South-Western College Publishing - Economics  
Here in Quebec, We Know the Difference Between Butter and Margarine
Subject Canadian dairy farmers lobby to keep butter yellow and margarine white.
Topic Market Failure, Regulation, and Public Choice
Key Words

margarine, dairy, lobby, Wal-Mart

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Reference ID: A139564618
News Story

Wal-Mart has found itself in the center of a firestorm again...but it’s not the company’s fault. Canadian dairy farmers are lobbying to prevent Wal-Mart from selling yellow margarine.

No, seriously. The lobby for the Canadian dairy farmers has fought to maintain a Quebec law requiring margarine to remain white in color, and only allowing butter to be colored yellow. Police from the agriculture ministry noted that a Quebec Wal-Mart was selling yellow margarine. Wal-Mart argues that the incident was a simple distribution mistake, and that the yellow margarine was intended for another store within the U.S.

Canadian dairy farmers, especially in Quebec, where half of the country’s farmers do business, are an extremely strong lobby. They pushed for a labeling law requiring descriptives – “buttery taste”, “cheesy consistency” – only if those items were specifically found in the natural product and not artificially added. Consumer products giant Unilever argues that it costs the company $1 million a year to provide white margarine for Quebec, and yellow margarine everywhere else.

Thus far, the dairy lobby has been successful, but it faces attacks both within and outside the country. It is likely that other countries will argue within the WTO that such laws constitute restraint of trade. Whether Canada agrees with that logic remains to be seen.

Questions
1.

Critics argue that such laws as the one described in the article allow for a distribution of surplus away from consumers and toward producers? Do you believe that this statement is accurate? Draw a diagram to support your conclusion.

2. Does the government gain monetarily from such protectionism? Why or why not?
3. Illustrate the effects of this law on the price of butter via a supply and demand diagram.
Source “Let them eat yellow margarine.” The Economist. 8 December 2005 http://www.economist.com
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