program through market sharing. Both models require some form of power sharing or delegation agreement, and this is accomplished through the federal-provincial agreements.
At least three factors contributed to the creation of supply management: 1) market failure in terms of persistent overproduction of dairy and poultry products coupled with an uneven distribution of bargaining powers; 2) jurisdictional disputes between federal and provincial levels of governments and among provinces; and 3) rent-seeking by industry stakeholders promoting protection from imports and domestic production control.
This chapter suggests two scenarios and/or hypotheses for further research. The first scenario is that some provincial boards may start leaving the supply management system, especially if exit costs are perceived to be less than the loss of producers' surplus from their internal adjustments to the new international trade rules ( Saint-Louis, 1994). The second scenario is that federal regulatory agencies will conclude that desirable, structural adjustments in the whole food and fiber industry in Canada must take into account issues of competitiveness. The agencies must justify preemption of such organized price-leveling mechanisms as those tolerated in the past, especially when the possibility of rent-seeking by provincial stakeholders is greater in some provinces than in others.
Supply management is about power-sharing in a national market protected by import quotas or tariffs. In the context of trade liberalization, governments and business will be less able to exercise market power in the future. Planned adjustments are needed to meet increased international competition and to prevent the destruction of supply management systems from within.