TENTATIVE
There are elements we still need to nail down, but it is likely that GBD will host a discussion on the topic THE TPP MILK SHAKE: PERSPECTIVES ON DAIRY AND THE TRANSPACIFIC PARTNERSHIP.   This session is currently slated for the morning of Thursday, June 5.   Speakers and venue to be announced. 
SOURCES & LINKS
Canada, Dairy and the TPP is Professor Woodford's article for the Sunday Star Times as published on the website www.stuff.co.nz.

Reforming Dairy Supply Management: The Case for Growth is a link to the website for the Conference Board of Canada.  You can locate the Supply Management report by typing those key words into the search box.

Lincoln University is the Wikipedia entry for this New Zealand university.

Supply Management (Canada) is the Wikipedia article on this topic.

Dairy Groups out of patience takes you to an article from Western Farmer Stockman with the quote from Jim Mulhern repeated above.
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