- Dr. Greg Mason, Department of Economics, University of Manitoba (Last of a three part series)
Myths exist about the strategic position of food, the importance of the family farm to the preservation of rural Canada, and the need to defend Canadian farming in the face of European and American subsidization. These myths get in the way of creative farm policy.
Farmers are often represented as deserving a special place since they produce one of life's necessities. Since we need food, it is important that we preserve our capacity to produce food in case we confront a situation where we cannot import it. However, Canadian farmers currently export about two-thirds of the total value of their annual production. In many of the main commodity areas, such as grains and livestock, we produce far more than we can ever hope to consume. If we buy the argument that we need domestic farms to maintain food security, and we are prepared to eat only what is grown in Canada, we could get by with one third of the farms we currently have. At the same time, Canadians have acquired a taste for strawberries in January. We import over $15 billion of food annually.
Because Canadian farmers produce surpluses of food we could never hope to consume, the argument that we need to subsidize farming in case the world collapses and we need to supply ourselves simply makes no sense. If the world collapses, either through environmental chaos or some other calamity, the notion that Canada can hunker down and feed our faces while the world starves is geo-political naivety.
Another common argument for subsidizing farming is to preserve rural society. It is important to understand exactly why the preservation of rural Canada strikes such a core in Canadian policy. Partly this may reflect nostalgia for a simpler and presumably more wholesome life. It often seems that Canadians believe that quintessential “Canadianess” emerges from rural Canada. This sentimentality may also reflect that many of us are but a generation or two away from the farm.
Policies to preserve rural Canada are valid. The recent Senate report on rural poverty makes many practical and useful suggestions to address rural needs, but what it misses, as do many, is the need to create strong businesses that support families. A tendency exists in that report to present income support and other welfare type policies as instruments to reduce rural poverty. These policies are pan-Canadian and essential elements of the social safety net. They are not elements of a long-term growth strategy for rural areas - for that we need business-oriented agricultural policy.
With the coming surge in retirements, an opportunity exists to support the succession of business from the sole proprietorship – the family farm – to a range of other business forms including agri-business, limited liability partnerships, cooperatives and corporations with any number of owners. These business ownership models will much more easily manage risks and therefore will have access to capital and other resources that manage the business through the agricultural cycle. The key role for government is to support the financing of that succession process by loan guarantees to allow a surge of new entrants to acquire businesses.
Finally, what of the massive government subsidies offered by the European Union and the United States? Should these compel us to subsidize our own agriculture? Yes, if you accept the two myths discussed above and in the case of unusual events. The BSE crisis, widely misrepresented as primarily an animal health issue, quickly became a massive non-tariff trade barrier erected by rogue elements within the United States agricultural and judicial community. The embargo persisted in spite of strong pressure from the US Administration; Canadian governments had no choice but to support the livestock industry with massive cash infusions.
The sustainable answer is no. New Zealand and Australia have substantially reduced agricultural subsidies and eliminated many of the institutions that impeded the growth of farm businesses. The Australian Wheat Board, the model of our own Canadian Wheat Board, was privatized. The entry restrictions into certain commodity areas have been relaxed. The goal of these changes is to create the conditions for farm businesses that can compete internationally.
Some object that the experience of New Zealand and Australia is irrelevant to Canada, since they do not share a border with a country offering massive subsidies to their farmers. In fact, New Zealand and Australia face exactly the same barriers and must ship their products 8,000 kilometres.
Agricultural policy should focus on supporting strong farm businesses. This would support families in rural Canada, benefit the food consumer through lower prices and relieve the taxpayer.
This article was prepared by Dr. Greg Mason of the Department of Economics, University of Manitoba and PRA Inc. and is part of the Canada West Foundation's Going For Gold Project. The paper upon which this article is based—Prairie Agriculture at the Crossroads: Time for a New Policy—can be download at no charge from the Canada West Foundation website ([url=http://www.cwf.ca]http://www.cwf.ca[/url]).
