The ugly side of supply management and how it drives up everyday prices

Posted January 15, 2015

When the Toronto Star recently published details of the deal that controls the supply of beer to Ontarians, it raised serious issues of the corruptive policies of successive Ontario governments. None are excluded; they all went along with it.

The back-story was the undercover benefits this beer monopoly has delivered to politicians and political parties for more than 15 years. It is a pernicious deal that restricts the sale of beer in the Liquor Control Board of Ontario (LCBO) stores in the province to be limited to six-packs.

This leaves the Beer Store with an absolute monopoly to sell 12 and 24 packs, not only walk-in beer customers but also the entire commercial sector, including restaurants, bars and other public and private outlets.

The final insult is that the Beer Store is owned and operated by three foreign beer producers, Sapporo of Japan. Molson Coors of the United States and Inbev of Belgium. This allows some 150 stores in the province, to control the sale of beer in Ontario.

The Beer store monopoly sets the price of beer because it is the epitome of supply management. It is a gross abuse of free trade in our society. It lacks competition and fair prices for a product enjoyed by millions of citizens in Ontario.

So, why do successive governments fail to end this aberration? Because the Beer Store lobbyists provide members and all parties in the Ontario Legislature to enjoy special personal privileges. These include free receptions and entertainment in facilities run by the Beer Store lobbyists. Not to mention the funds donated to political parties, a practice the federal government does not allow.

This monopoly is not alone in Ontario.

Here are some other monopolies that have exclusive control of most things we eat.

The Milk Marketing Board controls the price of all dairy products including milk cheese, yoghurt, butter, sour cream, buttermilk, you name it, and it produces it and fixes the price. There is no competition. It’s a take it or leave it for consumers.

Add to that the Beef Marketing Board, The Pork Marketing Board the Poultry Marketing board and the Egg Marketing board.

These so-called supply management boards favour the producers not the consumers. They were originally set up to restrict foreign competition from destroying the Canadian agriculture industry. Pure and simple, it was blatant protectionism and a free-trade killer.

Even when the North American Free Trade Agreement was signed some 26 years ago, it failed to protect the consumer. It allowed these monopolies to function, making Canadian foods and beverages among the costliest in the world.

When you can buy a pound of butter in the U.S. for $3 why does it cost $5.50 in Canada?

The whole idea about NAFTA was to create a North American economy where the three partners, Canada, the U.S. and Mexico could freely trade their products and create a true North American free trade zone.

Well, during the debates in 1988 the various legislatures and the House of Commons, the Agriculture lobbyists convinced the federal and provincial governments that NAFTA would destroy agriculture in Canada.

The final agreement created a devastating strike to the Canadian consumer.

For example, why should consumers protect 13,000 dairy farmers in the country when there are products from our NAFTA partners that allow lower prices for consumers? Why should 35 million Canadians put up with this?

Why do the politicians continue to maintain these supply management monopolies to exist in 2015? Didn’t the Stalin soviets try supply management in the ‘30’s and ‘40’s? How did that work out?

In Ontario, all political parties share responsibility to change this economic drag on those people they represent.

Beer should be available in grocery stores, convenience stores and the LCBO.

Basic dairy and meat should be unleashed from the bounds of institutional control by non-elected marketing boards.

The time has come to free up true competition. It can start with Premier Kathleen Wynne, who can introduce legislation to end these monopolies. It won’t be easy but in closing them down, there are opportunities to export Ontario agriculture products to the rest of the world. Canada is a trading nation. Restricting competition becomes a drag on our economy.

You don’t have to look too far to see the effect in the past three months of the drop in price of petroleum products including gasoline.

That’s the effect of global competition and how it benefits the consumer. And Ontario has to get on board.

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2 Comments

Filed under Between the Lines

2 responses to “The ugly side of supply management and how it drives up everyday prices

  1. Glen N. Tolhurst

    A few points to be noted:
    1) What are the subsidies paid to American farmers to permit $3 butter?
    If you dig into US farm subsidies you will find it is a billion dollar hand out.
    2) When I go to visit the in-laws in La Belle Province (a.k.a. Quebec) I can pick up a 24 of beer for about $22 along with some decent wine at the neighbourhood depanneur (corner store). Before we return from P.Q. we stop at a Costco to pickup a 50 can case of Coors Light for $50 + deposit.
    This contrasts with about $37 for a 24 in Ontario.Now do you think the Quebec government is stupid enough to forgo revenue from booze? Not likely as there is no brewers distribution monopoly maintaining exorbitant prices.

  2. Paul

    Glen: Some good points but you neglected to mention the annual Dividend paid to Queen’s Park. Obviously the Province under the strong but shaky hand of the Loser Win(sic) Govt . loves to spend, spend, SPEND!
    When is the next election?

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