Agricultural Subsidies in Canada: 1990-1999

Lawrence Solomon and Jessica Zippin

June 22, 2000

Graph 1

Canada - ratio of farm subsidies to net farm income
For every dollar that a Canadian farmer earns, the federal and provincial governments provide $3.55 in subsidies. By this measure, Newfoundland’s farm economy has been the most heavily subsidized over the last decade, with Ontario following closely behind. British Columbia and Prince Edward Island have been the least subsidized, with a farm subsidy ratio of approximately two.

Graph 2

Canada - ratio of farm subsidies to net farm income
Central Canada has the highest farm subsidy ratio, and it is the only region to exceed the Canadian average. Eastern and Western Canada have farm subsidy ratios about 15 percent lower than the national average.

Graph 3

farm subsidies
From 1994 to 1999 the ratios have remained quite consistent, ranging from approximately 1.3 to 2.9. However, in 1991 and 1992 great variability was seen in farm subsidy ratios. A low adjusted total net income contributed to a relatively high farm subsidy ratio in 1991. The ratio for 1992 is not represented because the adjusted net income was negative.

Graph 4

farm subsidies
The farm subsidy ratios have been declining over the last 10 years for the Eastern Provinces, indicating that the inefficiency in eastern Canada’s farm economy has been declining relative to the inefficiency of the Canadian farm economy as a whole.

Graph 5

farm subsidies
Both Ontario and Quebec had higher farm subsidy ratios than Canada for eight of the 10 years. In 1992, neither the Central Provinces nor Canada showed a positive farm subsidy ratio because the “net payments to producer” exceeded their “total net income”.

Graph 6

farm subsidies
In four of the 10 years, Western Canada had farm subsidy ratios ranging between one and three. Only in 1991 and 1993 did Canada have a higher farm subsidy ratio than the western provinces.

Graph 7

farm subsidies
Over the last decade, Newfoundland had Canada’s highest farm subsidy ratio, with a ratio approximately twice the national ratio. In 1990, Newfoundland experienced an extremely low total net income, leading to a high farm subsidy ratio.

Graph 8

farm subsidies
Prince Edward Island had Canada’s second lowest farm subsidy ratio over the last 10 years. In 1995 and 1999, farm subsidy ratios were less than one due to comparatively high adjusted total net incomes.

Graph 9

farm subsidies
Apart from 1991, over the last decade Nova Scotia’s farm subsidy ratio did not fluctuate greatly. As well, it remained fairly consistent with Canadian farm subsidy ratios.

Graph 10

farm subsidies
New Brunswick had a farm subsidy ratio similar to that of Canada’s over the last decade, apart from 1998 when the ratio was almost four times Canada’s ratio. This was a result of New Brunswick having the lowest adjusted total net income of all the provinces.

Graph 11

farm subsidies
Quebec has Canada’s third highest farm subsidy ratio over the last decade. Except for 1991 and 1997, Quebec had a higher farm subsidy ratio than the rest of the provinces. In 1997, Quebec received the greatest government transfers of all the provinces; it also had the highest adjusted total net income, giving it a low farm subsidy ratio.

Graph 12

farm subsidies
With the exception of 1991 and 1992, Ontario had higher farm subsidy ratios than Canada over the last decade. With respect to total net income, Ontario received relatively high subsidies compared to the rest of the provinces. In 1999, the farm subsidy ratio increased relative to the past five years due to a large increase in the net payment to producer.

Graph 13

farm subsidies
In 1999, Manitoba’s farm subsidy ratio increased due to the province’s low adjusted total net income. In the same year, in contrast, Newfoundland had a similar adjusted total net income but only received a tenth of the government transfers that Manitoba received.

Graph 14

farm subsidies
Canada’s farm subsidy ratio exceeded Saskatchewan’s every year except for 1997, when the government transfer was relatively high and the total net income was low. In 1991, Saskatchewan also received a relatively high government transfer resulting in the second highest provincial farm ratio.

Graph 15

farm subsidies
Over the last decade, farm subsidy ratios in Alberta have tended to be lower than Canada’s ratio. However, in 1990 Alberta had a significantly higher farm subsidy ratio than Canada due to a relatively low adjusted total net income.

Graph 16

farm subsidies
British Columbia had Canada’s lowest farm subsidy ratio over the last decade. Its ratio is approximately 40 percent lower than Canada’s farm subsidy ratio. In the last three years, the farm subsidy ratio has been declining due to an increase in adjusted total net income.

