Senate Approves Legislation That Makes Supply Management Off-Limits in Trade Negotiations

Dairy cows are seen on a farm in Saint-Valerien-de-Milton, southeast of Montreal, on Aug. 30, 2018. Christinne Muschi/Reuters

A Bloc Québécois bill aimed at preserving Canada’s supply management system during future trade negotiations is on the verge of becoming law after receiving Senate approval.

Private member’s Bill C-202 successfully passed through both the House and the Senate on June 18, and is now pending royal assent to be officially enacted as law.

The Senate passed the Act to amend the Department of Foreign Affairs, Trade and Development Act (supply management) through third reading last night, after the House of Commons pushed it through last week without opposition.

In Canada, supply management refers to a system that regulates the production, pricing, and imports of dairy products, eggs, chicken, and turkey to ensure a predictable market. The system was created in 1972 in response to decreasing prices in the sectors, and it imposes tariffs of up to 300 percent on products from other countries.

American farmers have long been eying a larger share of the Canadian market, which could potentially cause a rise in supply and reduced profits for Canadian farms. The current legislation stipulates that Canada’s trade minister cannot approve any trade agreement that would raise the tariff rate quota for dairy products, poultry, or eggs, or decrease the tariff on any imports of supply managed goods that exceed the tariff rate quota.

Chicken Farmers of Canada, Canadian Hatching Egg Producers, Dairy Farmers of Canada, Egg Farmers of Canada, and Turkey Farmers of Canada, applauded the legislation’s approval in a joint statement.

“This strong commitment equips Canada to continue to expand market opportunities for Canadian agriculture and agri-food exports, while safeguarding the food sovereignty of our country,” the groups said in a June 18 press release that thanked legislators for “keeping supply management and any other concessions impacting our sectors off the table.”

“Ultimately, the outcome of trade negotiations is what holds importance for dairy, poultry and egg farmers and the nearly 431,000 jobs our combined sectors support,” the groups said.

Canadian farmers dependent on export markets for selling their cattle and grain have criticized the removal of supply management from discussions, however, saying it could jeopardize their access to international markets in trade deals.

The Canadian Agri-Food Trade Alliance (CAFTA), representing industry organizations from the grain and oilseeds, beef, and pork sectors, is among those groups.

The agricultural organization characterized the bill as a “flawed piece of legislation”  that establishes a “troubling precedent” that could threaten Canada’s ongoing commitment to the rules-based international trading framework.

“At a time when Canada must be demonstrating leadership and consistency in defending predictable, rules-based trade, this bill sends the wrong message, both to our global partners and to Canadian exporters who depend on stable, competitive and fair access to international markets,” CAFTA said in a June 18 press release.

It urged Ottawa to prioritize the implementation of an expedited trade diversification strategy by exploring new markets and investing in and endorsing the priorities of the export-driven agriculture sector. It also asked the government to tackle non-tariff barriers that affect current trade agreements and eliminate regulatory obstacles that unduly limit the sector’s growth and competitiveness.

Grain Growers of Canada executive director Kyle Larkin also criticized the bill’s passage, saying it was approved without regard for the country’s export-oriented grain sector.

“With critical trade negotiations and renegotiations ahead, including with our largest trading partner, the United States, passing Bill C-202 sends the wrong message internationally,” Larkin said in a press release. “For grain farmers who rely on access to international markets, the result will be less ambitious trade agreements, fewer export opportunities, and slower economic growth at home.”

Dr. Sylvain Charlebois, director of Dalhousie University’s Agri-Food Analytics Lab, agreed with Larkin’s take on the issue, calling the legislation “one of the most misguided things Parliament has done in decades.”

“Canada is now the only country in the world that has legally and explicitly blocked a government from offering concessions on a specific food sector during trade negotiations,” Charlebois said on social media.

Impact on Trade

Prime Minister Mark Carney and U.S. President Trump are currently in trade negotiations as Canada looks for solutions to U.S.-imposed tariffs, while the White House seeks to fix what Trump calls a “trade deficit” between the two countries.

Trump has said that American farmers have been treated “very unfairly” by Canada, citing high tariffs on American dairy products such as butter, something he said he’d like to see changed.

Carney has said his government would protect the supply management system, adding that it would “never be on the table in negotiations with the Americans.”

Successive U.S. administrations have been critical of Canada’s supply management system, characterizing it as a trade irritant.

Canada’s system has also been cited as an issue among other countries. A major trade deal with the UK was shelved in 2024 when Canada imposed a 245 percent tariff on the country’s cheese products.

Both Australia and New Zealand have also taken issue with Canada and accused the country of dumping its dairy products on the international market, threatening the Comprehensive and Progressive Agreement for Trans-Pacific Partnership.

Supply has been an ongoing issue for Canada under the dairy industry’s quota system. Farmers that produce more milk than their quotas allot must either dump it or sell it outside the country. The farmers can’t sell it to Canadians because it would result in reduced domestic dairy prices.

A study last year estimated that more than six billion litres of milk have been discarded on Canadian dairy farms since 2012.

Bill’s History

Supply management has been supported by the federal government since its creation in 1972. The bill largely benefits Quebec, where the bulk of Canada’s large dairy operators are located.

Similar legislation to Bill C-202 was introduced by Bloc MP Luc Thériault in June 2022. The bill, C-282, was passed by a majority of MPs in the House of Commons before stalling last fall in the Senate following examination by the Foreign Affairs and International Trade Committee.

Several senators voiced concern about the potential impacts the bill could have on Canada’s future trade talks, such as limiting its flexibility in negotiations and harming its reputation as a reliable trading partner.

Independent Sen. Marty Deacon said the bill “raised alarm bells” noting that it equated to “good politics but not good policy.”

The legislation stalled when Parliament was prorogued earlier this year and had to be reintroduced in a new format after the April 28 federal election.

Despite concerns voiced by some senators, the Senate typically supports legislation that is passed in the House of Commons.