Supply Management - July 25, 2025

A special shoutout to one of my Substack subscribers, Parmod Nagratha, who asked me about “Supply Management” and what it means when United States President Donald Trump complains about Canada and its’ Supply Management policy.  I had no idea what this was in reference to, and assumed it was some classic Trump throw-away reference because “Supply Management” is such a vanilla term.  It turns out that Supply Management is a long-standing Canadian government policy in-place to protect the Canadian agriculture industry, in particular dairy, poultry and eggs.  

Supply Management is the government’s way of controlling domestic production, setting price support for Canadian farmers and it uses tariffs to limit imports of these products into the Canadian market.  With this, we control the supply of these goods to match the domestic Canadian demand for these products.  These Canadian tariffs effectively block US farmers/producers from exporting their products into the Canadian market because they become too expensive for consumers as compared to similar products delivered by Canadian farmers.  This is why President Trump is complaining about “Supply Management” and the Canadian government policy.  

Supply Management goes as far as to restrict production of goods such as, milk, poultry and eggs by farmers through the imposition of quotas.  By putting limits on how much of these goods can be produced by a given farmer, and by making it hard for foreign producers to sell their products in Canada at lower prices than those offered by Canadian farmers, it stabilizes incomes for the Canadian producers/farmers.  While some in the Canadian industry welcome Supply Management, it is contrary to free and open market business theory, where any producer should be free to sell as much as they can of their products, and in the process make as much money as they can.  Supply Management is protectionist in favour of smaller or weaker Canadian farmers.  

Supply management was introduced in Canada in the 1960s in response to the over production of goods, caused by technological advances.  This resulted in low and unstable prices in the poultry, egg and dairy industries. The three elements of Supply Management are: production control, pricing mechanisms and import control;

• Production control: Production quotas are set for each province in order to prevent surpluses or shortages that may cause price fluctuations. Provincial boards then allocate production among farmers, who may only produce up to their allocated quota.

• Pricing: Supply Management guarantees farmers a minimum price for their products. Provincial marketing boards negotiate minimum prices with processors on behalf of the farmers.

• Import control (i.e., tariffs): Canada restricts imports of products by setting TRQs (Tariff Rate Quotas), which limit the amount of imports of products. TRQs impose high tariffs on imports in excess of the established quota to prevent foreign products from flooding the Canadian market.

While Canada’s Supply Management system stabilizes the industry by controlling supply, the US dairy market operates without any supply restrictions, but is subsidized by the 

US government in other ways to regulate prices.

We can respect President Trump's wish to open restrictive markets for American farmers; he has claimed that Supply Management is “rigged trade” or unfair treatment of the US. He also suggests the United States is open for business while its trading partners, such as Canada, are limiting reciprocal trade into their countries.  There is a valid complaint here.  

Canada’s policy of Supply Management has been around since the 1960s. It remained in place after Canada and the United States signed NAFTA in 1992, governing trade rules between the two countries and Mexico; and, it survived the revision to NAFTA in the form of the USMCA, which came into place in 2020.  Given that President Trump championed the USMCA and didn’t seek to eliminate Supply Management then, his raising of this issue now, especially while he leads a trade war against Canada, and globally, seems facetious. Why now?  He’s raising this issue now to appease American farmers, many of whom make up his MAGA-base of supporters.  It is similar to his tariffs-based trade war, which again is an attempt to appease his supporters by claiming the tariffs will lead to American manufacturing jobs. Both of these matters serve as distractions to American voters, drawing their attention away from the various unfulfilled election promises Trump made.   By itself, the Supply Management policy may seem unfair towards our largest trading partner. But given President Trump’s trade war, his assault on Canadian sovereignty with his “51st state” commentary and his repeated assaults on Canadian leadership by referring to  our Head of State as a "governor", Canadians are not too sympathetic towards America at the moment.  

As is often the case with President Trump, he makes false claims to emphasize his point of the day.   In April 2025 President Trump claimed that Canada imposes a 250% to 300% tariff on dairy products from the United States. The truth is that tariffs this high only take effect if the United States exceeds its defined quota, which has never occurred.

The Supply Management policy of the Canadian government has been a regular source of tension between the United States and Canada.  In recent years the US has filed a formal complaint against Canada twice under the new USMCA, related to Supply Management practices.  In both cases the governing panel ruled in Canada’s favour, as the practices of our Supply Management policy do not contravene the USMCA trade agreement. 

With Canada and the United States deep in the midst of new trade negotiations you can bet the US will expect Canada to repeal its policies of Supply Management, as part of any new agreements reached between the two countries.  My research does not show a definitive position by Prime Minister Mark Carney as it relates to Supply Management. However, he has expressed, as Governor of the Bank of Canada, and as Governor of the Bank of England, his preference for natural market forces, and free and open trade, to dictate how industries should operate. These previously stated positions suggest that Prime Minister Carney is not a fan of protectionist policies, per se, but he's not going to come out openly against a policy designed to support Canadian farmers and the Canadian agriculture industry.  Nor is he going to signal in advance his willingness to rescind Supply Management without getting something meaningful in return from the United States. Unlike Donald Trump, Prime Minister Carney doesn’t negotiate in public, through the media.  

Writing this article has been educational for me, as I learned about “Supply Management”. I now understand why this policy was put in place many decades ago, but I have also arrived at the position that it is time for this practice to come to an end, as we look for Canada to compete and thrive on its own merits and through unaided efforts.  We’re going through this growth period as a result of the global trade war caused by tariffs. Why not strengthen our agriculture industry as well and compete on even ground.  

PS - If any of my Substack subscribers, or regular readers want me to write about a subject of interest to them, please drop me a line and I’ll be happy to do some research and author an article on that topic.