The data used in this study is drawn exclusively from Statistics Canada and Agriculture and Agri-Food Canada’s Data Book. The data has various inconsistencies and omissions. For example, since 1996 Agriculture and Agri-Food Canada has placed a moratorium on the measure of government transfers from property tax concessions, with results for previous years removed from the data series. Previously, transfers from rebates and exemptions were measured for all provinces except Newfoundland by counting the rebate paid to farmers and by estimating the value of exemptions granted to farm property. During 1994/95, the last year property tax concessions were estimated, the national total came to $296 million.

In addition, Agriculture and Agri-Food Canada has never measured the benefits of preferential income tax treatments or subsidized power rates available to farmers.

Agriculture and Agri-Food Canada provides different sets of subsidy estimates to the OECD, for use in the OECD’s calculation of Producer Subsidy Estimates (PSEs) and Total Subsidy Estimates (TSEs). The OECD’s PSE and TSE estimates are used in trade negotiations, and have greater international acceptance than the figures provided by the Data Book. In 1998, the PSE estimate was $5.3 billion, and the TSE $7.2 billion, compared to $3.7 billion shown in the Data Book. PSE and TSE figures are not available by province. Were they available, the national subsidy would be almost twice as high as that shown by the Data Book. Because the difference between the two estimates derives largely from market price supports provided to the supply managed commodities, and in particular to milk, Quebec and Ontario would be shown by the PSE and TSE measures to be receiving the bulk of the additional subsidies. The PSE includes property tax concessions to farmers but not income tax concessions to farmers.

Agriculture and Agri-Food Canada’s data for its Data Book is reported on an April 1-March 31st fiscal period, its data for the OECD is reported on a “PSE-year” that attempts to accommodate the different characteristics of various programs, and Statistics Canada’s data, which draws upon income tax returns, tracks the calendar year. While some inconsistencies would negate others, the net effect understates the extent of subsidies that Canada’s agricultural sector – – and especially Quebec’s and Ontario’s agricultural sectors – receive.


Calculations:
Adjusted total income = total net income-net payments to producers
Farm subsidy ratio = government transfer/adjusted total net income

When net payment to producer is greater than the total net income, adjusted total net income is negative. The farm subsidy ratio cannot be calculated using negative values and therefore a “*” is recorded in the table and is not included in the graphs.


References:
1. Statistics Canada, Agricultural Economics Statistics, Catalogue 21-603UPE, June 1999
2. Statistics Canada, Agricultural Economics Statistics, May 2000 67-‘(final)’
3. Statistics Canada, Agricultural Economics Statistics, Catalogue 11-001E, May 2000
4. Farm Income, Financial Conditions and Government Assistance – Data Book, Table D, March 2000

Posted in Agriculture (Rural) | Leave a comment

Toll highways: Response to ‘How the free road lobby led us astray’

Al Eisele
National Post
June 19, 2000

I read with much curiosity Lawrence Soloman’s arguments in favour of Toll Highways (How the Free Road Lobby Led Us Astray, May 30). There are, however, two glaring errors in his statements: One, that Canadian drivers are getting a free ride on our roadways.

I wonder what planet he lives on. A free ride?

Does he not realize that every litre of gasoline we buy has a 31¢ cut taken by the provincial and federal governments?

Drivers also pay a myriad of fees when they purchase their cars, such as tire tax, air tax, GST, PST, plus renewal fees for the plates and driver’s licence.

And, what do all these fees get us drivers? Deteriorating, congested roadways because governments don’t plow back nearly what they take from us in all those fees.

In the United States, the majority of roads are free access and in excellent shape because a road tax is for roads. Period. All such monies are earmarked for infrastructure improvements and, nothing else.

If the same were done in Canada there would be plenty of money to keep our roads in good repair and, there would be plenty for expansion, too.

The other argument that toll roads are safer is hogwash. Ontario’s 407 is safer because traffic flows are way less than on the free roads such as the 401.

It doesn’t take a rocket scientist to figure that one out. Less traffic volume naturally means less accidents.

Why should I use a toll road when I am taxed to death? is already the argument most now use to stay off that highway.

So let’s stop all this talk about toll roads and get some more commitment from the likes of Ottawa who confiscate 17¢ a litre from drivers and give us back nothing in terms of funding for our road systems.

Al Eisele, Milton, Ont.

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Farm lobbies spread it on too thickly

Lawrence Solomon
National Post
June 13, 2000

Trust us, said a Walkerton lobbyist, and politicians did

Non-farmers — rural residents and city folk alike –are ignorant, or so leading farm groups believe.

