Mr. Harper, cut down these tariffs
Posted: March 05, 2010. By Terence Corcoran
The commentary brigades are rightly falling all over themselves in praise of the Harper government’s budget plan to eliminate tariffs on industrial machinery and equipment. As economic policy goes, it was the best move in the budget. Whether it says anything at all about the free trade resolve of the Harper Conservatives is another matter. Ottawa talks big on trade, but the equipment tariff cut is a small-time play in the government’s $4-billion annual consumer-punishing customs tariff regime.
The removal of tariffs on 1,541 equipment import categories is a tribute to the lobbying efforts of Canadian manufacturers. Businesses from car makers to carpet makers will benefit from the lower cost of equipment purchases. By definition, that improves their productivity because they will get the same amount of output from fewer dollars invested.
All very nice for manufacturers, but what about the rest of us — as consumers and corporations — who will continue to pay billions a year in tariffs on other products? According to the budget documents, the equipment tariff move will reduce Ottawa’s customs revenues by only 1.4% next year. Canadians will continue to pay the remaining 98.6%, or about $3.4-billion this year and rising by 2014 up to $4.1-billion, higher than the duties collected before the recession reduced imports and tariff collections.
Who pays these tariffs? There are thousands of categories. But here’s a tiny sample. A resident of Toronto recently bought $187 worth of shirts from L.L. Bean via catalogue order. The total bill came to $233 after Ottawa collected $35.53 in customs duties and $11.33 in GST. Who benefits from the customs tariff? In this case, the Canadian shirt manufacturer who will now be able to buy shirt-making equipment tariff-free thanks to the new budget, but who will continue to be protected against shirt imports.
If tariff cuts that eliminate import costs are beneficial for manufacturers — freeing up money for productivity gains and other uses, creating 12,000 jobs — then cuts that eliminated costs for everybody else would be just as good. Canadians pay hundreds of millions of dollars in protective tariffs on clothing made in certain countries, agriculture imports, on shoes, on certain metal products and in anti-dumping fees on steel imports.
Even though it will leave up to $4-billion in tariffs in place, the Conservatives are full of fake free trade bravura. The Speech from the Throne said the government “will oppose trade protectionism in all its guises.” What utter baloney. The same speech, a few sentences earlier, declared the government’s resolve to “continue to defend supply management of dairy and poultry products.” Supply management is one of Canada’s ugliest, most destructive and most punishing protectionist scams. It’s not even a guise. Ottawa shoots imported cheese consumers in broad daylight if they do not pay a 300% tariff.
In Ottawa, trade hypocrisy is worn as a badge of honour. In literally the same sentence of the Throne Speech, Ottawa promised to systematically block billions in agricultural imports and to “pursue market access for agricultural products” abroad. The speech, by the way, said Ottawa had given up on the Doha round of trade negotiations due to “disappointing results.” Since Ottawa played a leading role in undermining the Doha agricultural file, there couldn’t have been that much disappointment.
But still the government, milking media gullibility on trade, was able to pat itself on the back as world-leader in tariff reduction. The budget said the “historic step” of removing tariffs on equipment makes Canada unique among G20 nations and creates a national “free trade zone” for manufacturers.
Then, continuing the bravura claims on trade, the budget said “The government will continue working with Canadians to identify areas where further trade liberalization could take place.” Is this for real? Do the Harper Conservatives really want Canadians to identify areas where $4-billion in tariffs could be removed and where protectionism in all its guises could be fought and eliminated?
It’s hard to get on board this bandwagon, given the policies of the drivers, but maybe it’s worth a try. To this end, FP Comment, in weeks ahead, will begin a new drive — Cut Down These Tariffs, Mr. Harper — aimed at eliminating at least half of the $4-billion in existing protectionism by 2014-15.
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