Canadian Intervening in the Agriculture Sector - Essay Example

Macro & Micro economics Microeconomics The Canadian government has a long history of intervening into the agriculture sector, though the economic situation of the agriculture sector undergoes rapid evolution. There are policies that are implemented by the government and stakeholders; hence, establishing the rationale for intervention and the traditional justification for intervention becomes a public concern relating to distribution of income. In this case, after the long-standing tradition of stakeholders, there are chances of assuming the rational for government intervention in the agricultural sector. On the other hand, a rationale requires healthy debate in the process of evolution concerning the operating conditions of the sector. The Canadian government intervention in the agricultural sector, specifically in the livestock sector has brought forth numerous benefits and consequences as outlined below. The intervention occurs because of imperfect market, in order to provide public goods and services like the web extension reports and crop information. However, the private market can fail to offer sufficient public goods or services, thus result to excluding the some people from consumption of goods and services. The other reason relates to extremities such as high costs of public health due to poor nutrition. In this case, the occurrence of an externality happens in situations when the costs benefits are not related to decision makers. The other reason relates to the market power and monopolies in situations when the firm influences market prices. For example, the cooperative has offered the necessary privileges for offsetting the concentration of power to the buyers or service providers like railroads. Moreover, the imperfect and asymmetric information, whereby there is uncertainty relating to the products attribute, and in other situations processors might have more information concerning a required attribute compared to the supplier. The other reason relates to the labeling requirements, whereby the government intervention helps to solve private market imperfections. In this case, the intervention of based on offsetting economic distortion and it is created by the actions of the foreign party. Moreover, the subsidized exports in a country are a determinant of the returns in the other, whereby the economic augments for the government intervention is harmonized in standards of the trading partners. There are justifications within the economic situations that government intervention into the agricultural sector is premised on a philosophy, which capitalist economy within the private market is the best system for facilitating production and distribution of goods and services. In this case, the rationale for government intervention focuses on two basic issues relating to performance of the private market. The intervention of the government focuses on improving the performance of the private market economy, and it limits the biases of the private market results through the provision of individual having minimum standards of fairness. The other reason for intervention relates to the need to change the distribution of income, for instance, transfer of produces that can be applied in social justice issues in order to provide the producers with minimum living standards. Therefore, the intervention helps to address problems, though not all the economic are considered supportive in transferring the income for addressing the equity issues. Government intervention is needed in a situation where the market is not working properly, and when resources are no allocated to appropriately. This can result to market insufficiencies in a system, and this requires a government intervention. On the other hand, the preceding section offers a condition for the government intervention, whereby it relates to the connection of issues and opportunities in the agriculture sector1. In Canada, there are concerns related to the existence of farm incomes and stabilization programs, whereby the organization positions are identified as issues in the agricultural sector. There is an exception relating to supply of managed sector, whereby numerous farms in Canada have a comprehensive farms policy or a strategy. Moreover, there are groups that attempt in developing the policy while other organizations believe that the government deals with issues affecting producers in Canada. The producers in Canada, who are beyond the control of the foreign government and accessibility of market issues, embrace the need for innovation. There are issues concerning the biotechnology and marketing, which are issues concerning supply of produce, and they are affected by the regulatory system in horticulture and supply chain. In fact, the structure and power of actors in the supply chain are identified as an issue, whereby disposal of Specified Risk Material (SRM) has become an issue in the supply of products like red meat. Numerous social policies and political rationales result in government interventions, for instance the desire to assist the rural economic development, achieve environmental goals, promote energy security and attain social-political objectives underlying the provisions of subsidies to ethanol and bio-fuels. Moreover, the agricultural policies are dependent of the monetary and fiscal policy of the Canadian government. The government intervention in Canada is attributed to strategic policies in the international arena in order to enhance the economic performance in the key sectors. There are strategic trade policies in the agriculture sector, which has been established through the government intervention, in order to support international competition, and national welfare at the expense of other countries. Furthermore, the intervention also contributes to the provision of government grants to commodity groups for international market development. The agricultural commodity in Canada experiencing government intervention is livestock, whereby in the late nineteenth and early twentieth century, eastern Canada had numerous small mix farmers engaging in production for satisfying their needs. There were farmers who produced regularly; others had limited surpluses while others produced occasionally for markets and exports2. On the other hand, the Western Canada entailed a primary widespread cattle ranching with restricted mix farming in only some regions of early settlement. Nevertheless, at this period, the government has limited and few operations that entailed: protecting the population from aboriginal people, and renegades. They government also focused on providing transport infrastructure for activities such as research education and extensions. In the mid-twentieth century, agricultural production was growing at a significant rate to urban markets, whereby there were exceptions of the farmers who never wanted government intervention. However, years past and food supplies in the industrialized countries grew substantially with a slight increase in demand. Consequently, this resulted to a decrease in the food prices and low profits; hence, the situation resulted to a change in the farmers’ attitude towards government intervention, and they responded by intervention at the global, national, regional and local levels. The government intervene