Mises Wire

Home | Wire | Protectionism Is Not the Answer to the Canadian Fur Trade’s Problems

Protectionism Is Not the Answer to the Canadian Fur Trade’s Problems

  • Furs

Tags Free MarketsProtectionism and Free Trade

01/29/2020

The North American fur trade began in the seventeenth century, and though many think of it as history, it continues to this day, contributing almost $1 billion to Canada’s economy. Although there is global demand for fur—the US, China, and Hong Kong are the largest markets for Canadian fur—the industry is in decline. Prices have dropped significantly and overproduction relative to demand has led to a glutted market.

In particular, the wild fur industry is suffering. Improvements in farming techniques have allowed fur farms to conquer the market, and now two-thirds of Canadian fur is farmed. Although this is a boon for consumers, who now have a more steady and affordable supply of furs to enjoy, as well as for fur farmers, trappers are hurt by the change, which has recently manifested itself in two major players (the North West Company and the North American Fur Auction) moving to back out of the industry.

Unfortunately, many think that the solution to the issue of the ailing trade is for the government to step in to “protect” trappers from “market fluctuations” rather than allowing the market to change and reabsorb the trappers in new capacities. Although the trapping interests affected are still shopping around for private fur buyers, they’re also trying to involve the only entity that would ever consider pumping money into a declining industry: the state.

Private Responses to a Changing Market

On December 10, 2019, the Canadian Broadcasting Company (CBC) reported that the North West Company had decided to stop buying furs at its Northern Stores. The decision would affect trappers across the Canadian North, who would lose an important source of income since the company is often the only fur buyer in remote areas. The company’s reasons for suspending purchases were market based: declining fur prices—sometimes by 50 to 70 percent—and high inventories of unsold furs. (Fur buyers often pay trappers for their pelts in advance, shouldering market risks in the hopes of turning a profit later.) Just three days later, the company reversed its decision after receiving much criticism from “disgruntled customers” and trappers, interests that overlap in northern Canadian communities, where the Northern Store can be the only store.

Although of course the reversal does not change the facts of the market, it is an example of how private interests react and adapt to changing market conditions. In order to continue buying the furs, the company has partnered with the Fur Harvesters’ Auction (FHA), the largest wild fur auction house in the world. The North West Company, ideally situated to purchase wild furs, will act as an agent for the FHA, which is located in North Bay, Ontario, accepting the furs at its Northern and NorthMart stores and continuing to give trappers advances against auction sales.

The company’s initial decision to stop buying furs seems to have been spurred by the pending dissolution of its main buyer, the North American Fur Auction (NAFA), a major fur marketer that was originally part of the Hudson’s Bay Company. The Toronto-based NAFA decided to close up shop in November, having lost its primary lender after a long refinancing struggle. But when the announcement was made, the affected interests had already been mobilized to find a solution to the widening fissure in the market.

When the NAFA’s financial troubles became known, the Saskatchewan Trappers Association reached out to the FHA to see if it would be interested in filling the gap created by NAFA’s imminent failure. The FHA responded enthusiastically, allegedly “assur[ing] all the trappers across Canada here that they can handle the fur volume.” Knowing that there are multiple remaining buyers trying to fill an enduring consumer demand for fur, the association had turned to the Canadian fur marketer that arguably stands to gain the most from the gap created by the NAFA’s volatile circumstances, setting in motion a reorganization of the wild fur industry.

The FHA’s voluntary involvement in the North West Company’s reinstatement of fur sales suggests that there are still worthwhile profits to be made in wild fur in spite of the industry’s decline. No government force or groveling on the part of the fur producers was necessary to get the FHA to swoop in for the NAFA’s share of the fur market. This shows that, to some extent, trapping and wild fur production is still a productive enterprise—yielding a product that increases many people’s psychic profits.

For its part, the North West Company’s decision to accept furs again is more than a charitable PR move. Although Director of Business Development David Reimer allegedly “said the company acknowledges its responsibility to communities,” the reality is that a bunch of disgruntled customers would have had significant ramifications for business. Though fur sales represent “a very small percentage in terms of revenues” for the company, one of its primary business activities—as a retailer specifically to remote communities in the Canadian North (Read: places where trappers and their families live)—might have been severely impacted by local ill will.

Moreover, although the details of the North West Company’s deal with the auction house are not known, it’s likely that the latter’s business prospects have been brightened considerably by the NAFA’s pending demise—perhaps enough that it ventured to offer the North West Company a commission that makes accepting furs lucrative once again. Whatever the case may be, private interests at various stages of the fur production process—producers and marketers—are engaged in a natural (if trying) process of reconfiguration in response to a major change in the market. (Remember, the NAFA’s operations date to the Hudson’s Bay Company’s 1670 founding.)

Calls for the “Protection” of the Trappers’ Industry

But, as in other industries, there are voices clamoring for government involvement to “protect” the industry, in spite of its evident ability to respond to changing conditions, and they’ve already had some success.