Non-farmers don’t understand that no one cares more for the environment than farmers and that modern farming poses no untoward risk to the environment. Non-farmers don’t understand that “normal farm practices” — which provincial right-to-farm legislation allow — include industrial livestock operations, genetic engineering and even biotechnologies not yet imagined. Non-farmers don’t understand that laying manure over land at previously unheard-of levels is also normal, even though rains will inevitably wash these wastes into waterways, where they’ll find their way into groundwater, public wetlands and other people’s lands.

Trust us, said Agricultural Groups Concerned About Resources and the Environment (AGCare), one of Ontario’s leading farm lobbies, to the Ontario government during 1998 hearings into a new right-to-farm act. “I don’t believe [widespread contamination of our water supplies] can happen here because we’ve taken a proactive approach second to nowhere else in the world to address this before it can happen,” asserted Jim Fischer, AGCare’s chairman and a cattle farmer near Walkerton, Ont.

The MLAs did believe him. They also believed other farm groups, who regaled them with stories about ignorant councillors whose bumbling bylaws impeded farmers’ ability to economically bring food to market. The MLAs also believed the Ontario Federation of Agriculture’s assertion that farmers’ property rights should allow them to use their lands as they see fit, including in ways that pollute their neighbours’ property, and that landowners who want a farmer to stop polluting their lands should compensate him for his lost revenue. As a result, the Ontario government exempted farmers from municipal bylaws and from common-law rules that preceded the founding of our nation.

To overcome public ignorance, the farm lobbies stress the importance of public education about the importance of the farm economy. The farm groups could stand a lesson or two as well.

Lesson 1 No risk is worth taking without a commensurate reward. The farm economy — particularly in Ontario — has been all risk, no reward. For every dollar in profit that an Ontario farmer earned over the last decade, the rest of us contributed $6 in subsidies, making Ontario the most heavily subsidized province next to Newfoundland. No province boasts a profitable farm economy. Canada’s farm economy as a whole required $3 in subsidies for every dollar of farm profit.

Lesson 2 Some farming operations are highly productive and would thrive without subsidies. The subsidies convert what would otherwise be a smaller but profitable farm sector into a bloated, unprofitable one. Giving farmers the right to pollute by gutting the private property rights of pollution victims has turned what should be a relatively benign industry into a reckless one that excessively spreads E. coli 0157:H7, the deadly bacterium responsible for at least seven deaths and 2,000 illnesses at Walkerton, as well as other less toxic strains of bacteria.

Almost all toxic E. coli comes from farm animals. Ninety percent of Canada’s cattle, sheep and goats carry 0157:H7 at some point in their lives and 30% to 40% carry it at any one time. Farmers then spread infected manure on crop land as well as pasture, contaminating much of the countryside and creating risks especially when the manure — which is otherwise expensive to dispose of — is laid thick on the land. “Most of the E. coli contamination comes from agricultural runoff following a rain,” explains Dr. Carlton Gyles, professor of pathobiology at the University of Guelph, who notes that infections tend to occur in rural regions. Contaminated water then becomes a threat to well water, swimmers, consumers of lettuce washed in contaminated water, and other users of rural water. Small amounts of manure, carefully spread over the land, pose little risk, since soil tends to filter E. coli effectively. Large amounts of manure make careful manure management expensive and therefore unlikely.

The biggest victims of licence-to-pollute laws include responsible farmers, rural residents and cottage owners. The MLAs ignored their presentations, even though — unlike uneconomic farmers — they tend to produce net wealth for society while living lightly on the land. “Land values will fall and properties will become unsaleable [with manure creating] virtual rivers of sewage … through our watercourses and drinking water,” warned the Rural Rights Alliance of Ontario. Explained PROTECT, a group dominated by small farmers affected by industrial farm pollution and alarmed at widespread well contamination and increased beach closings: “In Ashfield township, over half, about 62%, of our tax base is derived from recreational residential ratepayers — they probably take up 1% of the overall land base.”

The answer from the Ontario Fruit and Vegetable Growers’ Association, which favours lax manure laws but fears water shortages: Cottagers should leave. “Essential needs [such as food production] must be looked after prior to recreational needs,” it testified. The rational answer: Unprofitable and polluting farmers should leave.

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How tolls could reduce truck traffic on our highways

Fred Langan
Newsworld Business News
June 12, 2000

Long live high gasoline prices if they will do the job of getting some trucks off the road! There are too many trucks clogging highways. And the rest of us are paying for them to be there as manufacturers use the highways as warehouses for just-in-time manufacturing on roads subsidised by income taxes.