through national and regional dimensions and other countries, whereby there are attempts to insure ample income for farmers in the multitudes of programs, which ranges from development of protection barriers. These barriers are established through direct input and output subsidies, storage and assistance, preferential taxation and measurement of interest, disaster relief, and supply management. Moreover, there are efforts towards the multitude ingenious, though it results to failure in stabilizing program, whereby the activities create difficulties like uncertainty concerning the effectiveness and frequency of attacks by other countries, which results to trade distortion. There are responsibilities of safety and quality of food products, which are shared by various levels of government with the responsibility for animal health on a national basis and a focus on the significant disease endangering the health of people and animals in the country. The government has succeeded federal-provincial programmes, which are attributed to complete eradication of tuberculosis and brucellosis form cattle in Canada. The government monitors the laboratories within the federal government through a routine monitoring of animals and product specimens for contagious disease and undesirable residues. There are regulations established through the Health of Animal Branch within the Agriculture and Agri-food Canada, which are indispensable for the lives of animals or product that are followed. The intervention facilitates the necessary health tests and issues that allow covering of animal, semen or embryo for exporting to other countries. There are disease controls programs established through the government intervention, whereby there are diagnostic services for satisfying the local needs, and inspectors supervise the dairies, hatcheries and grading the stations and abattoirs selling the products. The government inspectors take the responsibility of examining the products in order to certify the carcass to suit human consumption. The federal inspectors in Canada are supposed to approve anything deemed for export, though the inspection is performed on products sold within the provinces. Local government is active in protection of public health through inspection of non-exporting food processors and restraints that are within the federal jurisdiction. Moreover, there are government inspectors who grade the products for quality appearances while the federal and the provisional government control disease recording and control. The impact of government intervention in Canadian agricultural sector has externalities, which results to benefits for the producers. For instance, there are positive externalities, which flow benefits to producer practices of environmental stewardship while others experience a negative externality that is associated with a higher cost due to improper nutrition. The involvement of externalities in the private sector offer excess or insufficient goods or services; thus the intervention is needed to rectify the situation through a means such as laws, which is defined by proper rights and regulation. There are government regulations focused on limiting the power and increasing competition in markets. For example, the government has chances of establishing regulations for protecting the producers form trade practices of the input suppliers. Government interventions are also vital in dealing with the problems of asymmetry in information and imperfect information that can result to market failure. Moreover, the asymmetry in information results from a situation when the processor has information concerning the quality of products that are unknown to the consumers, thereby preventing appropriate functioning in the market, thus government intervention is vital. There are other cases related to food borne illness and chemical contamination, which is associated with imperfect information. In fact, the producer can have the knowledge whether the products have food borne illness or contaminated chemicals; in this case, there is a need for government intervention for ensuring food safety. The other effect of government intervention relates to the consequences associated with competitiveness reduction; whereby there is technical, marketing and market efficiency that can be affected have a negative impact resulting to market failure due to decreased competitiveness3. There is low technical efficiency relating to production in a situation when the ratio of output to input is lower compared to competitors having the same conditions. Nevertheless, the relevant government intervention can rectify the problem related to lack of knowledge and poor managerial skills of fostering technical efficiency. Moreover, there situation are no economies of scale the products are distributed in a way that corrects the market power, thus resulting to marketing efficiency. Government intervention contributes significantly in the establishment of producer marketing association, whereby provision of marketing information assists the producers to respond to consumer demand. On the other hand, lack of responsiveness is considered an indication of low efficiency, thus the government intervention is applied in a situation with low efficiencies due to lack of completion in supply chain. Moreover, there are grading schemes that can assist the producers in differentiation of products, whereby lack of differentiated products is an indication of low market efficacy. The paper has explored issues related to government intervention in the agricultural sector in Canada, whereby the intervention into livestock farming is discussed and the effects of the intervention. Nevertheless, some of the issues identified are the necessity of intervention caused by market failure, whereby there are sufficient benefits of intervention that surpasses the cost. In fact, the opportunity cost of intervention is appropriate; though the intervention is costly since the government policy is effective and efficient due to consideration to appropriate policy instruments and desired results. The other rationale for government intervention that has been identified is the recognition of economic distortion, which is beyond the control of the producers. For instance, there are subsidies of the agricultural producers that are damaging in income of Canadian farmers that can constitute a distortion. Therefore, the paper has identified substantial intervention that can be justified in situations where the actions are required in offsetting the distortion, which is created by an action plan of the parties involved. Bibliography Clark Stephen and Thompson Shelley. "Advancing a Policy Dialogue: Policy Context & Rationale for Intervention in the Agri-Food Sector". Canadian Agri-Food Policy Institute. February 2011. Available at: http://www.capi-icpa.ca/pdfs/2011/CAPI_Viability1_Context.pdf [Accessed on November 9 2012]  Spriggs John, Kooten Van and Hayward Keith, “Rationale for Government Intervention in Agriculture: A Review of Stabilization Programs,” Canadian Journal of Agricultural Economics, Volume 36, 1988 Sandell, Michael, Kaine Timothy, and Johnson Rodney, “Clarifying Economic Justifications for Government Intervention to Assist Agricultural Adaptation to Climate Change,” Department of Primary Industries, Government of Victoria, September 2009 Read More