The Rural Voice, 1996-01, Page 32national allocation system, however,
spread new production across the
country in the same proportion as
production had been when the agency
was set up. "We knew we had to find
a way to deal with it.
"Things kind of came to a head
when we could see that the world
wide trade environment was
changing the rules. That made the
whole thing much more imperative.
We had to deal with the allocation
system in order to have a sustainable
system nationally."
If the shortages of chicken had
continued in Ontario after the
GATT agreement turned border
restrictions into tariffs, Maaskant
says, processors would have been
facing high tariffs to import the
chicken they needed that Canadian
farmers wouldn't provide. "That
would be an impossible situation to
defend. Those buyers would become
advocates for an open border. They
would have good reason to because if
we were shorting the market we can't
justify the system we have. To keep
government support and the support
of all sectors, the supply problem had
to be dealt with. The system had to
become more flexible so that growth
in production could happen in
markets that were growing faster than
other markets. We need to be able to
grow the chicken where it is needed."
After a lengthy period of
unsuccessfully trying to make the
producers from the rest of the
country, through the agency,
understand the problem, Ontario
finally announced its intentions to
pull out of the agency. The same
issue had prompted British Columbia
to pull out earlier because it wasn't
able to get additional quota to meet
its growing demand, but production
was small enough on the west coast
that this didn't precipitate a crisis.
Ontario, with the bulk of national
production, was crucial to making the
agency work. If Ontario had pulled
out, the percentage of production left
in the national agency would have
been so small that Canadian chicken
producers would have lost their
protection under GATT's Article 11
which allowed the supply
management system to function.
With trade rule changes under the
GATT negotiations, it put pressure
one everyone to negotiate a new
28 THE RURAL VOICE
market sharing agreement.
"With the new system," Maaskant
says, "it became in everyone's
interest to be a working part of the
agreement." That's why British.
Columbia producers have come back
into the system. "The way it is now,
each province is able to achieve the
level that its industry needs."
The new system may have given
the Ontario chicken board new
flexibility but it hasn't come without
problems. With provincial boards
now supplying what processors said
they needed, suddenly the country
went from a shortage to an
oversupply of chicken. The problem,
says Maaskant, isn't with the system
but with the fact most provinces
except Ontario didn't implement the
whole plan. "They agreed on starting
the new system over a year ago and
operating the way Ontario does, but
nobody actually did that. Only
Ontario negotiated volume and price
together. The other provinces went to
their processing industry and said
'How much do you need?'. They got
a figure, but of course the processors
weren't committed to that figure, or
hadn't priced it.
"Everyone was playing the market
share game again, trying to hold their
"Everyone was playing the
market share game again, trying
to hold their market share."
market share. They set their volume
according to what Ontario did.
Ontario was the short market, not the
rest, so when they did that they
oversupplied the Canadian market.
The processors didn't have to answer
to that because they hadn't
committed to a price for that volume.
As a result, when the volume was
obviously too large and prices started
following, they paid according to an
oversupplied market."
Because Ontario had negotiated
price as well as supply, its producers
came through the resulting low
market prices the best of all,
Maaskant says. The result has
convinced the other provinces to start
using the new system the way it was
supposed to and for the first time this
past fall, the new system is entirely in
place. Now all sectors of the industry
are in a position to make a profit, he
says. Under the new agreement there
is some discipline to make sure there
won't be an oversupply. Ontario and
Quebec have agreed to work together
to prevent surpluses.
When the oversupply became
obvious, Ontario led the move to cut
production, followed soon after by
Quebec. "Ontario has to be a leader,"
Maaskant says. "It is the largest and
most dynamic industry. We
recognized that we had to go ahead
and cut back first and try to set an
example and try to encourage the rest
to follow, and try to encourage the
rest to sign the agreement and make
it work.
"In the end, we've gone through a
difficult time but we now have a
working national agreement and we
have the flexibility to deal with all
the kinds of problems we never could
deal with under the old system. Now
we can legitimately expect the kind
of support from the federal
government that we should get." That
support has been forthcoming, he
says.
The result has been "second
generation" supply management, he
says, a supply management system
that has built in some flexibility and
ability to deal with problems as they
come along.
"I still believe that the increase (in
production) Ontario made last year
was much more rational than that
made by other provinces," Maaskant
says. It will be hard to know just how
rational that increase, which created a
building boom of broiler barns across
Ontario, was until the new system is
fully effective. Right now there may
have been an overreaction to the
oversupply situation and there may
be too tight a market on a temporary
basis, he thinks. "That's unfortunate
but that's something we'll hopefully
get out of very quickly."
Under the old system the goal
was to be one chicken short of
meeting the market demand,
he says, thus keeping prices
up. Too often that resulted in supply
being short a lot more than one
chicken. "Right now what we'd like
to be is not one chicken short but
right on — and if anything, one
chicken extra."
With GATT Article 11 dead, the
system has become more
businesslike, he says. The old
discipline is gone. "We operate by
agreement now, and we have to make