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Hidden costs of supply management in a small market

Author

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  • Colin A. Carter
  • Pierre Mérel

Abstract

Canada regulates its dairy and poultry industries through supply management. The supply-management programs use target prices, production quotas and import tariff-rate quotas to raise domestic prices. Canadian supply-managed producers cannot export their output to world markets as exports would be considered subsidized under World Trade Organization rules. In this paper, we show that once foregone export opportunities are accounted for, supply management may no longer be beneficial to domestic producers of the supply-managed commodities. The extent to which foregone profits from exports dominate domestic rents depends on Canada's comparative advantage, domestic market elasticities and the extent of supply management distortion in the domestic market.

Suggested Citation

  • Colin A. Carter & Pierre Mérel, 2016. "Hidden costs of supply management in a small market," Canadian Journal of Economics, Canadian Economics Association, vol. 49(2), pages 555-588, May.
    • Handle: RePEc:cje:issued:v:49:y:2016:i:2:p:555-588
    DOI: 10.1111/caje.12206
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    Cited by:

    1. Pierre Desrochers & Vincent Geloso & Alexandre Moreau, 2018. "Supply management and household poverty in Canada," International Review of Economics, Springer;Happiness Economics and Interpersonal Relations (HEIRS), vol. 65(2), pages 231-240, June.
    2. Peter Slade, 2018. "The Effects of Pricing Canadian Livestock Emissions," Canadian Journal of Agricultural Economics/Revue canadienne d'agroeconomie, Canadian Agricultural Economics Society/Societe canadienne d'agroeconomie, vol. 66(2), pages 305-329, June.
    3. Ryan Cardwell & Chad Lawley, 2025. "What explains public support for Canada's supply management regime?," Canadian Journal of Economics/Revue canadienne d'économique, John Wiley & Sons, vol. 58(2), pages 580-608, May.
    4. G. Cornelis van Kooten, 2020. "Reforming Canada's Dairy Sector: USMCA and the Issue of Compensation," Applied Economic Perspectives and Policy, John Wiley & Sons, vol. 42(3), pages 542-558, September.
    5. Rude, James & Goddard, Ellen, . "Canadian dairy regulations as a driver of foreign direct investment: the case of Saputo," International Food and Agribusiness Management Review, International Food and Agribusiness Management Association, vol. 24(3).
    6. Stavroula Malla & K. K. Klein & Taryn Presseau, 2020. "Have health claims affected demand for fats and meats in Canada?," Canadian Journal of Agricultural Economics/Revue canadienne d'agroeconomie, Canadian Agricultural Economics Society/Societe canadienne d'agroeconomie, vol. 68(3), pages 271-287, September.
    7. Scott Biden & Alan P. Ker & Stephen Duff, 2020. "Impacts of trade liberalization in Canada's supply managed dairy industry," Agricultural Economics, International Association of Agricultural Economists, vol. 51(4), pages 535-552, July.
    8. Brennan A. McLachlan & G. Cornelis van Kooten, 2022. "Reforming Canada's dairy supply management scheme and the consequences for international trade," Canadian Journal of Agricultural Economics/Revue canadienne d'agroeconomie, Canadian Agricultural Economics Society/Societe canadienne d'agroeconomie, vol. 70(1), pages 21-39, March.
    9. Elliot, Thomas & Goldstein, Benjamin & Charlebois, Sylvain, 2025. "Over 6 billion liters of Canadian milk wasted since 2012," Ecological Economics, Elsevier, vol. 227(C).

    More about this item

    JEL classification:

    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations

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