Trans-Pacific Partnership: Implications for the Canadian Industrial Dairy Sector

Abstract

The announcement of the Trans-Pacific Partnership in June 2012 raised speculation about dire consequences for the dairy sector and the end of supply management. We examine these claims in the context of tariff liberalization and the transmission of volatile international dairy prices into the Canadian market. The paper examines the implications for dairy farmer welfare, quota values, and the welfare of other agents in the economy. Given that the US dairy industry has interests of its own to protect, significant dairy tariff liberalization is not expected. With modest tariff reductions, the impact on quota values will be minimal. Likewise, the overall decline in producer welfare will also be small. Therefore, supply management, as a marketing institution, is likely to survive the TPP, but marketing boards may have to change their pricing policies in response to tariff reductions.