Article content continued

The TPP negotiations have stalled, and reports suggest that Canada is largely to blame. There are two points where Ottawa has dug in its heels: Canada’s government-enforced dairy cartel, and a side deal negotiated with the U.S. that would have weakened domestic content rules for the auto sector. Both cases are portrayed as “concessions” that Ottawa is refusing to make and that by doing so the government has been defending the interests of Canada. But this view has things backwards: Canada’s interests would be better served by abandoning these policies.

I’ll pass briefly over the dairy cartel; much has already been written about the negative effects of a policy that restricts supply in order to keep prices high. In a recent study published in Canadian Public Policy, three University of Manitoba researchers estimated that these high prices reduce average incomes by about 0.8 per cent, and by more than 2 per cent for low-income families. The system is indefensible, and yet it enjoys the full-throated support of all the major parties.

The dairy cartel was always going to be a point of contention for Canada at the TPP. Some countries — most notably New Zealand — argued that dismantling the cartel should have been a precondition for Canada’s participation in the negotiations. The disagreement on domestic content rules in the auto sector is the more surprising development, but perhaps it shouldn’t be. These rules are the last vestiges of the 1965 Auto Pact, unsustainable and probably not worth the loss in productivity that they cause.