According to news outlets, the government of Quebec prepares to cater to the interest groups in the farming sector by criticizing the EU-Canada free trade agreement as long as the increase in the quantity of foreign cheeses that can be imported in the country will not be compensated by financial promises to Quebec dairy farmers. This seems like the right time to wonder what is the cost of the policy of supply management.
This policy aims at restricting supply by limiting production and imports in order to pump up the prices that domestic farmers can demand. In the end, it is a transfer from consumers to farmers. How much does it cost?
The Food Guide produced by Health Canada points out that Canadians should consume 2 servings of dairy products per day (250 ml of milk or 175 g of yogourt or 50g of cheese) and 2 servings of meat (75 g of cooked fish, poultry, shellfish or lean meat or 2 eggs). Assuming that Canadians try to respect these guidelines, they would require roughly 90 liters of milk per year, 27 kg of chicken per year, 18 kg of cheese and 60 dozens of eggs. The annual cost of this basket of good (at the prices observed in October 2013) is 820.75$ according to the datasets produced by Statistics Canada and Agri-Food Canada. In the United States, where such goods are not subjected to supply management, the cost of this basket (using USDA’s datafile of retail prices) would stand at 485.68$. This translates in a cost difference of 335$.
This makes supply management a candidate for Canada’s most socially regressive policy. It represents over 5% of the net income of individuals the bottom decile of the income distribution in Canada. Comparatively, supply management costs 0.5% of the net income of Canadians in the top decile of the income distribution (using the Survey of Household Spending of 2009).
More importantly, if the poverty line (calculated by Chris Sarlo) was reduced by the amount that supply management costs Canadians, it would be 2.5% below its current level. That tiny reduction translates into the lifting of 76,671 Canadians living in single-person households above the poverty line (still using the Survey of Household Spending). In short, at least 76,671 persons are pushed into poverty because of supply management (I am saying “at least” because I am only considering single-person households).