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The Paris-based Organization for Economic Co-operation and Development (OECD) criticizes a number of Canadian subsidy programmes, but particularly its support to farmers, in a new economic survey. In the last six years Canada has backtracked from earlier moves toward liberalizing its agricultural sector, to the detriment of most Canadian farmers, according to the OECD. 

“It is perhaps surprising that a country like Canada with its vast agricultural potential has not seen fit to be a recent leader in pushing for liberalization, especially when so many of its farmers would benefit so handsomely from a freer global trading regime in this sector,” says the OECD report.

In 2006, government support to Canada's farmers amounted to CAD 3.8 billion or CAD 16 600 per farm per year, according to the OECD.  This is more than Canada’s NAFTA partners, the United States and Mexico, although still less than many other OECD countries.
Canada’s dairy industry, which operates under a supply-management system, is particularly sheltered from the open market.*  As a result, prices for milk and cheese are about 2.5 times higher than in the United States. The OECD calls the supply management system “a blight on the economic landscape and totally unjustifiable in a world of skyrocketing global dairy prices.”

The OECD also has recommendations for Canada’s fast-growing energy sector. Canada’s sustainable growth is at risk, says the OECD, given the energy intensity of its oil-sand production in the province of Alberta. Canada is behind only the United States in terms of per capita GHG emissions, and 33% off of its Kyoto Protocol targets.

The OECD suggests market-based incentives, as well as financing carbon capture and storage, and quickly implementing a carbon credit scheme. All of these will be necessary if Canada is going to reach its goal of bringing down emissions to within 8% of its missed target by 2020, says the report.

The OECD also recommends that tax incentives and the royalty regime should be updated in light of the record high oil prices. 

The Canadian government has taken the report largely in stride, with the Minister of Finance, Jim Flaherty, saying that "The OECD's ... policy recommendations largely accord with the direction the government is taking."

For a commentary on Canada’s supply management system, see the January 2007 issue of Subsidy Watch, available by clicking here