On October 31, the Ontario Superior Court of Justice granted the NAFA creditor protection status, which prevents creditors from collecting their rightful property from borrowers who have defaulted on their obligations—a shameless act of corporate welfare. Specifically, the order “prevents the company from paying creditors with outstanding payments from before [October 31],” buying it more time to dispose of worthwhile assets, such as its “ranched mink portfolio,” which it is selling to Saga Furs.

In light of the industry’s near loss of the North West Company as a fur buyer—often the only one in remote northern communities, as mentioned—some have called for the Canadian government to buy the furs. In the Northwest Territories such a program is already in place, and nearly 650 trappers sell their furs to the state.

Francois Roussow, a fur marketer with the territorial government’s traditional economy division, thinks that “every jurisdiction should be running something like this especially in their northern communities to assist trappers to get out on the land.” Even if all the rural provinces instituted such programs, though, Roussow thinks the company should continue buying furs because it “owes it” to the communities, and because it allows them to get quick money to spend at the stores.

In the same interview, however, Roussow admitted that the North West Company’s original decision aligns with the fur industry’s trend and mentioned several factors contributing to it, including competition from the ranched fur market, a saturated market, and changing tastes.

Roussow’s contradictory remarks reflect the dangers of central planning. He’s asking for the state to use its apparatus of legalized violence and theft to funnel indefinite amounts of money from Canadians’ pockets into fur-buying programs across the nation simply to “assist trappers to get out on the land.” He has the gall to say this knowing that the market is glutted with pelts and that the industry has virtually abandoned trapping as an inferior method of production (and possibly in keeping with some customers’ ethical concerns about wild fur and furbearer populations). Neither consumer demand nor costs make an appearance in his reasoning. The end is practically trapping for the sake of trapping: northern Canadians have made their living a certain way for a long time, so the Canadian government must supply them a buyer if there are none, rewarding that living over and above the vociferous preferences of consumers, who have voted wild fur down on their value scales.

Although the Saskatchewan Trappers Association clearly knows how to hunt for new fur buyers of its own accord, as its communications with the Fur Harvesters’ Auction shows, it too seemed to push for government intervention, albeit indirectly. The association reached out to the Ministry of Environment in its search for more auctioneers to replace the NAFA’s market share, not only seeking referrals but asking the department to do the legwork of connecting them with new buyers. Trappers also expressed concerns to the ministry about employment and compensation for unpaid furs provided to the NAFA, some of which were probably voiced through the association.

By directing their concerns to the state and asking for its assistance, trappers and trappers’ associations are tacitly calling for state intervention in the fur market. They are calling for insulation from market forces and for special privileges at the expense of other Canadians. Indeed, the Saskatchewan Trappers Association’s About statement shows this:

Composed of trappers and other interested persons, working for trappers and the fur industry in general…

We defend your right to trap and to harvest fur…

We speak…to Government resource related industries and the public in general…

We believe that the fur bearers of Saskatchewan should be properly managed for the benefit of everyone.

Although lightly cloaked in a rhetoric of public benefit, it is clear that the association’s goal is to prolong the lifespan of its industry by securing special favors from the state and pushing for barriers to entry for outsiders (such as trapping permits), as the final sentence implies. Attracted by the opportunity to coopt the power of the state, its goal is not merely to make a living, but to rig the industry in trappers’ favor by making economic failure impossible.

Instead of calling for the state to put a declining industry on life support at massive taxpayer expense, trappers and their allies in related industries should work to adapt to the changing market. Whether this will mean pursuing commercial trapping part-time or abandoning it altogether, creating fur farms, trying to influence consumer tastes, or simply hustling to find new buyers, as recently occurred, cannot be said for sure. The only thing that is certain is that uncertainty and change are facts of entrepreneurship and of human life, and that “protection” from market fluctuations is achieved only through a human shield put in place through coercion. It is no benign proposition, and it comes at the very real expense of others.

The fur trade has seen a lot of change in the past several centuries. The primary fur traded has varied, shifting from beaver (1600–1870s) to white fox (1900s–50s). The industry has also seen the expansion of its scope to include small furbearers such as ermine, as well as polar bears and seals. The division of the production process has varied, with the Hudson’s Bay Company once seeing a fox from its traps through the auction house, a process that market conditions eventually divided up, as we’ve seen. The stages of production themselves have evolved, as the dominance of fur farms indicates. If wild fur really brings consumers joy, satisfying the ends of their diverse value scales, the trade will transform again and see a new century.

Protectionism will only freeze the industry in its enervated transitional state and turn it into a stagnant affair, useful only to trappers—and arguably harming them simultaneously as they become dependent on rent seeking rather than their own resilience. Worst of all, it will be costly to taxpaying Canadians and to consumers, both due to the actual cost and the missed opportunity for greater human fulfillment through the natural (re)allocation of resources with shifting value scales.

Author:

Contact Daniella Bassi

Daniella Bassi holds master's degrees in early American history from the University of Vermont and the College of William and Mary. She is particularly interested in the voluntary trade between indigenous and white peoples. She is assistant editor at the Mises Institute.

Note: The views expressed on Mises.org are not necessarily those of the Mises Institute.
Image source:
Getty Images
When commenting, please post a concise, civil, and informative comment. Full comment policy here

Add Comment

Shield icon wire