President Donald Trump revived his tough talk on the North American Free Trade Agreement Tuesday, warning Canada it must stop protecting its dairy farmers from US competition.
Canada’s trade policy, after all, manages dairy production through a quota system (which is anathema in itself to a free market, but that’s mostly a Canadian domestic problem), and it seriously impedes foreign competition with tariffs designed for the task.
Circularly, Canada controls dairy prices by matching them to “average” production costs, and then controls production by setting allowed quotas. With prices thus under government control, Canada sets tariffs to achieve prices for imports of foreign dairy products that aren’t competitive.
Of course, there’s a flip side to this: the US must stop shielding American farmers from the United States’ own free market and eliminate Big Government price supports for dairy and other farm products as well as corn price support achieved via ethanol mandates.
Good luck with either.