With Canada having just enacted Bill C-202, uncertainty and speculation abound regarding the fate of Canada’s supply management system. This advancement occurs amid increasing trade pressures from the United States. Farming experts have been warning that supply management continues to be a major trade irritant, especially for U.S. dairy and egg producers. The law was granted royal assent on June 26. Specifically, the bill seeks to reduce the foreign affairs minister’s capacity to compromise in international trade negotiations on tariff rate quotas and tariff rates. So far, most analysts are profoundly skeptical of the pact’s effectiveness in addressing U.S. concerns.
These types of frustrations bubbled up from the United States Trade Representative (USTR) earlier this spring, most notably focused on Canada’s supply management system. They pointed to quota regulations set out in the Canada-United States-Mexico Agreement (CUSMA) that Canada has failed to put in place as expected. Ongoing U.S. frustrations center on the cost of products utilizing different types of milk, indicating that this dispute is still hardly resolved.
Experts including trade lawyer William Pellerin contend that the new law makes negotiations much more difficult. Most importantly, he shared the frustrations that his country faced in trying to negotiate with the United States. This bill pretty much hamstrings Canada’s ability to do that,” he argued. Yet this sentiment points to a bigger problem. Canada’s legislative approach is often out of step with the harsh realities of international trade negotiations.
The Implications of Bill C-202
Bill C-202 stands up for Canadian farmers. It prevents the U.S. government from entering into concessionary or overly ambitious commitments on import tariffs and import quotas that are greater than a threshold level. The Bloc Québécois welcomed the new law as an important victory for Quebec farmers. In fact, many see it as a limit on Canada’s negotiating ability.
Trade attorney Mark Warner echoed those sentiments, noting that the law’s design makes the government accountable. Unfortunately, American trade officials likely won’t be moved by it. He said that the Canadian federal government needs to come to the table with the US and negotiate. He went on to say that he has never encountered an American trade official or American lawyer who would advise taking the argument about the Parliament’s bill seriously.
Additionally, as Philippe Lagassé pointed out, the law would not necessarily bind the government’s negotiating hand. He asked whether Bill C-202 had actually displaced the royal prerogative. As he concluded in relation to the Bill’s provision, the language fails to sufficiently bind the Crown.
“I have doubts that the royal prerogative has been displaced by the law. There is no specific language binding the Crown and it would appear to run contrary to the wider intent of the (law that it modifies)” – Philippe Lagassé
Long-standing Tensions Over Supply Management
The U.S. has long been frustrated with Canada’s supply management system, which is designed to stabilize prices for domestic dairy and egg producers. Under CUSMA, Canada retains the ability to slap punitive tariffs of 250 percent on US dairy exports that go beyond specified, government-mandated quotas. This system is seen by many American officials as a dangerous impediment to free and fair trade.
Mark Carney, a former Canadian diplomat, expressed skepticism about the necessity of Bill C-202 during recent elections, claiming it might hinder negotiations without offering any real solutions. “Now that we’ve removed the digital service tax, dairy and supply management is probably the number 1 trade irritant that we have with the United States. That remains very much unresolved,” said Pellerin.
While the unrest continues, many experts say there is shared ground on which to stand when it comes to resolving these conflicts. Louise Blais suggested that if Canada were to “respect the spirit” of CUSMA as understood by the Americans, many issues might resolve themselves without drastic changes to supply management.
“We jump to the conclusion that it’s dismantlement or nothing else, but in fact there’s a middle ground” – Louise Blais
Future of Supply Management in Canada
Experts do not expect a sudden collapse of Canada’s supply management system anytime soon. Pellerin is hopeful that it will survive like this for years to come. He stated, “The system itself won’t be dismantled. I don’t think that’s anywhere near happening in the coming years and even decades.”
Taking discussions on expanding access to dairy quotas further could be one way. Pellerin’s plan involves opening these quotas up to more than just processors. This would be a useful step towards lessening many of the regulatory trade irritants between our countries.
Warner pointed out that Bill C-202 could limit ongoing negotiations. That doesn’t mean it prohibits – indeed it does not even prohibit – changes to supply management practices in the future. He pointed out that if Canada really wants to make concessions, it would just introduce those types of changes directly through Parliament.
“Doesn’t prevent supply management from eventually being removed or weakened” – Mark Warner
