Politics muck up a free market

Everybody talks about free trade as something which we should aspire to.

It is felt, at least by many, that unfettered trade would mean those who do the best job of production will prevail and supply those wanting products.

It would allow the concept of supply and demand to take control of markets, which again, most suggest is the fairest way to determine true market value for any commodity.

But the idea of free markets constantly run into barriers, most often erected by governments who are quite willing to muck about in markets to gain political favour with one sector, or another, from amongst their voters.

Canadian Prairie farmers are quite aware of the impact governments can have in terms of grain markets. It was not so long ago farmers here were caught in the crossfire as the American and European Union threw millions and millions in subsidies attempting to buy market shares in the wheat market. It was a long battle which impacted markets for years through the ‘80s, and in the process took the idea of a supply/demand market out of the picture.

We have also seen government meddling, again from our American neighbours bringing cases against Canada for their perceived issues with the Canadian Wheat Board, the big sector here, the lumber sector and others which were more nuisance cases causing a drain on financial resources than based in real problems with the flow of trade.

We of course have trade deals in place, but those are only pieces of paper, and we still see barriers tossed up moving south, as the meat sector will attest as the Americans still look for advantages by using tools such as Country Of Origin Labelling (COOL), which is still an issue nagging trade.

And the story of political interference in markets is in the midst of writing new chapters.

While we are all happy to head to the gas pumps right now, as locally prices for a litre of regular fuel have dipped under 90-cents for the first time in ages.

The low gas prices reflect a huge drop in the price for a barrel of cure oil, a situation which is being driven by a trio of factors.

The first is a slight glut in the marketplace when supply is compared to world demand.

The Middle East is involved in creating the oversupply as OPEC or perhaps more accurately Saudi Arabia, is pumping oil at a higher rate to recapture some lost market share.

And then there is the ‘feeling’ within the sector the Americans are pushing for lower oil prices as a way to undermine Russia. Certainly trade sanctions are a standard way to pressure countries, so the likelihood of American fingerprints on the situation are likely.

As things tighten in Russia, and consumers face higher food prices, that country has instituted export tariffs on export wheat as a way to keep wheat in-country and hold bread prices lower for their residents.

That has actually bolstered wheat prices for the rest of the world, a situation which could extend into 2016, but is still a political induced market, and not one based on the most basic idea of demand paying for a commodity based on available supply.

It is a situation which has to leave farmers again wondering when their livelihood will stop being a chip governments play with what appears little thought of its impact on primary producers.

Calvin Daniels is Assistant Editor with Yorkton This Week.