Experts from both Transport 2000 and the Urban Renaissance Institute say highways are a form of government subsidy for the trucking industry. Road and gasoline taxes do not come close to paying for highways and the damage done to roads by trucks.

“Because of the weight and physics involved, the maintenance burden of trucks on the roads is to the fourth power greater than cars,” says a spokesperson for Transport 2000. The fourth power means 10x10x10x10. In other words, a fully loaded truck can do 10,000 times more damage to the highway than a car.

Railways are a better way to ship freight, but railways find it hard to compete with trucks since the railroads have to maintain their tracks and signals. Local politicians would rather rip up tracks and turn them into bicycle paths.

Just-in-time manufacturing is marvellous system that allows companies to do away with expensive warehouses. Parts arrive as they are needed. Several years ago The Economist said Toyota plants were so efficient that parts arrived seven minutes before they were used on the assembly line.

This has trucks racing down the highway facing a penalty if they are late. Combine this with slipshod maintenance by some trucking firms and is there any wonder trucks are involved in such horrendous accidents? The trucking industry defends itself with statistics of how few accidents trucks are in compared to the number of miles travelled. But that is a statistic that ignores a gruesome reality. When something as big a truck hits something the size of a car, it is going to be a mess.

“The physics involved means there is the potential for spectacular crashes,” says the Transport 2000 spokesperson. We saw one accident this month in which police cruisers parked on the side of the road were hit by transport truck. A police officer died. Imagine: a truck running into police cruisers with their flashers on.

This type of truck driving will not surprise anyone who travels on highways in Canada. About once a month I drive from Toronto to Quebec. The 401 is jammed with trucks. They drive at 120 kilometres an hour and race each other jamming the passing lane. In some European countries, Germany for example, trucks aren’t even allowed in the passing lane.

On one recent trip I flashed my lights at a truck that had been in the passing lane for 10 minutes or more. When I passed he feigned a swerve into my lane to pay me back for my cheek at asking him to move over. The police never catch this type of behaviour. They are too lazy and prefer speed trap, a simple-minded type of policing invented in the 1930’s. They do not catch reckless truckers, just the occasional speeder. In the dozens of years I have been travelling along the 401, I have never seen the police in Ontario or Quebec pull over a truck for speeding or reckless driving. Never.

There is a safer type of road. The toll road. From the time I started driving I used toll roads in Quebec. The Autoroute, first to the Laurentians, then to the Eastern Townships, was well-maintained and, because of the tolls, free of trucks. The Autoroutes had their own police force. At the Montreal end of the Eastern Townships Autoroute there was another toll bridge. It cost $1.25 to drive to where I wanted go and it was worth it. The tolls were taken off by short-sighted politicians and the old autoroutes are now jammed with trucks and riddled with damage which is paid for out of general taxes rather than tolls.

Making all highways toll roads would level the playing field between trucks and rail. It would encourage all kinds of energy-efficient behaviour, including discouraging people from long commutes. If you’re a believer in getting rid of greenhouse gases — I’m indifferent — toll roads do the job. But gasoline prices might do the same job if they stay up there long enough.

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Taking the snarl out of traffic

National Post
June 9, 2000

Aside from buying an airplane, here are three simple ideas for getting home in fewer than three hours.

”We’re flying northbound above the Don Valley Parkway, and boy-oh-boy-oh-boy, traffic is rock solid from Pottery Road all the way to York Mills. As for the southbound DVP – jammed! Alternates aren’t much better I’m afraid … Bayview north of Eglinton — jammed! Yonge Street — jammed! Bathurst is bumper-to-bumper. Wow, it’s best you just avoid the whole area if you can. Moving along to the westbound express lanes of the 401, it’s a really slow ride home from Victoria Park all the way to Keele Street. The collector lanes aren’t faring much better. Yikes! Eastbound 401 is a write-off, with traffic bunching up from Avenue Road all the way past Kennedy. As for northbound on the 404 and the 400 — jammed. Oh, man, what a ride home today.” — A recent Toronto radio afternoon rush-hour traffic report.

Traffic. Just the mere mention of the word makes commuters cringe. Ah, if only cruising the highways and the byways was as joyful as it’s made out to be in all those TV ads for new cars. You know: endless kilometres of winding, scenic roads without so much as a wayward Austin Mini impeding your Indianapolis Speedway-like progression from point A to B.

