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The Impact of Current Doha Round Agricultural Negotiations on the Canadian Dairy Industry

The Impact of Current Doha Round Agricultural Negotiations on the Canadian Dairy Industry. Xiangxiang Ye April 4th 2006. Background. Dairy industry profile in Canada ◆ Second largest in the agri-food economy (2004) total net farm cash receipts =$4.6 billion

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The Impact of Current Doha Round Agricultural Negotiations on the Canadian Dairy Industry

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  1. The Impact of Current Doha Round Agricultural Negotiations on the Canadian Dairy Industry Xiangxiang Ye April 4th 2006

  2. Background • Dairy industry profile in Canada ◆ Second largest in the agri-food economy (2004) total net farm cash receipts =$4.6 billion 38,000 people on the farm and 26,000 at the processing level ◆ Dairy supply management system supervisory price support, production quota and border protection measures ◆ Trade performance dairy imports have continued to increase while exports have decreased. Exports=$264.3million, Imports= $588.1 million (2004) • WTO agricultural negotiations impact the dairy industry ◆ Domestic support ◆ Market Access ◆ Export competition

  3. Previous work • Romain, J.(2001) The Future of the Dairy Industry in Canada. Advances in Dairy Technology 13:337-353. The mechanism for transferring quotas and the mechanism for discriminating prices in milk products to expand the domestic and export market. • Phillips, R. (2003) Future Dairy Policy in Canada. Advances in Dairy Technology 15:151-169. Canada has pursued a policy of giving real and expanding domestic market access and keeping government out of producer and processor decisions to participate in lower export market. • Gifford, M. (2005) Canada’s Dairy Industry: Can Supply Management Survive an Open Trade Environment? Policy Options Nov 57-63. Policy adjustment package to adjust dairy supply management under current Doha Round mainly for producers.

  4. Objective of this study • Investigate the impact of Doha Round on the dairy industry in Canada • The possible policy adjustments for the dairy industry • Alternatives available for the dairy supply management system

  5. Content • Doha Development Agenda and the impact on the dairy industry • Policy adjustment proposals for the dairy industry • Alternatives for the dairy supply management

  6. Doha Development Agenda and the impact on the dairy industry • Doha Development Agenda ◆ Substantial reductions of 50%-70% in trade distorting domestic support with a cap on product specific trade distorting support; ◆ Market access is improved with higher tariffs facing deeper cuts; ◆ The deadline for the complete phase out of export subsidies is 2013. • The impact on the dairy industry ◆ Constraint on the increase of the support price; ◆ Increase of import quotas and reduction of over-quota tariff rates; ◆ Loss of export market.

  7. Policy adjustment proposals for the dairy industry • From producers’ perspective ◆ A voluntary production quota buy-back program accompanied by a one-time compensation payment; ◆ Assurance that the production quota system to be continued for at least next 10 years and a continued access to the national direct income stabilization program; ◆ Assurance of the emergency import safeguard to prevent imports from entering Canada. • From processors’ perspective ◆ Guarantee that dairy and other food processors will continue to have unrestricted access to imported milk and dairy products used to manufacture food products for re-export; ◆ Promote market development and innovations in the dairy sector in response to the market demand.

  8. An alternative for the dairy supplymanagement----Deregulation in the dairy industry • An example from Australia for Canada ◆ Dairy support prices and quotas eliminated in 2000; ◆ Adjustment assistance and transitional assistance are provided; ◆ Recovery in milk production and the industry’s export performance has been maintained. • Reform the dairy industry ◆ Transitional aid for all producers; ◆ Aid for producers who decided to leave the industry; ◆ Aid to regions with large communities dependent on the dairy industry; ◆ Programs specifically aimed at aiding particular producers.

  9. Conclusion and future work Conclusion: ◆ Current Doha Round will challenge the Canadian dairy industry; ◆ Policy adjustments have been provided to adjust the dairy supply management system; ◆Deregulate the market accompanied by adjustment assistance is a promising alternative for the dairy supply management. Future work: ◆ Provide more specific and detailed policy adjustments; ◆ Evaluate the potential outcomes of deregulating the dairy market.

  10. Thank you!

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