A. Schmitz, H. de Gorter, and T. G. Schmitz
With the passing of the General Agreement on Tariffs and Trade (GATT) in 1994, both import quotas via minimum access requirements and tariffs now apply to the Canadian supply-managed sectors. Minimum access commitments were increased slightly; however, tariffs on imports beyond these commitments appear to be prohibitive in many cases -- at least in the short run. The cartel will not be as easily held together today as it was under Article XI of GATT.
Trade between the United States and Canada in supply-managed commodities, such as chickens, has always been a contentious issue. When supply management was instituted in Canada, three pillars were established: 1) cost of production formula, 2) base and over-base production quotas and 3) import quotas. The latter, which significantly restricted the exportation of US goods into Canada, was allowed under Article XI of GATI because import quotas were used in combination with domestic production controls. The supply management system, because of its direct use of production controls and import quotas, generated significant rents for producers and importers ( Schmitz and Schmitz, 1994) but was costly for consumers ( Veeman, 1982). As a result, any attempts to lower trade barriers were opposed by special interest groups. This was certainly true in the Uruguay Round of GATT when Canada finally agreed to the tariffication of its border protection in the dairy, poultry and egg sectors. Throughout the negotiations, Canada argued against tariffication. of border measures, preferring that Article XI be strengthened rather than weakened. A major impetus for this position was the concern by producers that protection afforded them through production and import quotas would be diminished.