Alas, unless buying your own private island with newly acquired lottery riches is in the works, it’s doubtful you’ll ever see such a utopian state of commuting bliss. Instead, those of us who live in major cities are routinely subjected to the damnation that is gridlock. And if traffic jam hell seems ever more commonplace these days, it’s not a figment of your imagination. Rather, it’s Mathematics 101: cities are accommodating an ever-increasing number of cars travelling on a finite number of roads. The not-so-surprising end result: increased congestion.

But does it really have to be like this? Some observers say no — and that the only thing standing in the way of freeing up gridlock is political will.

Lawrence Solomon, executive director of the Urban Renaissance Institute (a Toronto-based think-tank) advocates three dramatic reforms that, if enacted, would virtually eliminate gridlocked roads overnight.

Mr. Solomon’s ideas:

1. Eliminating “public transit monopolies” so that private carriers can enter the market and determine their own routes. “We would see a huge increase in the use of public transit, because it would become much more service-oriented,” Mr. Solomon says.

While privatizing public transit may seem like a somewhat radical idea, the fact is many public transit systems used to be private until local governments decided they wanted to control transportation several decades ago. But there is room for change. Mr. Solomon points to the United Kingdom, where public transit systems were privatized beginning in 1986.

“Cities sold off public transit authorities for a lot of money, which was beneficial to taxpayers,” Mr. Solomon notes. “Fares increased very modestly — much less than rate increases in Toronto — and service improved. These days, it (transit) is much better for handicapped people, the routes compete with each other, the waits are much shorter — in rush hour you never have to wait more than a couple of minutes on most routes, and ridership is way, way up. Passengers are coming back to transit.”

2. Deregulate the taxi business and allow for the implementation of shared cab services.

Mr. Solomon says the only role a municipality should have when it pertains to cabs is ensuring that drivers are licensed and the vehicles are roadworthy. “Other than that, we shouldn’t be deciding how many taxis are on the road and how much they charge,” Mr. Solomon says. “Politicians got a hold of the taxi business the same way they got a hold of the transit business and, as a result, customers are getting very poor service at high prices.”

3. Vastly increase the number of toll roads.

“I would toll everything, including neighbourhood roads,” says Mr. Solomon, noting that the technology exists to do so. “By tolling the roads, we would eliminate this uneven playing field with people having free use of the roads. The problem is local taxpayers pay for the use of local roads, but commuters don’t, and commuters should be paying for the use of city roads if they are from outside the city.”

As well, toll roads would give people an incentive to either use public transit more often or to increase usage of existing cars. “People would be more likely to share a car with a neighbour, so you would get higher occupancy of existing automobiles,” Mr. Solomon says.

Of course, there would be no shortage of opposition to Mr. Solomon’s reforms. Public transit unions would fight tooth and nail. And the owners of taxi plates, who do very well under the current system, would not be keen on deregulation either. “Any time you have a monopoly, you always have some people who are taking advantage of the rest of us,” Mr. Solomon says. “And these people tend to have political friends that would resist it.”

Harry Gow, of Transport 2000 (an Ottawa-based group that lobbies for improved transit conditions), says he agrees with some of Mr. Solomon’s reforms.

For example, in terms of bus and taxi deregulation, he points to Rimouski, a town in Quebec that dumped its bus fleet, opting to put its transit budget toward subsidizing a shared taxi system. These days, a person can travel anywhere in Rimouski for a flat rate of $2. “There are taxi stops just like a bus system, and while the riders can’t get the exclusive use of the taxi, they do get to go anywhere for two bucks,” says Mr. Gow, noting that the system “has been copied to a degree on the Island of Montreal and on the Montreal south shore,” (where taxis are used to replace buses during off-peak hours and on weekends.)

Bottom line: Will there ever be a solution for gridlock in Canada’s major cities, or are increasingly horrific traffic jams an accomplished urban fate?

Mr. Solomon says the first step toward a solution might just be a forward-thinking politician running for office on the platform of eliminating gridlock and lowering taxes “In Toronto, if the TTC (Toronto Transit Commission) were sold, it would fetch a pretty penny and, at the same time, it would relieve the city of $100-million a year in subsidies. This could be a tax issue as well as improvement in transportation services and a reduction in pollution — it’s a very nice package if someone can put it together.”

Mr. Gow, however, believes public fury over gridlock will be the catalyst for bringing about change. “People have to be up to their nose in you-know-what before thinking about reacting — and they need to be up to their eyes before they actually will react,” Mr. Gow says.

“My guess is that it’s going to be another five years before people start really screaming about the situation and demand some action.”

Until then, happy motoring … er, assuming you’re not caught in traffic, that is.

Posted in Automobile, Cities, Public transit, Toll roads, Transportation | Leave a comment