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writing for godot

Milkin’ It -- Why Canada Won’t Be Cowed By Trump

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Written by Zepp Jamieson   
Saturday, 09 June 2018 10:26

In the chaotic and insane presser Trump gave at the G6+1 summit in Québec he railed about the Canadian tariffs of 270% on American dairy products. He howled that this was a devastating blow to America’s brave, patriot dairy farmers, or words to that effect. Canada was screwing America inside out, an insult not to be borne!

Oh, those awful, awful Canucks. (Truth in Advertising time for those who didn’t already know: I’m a Canuck). Two hundred and seventy percent! No wonder America’s going down the tubes! It’s probably why the US budget will have an extra trillion deficit next year!

Well, it was almost lost in the avalanche of sheer nonsense that Pissmop uttered during that strange press conference, but what makes his whines about Canadian dairy pure nonsense is this one inconvenient fact: The US actually enjoys a trade surplus with Canada in dairy. It’s about a 5-1 trade surplus, at that. Granted, the market, in both directions, is minuscule—about $600 million US—but it still means that the US exports about a half billion in dairy to Canada while Canada exports about $100 million to the US. Now, in case Trump is reading this, I’ll type it very slowly: The US does not have a trade deficit with Canada over dairy, the stuff that comes from cows, and for some reason, hens. It actually sells more than it buys. Have someone with actual business experience explain it to you, Donald.

So why is Fearless Leader pissing and moaning about Canadian cows? The best reason anyone can think of is that Canada has a regulated, efficient and effective dairy industry, whereas the American one is in such an intense state of cutthroat competition that there is a huge oversupply of milk, with the result that the “gate price”--the price distributors are willing to pay to take it off farmers’ hands—is lower than what it cost the farmers to produce the milk. And that’s with the cows doing all the work.

American dairy farmers overproduce, hoping that having more to sell means that more will be bought, and they will thus get a bigger share of the market. Anyone who has taken Econ 101 in high school knows this is utter nonsense, and someone who knows anyone who took Econ 101 in high school will probably be able to explain it to Pissmop.

Milk is milk is milk; there isn’t a great variation in quality from one farm to the next, despite what the advertising says, so the market is free to select the lowest price, knowing the quality will be about equal to the stuff selling for a few pennies more per gallon or liter. Which further drives down prices.

What will happen is what is happening: small farms are being driven, and the big dairy companies are buying their stock, overproducing yet more to destroy the remaining small farmers, and eventually they will turn on one another, and classic economics suggest we’ll eventually end up with a consortium of three-to-five big companies that will collude to artificially raise milk prices and limit supply. This is known as “the free market”, a market in which suppliers, consumers, and the product are anything but free in any sense of the word.

Not only are American farmers going broke competing with one another, but last year they cumulatively threw away forty three million gallons of milk—literally dumped into holes in the ground.

In Canada, they have this thing called “Supply management.” The Canadian Dairy Commission (and doesn’t the name just scream “Nazi socialism”?) set national quotas on supply, and coordinate with the ten provinces to ensure a stable market in which supply very nearly matches demand. (I don’t know if it applies in the Territories, despite that being nearly half of Canadian real estate—I haven’t heard much about an Inuit dairy industry, and cows are notoriously unhappy on ice).

Now here’s the thing: It works. It works extremely well. Yes, it means higher prices for consumers, but since Canadians enjoy a higher level of disposable income, nobody minds much. They look at the madness of the American industry and realize that the extra fifty cents a liter is a wise investment.

American wants a dumping ground for the surpluses created by its overheated cutthroat industry, and Canada isn’t interested in destroying its own efficient and effective industry in order to oblige suicidally competitive American dairy farmers. Nor do they want a system that encourages such patently destructive competition. They are also suspicious of lax American regulations regarding the use of hormones and antibiotics in cattle, and GMOs. The wild-west approach to basic health and safety measures in America has led to a deepening mistrust of American food products.

Pissmop has to know he’s spewing nonsense when he attacks Canada over dairy trade imbalances, since it’s obvious the existing imbalance actually works in America’s favor. (Part of the reason for that is that Canada doesn’t limit imports on cheese, and the American standards for cheese, which include permitting a certain amount of animal parts in the cheese, is much lower—as are the prices.)

Trump is taking a similar approach to trade with the rest of the world: American can’t compete because standards are low for their products, so Trump is demanding the rest of the world lower their health and safety regulations to let America compete “on a level playing field.”

The problem is the rest of the world, including Canada, perhaps America’s best friend, are looking at the US the way is is right now and muttering to themselves, “Don’t be that guy.”

 

-- 
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