News: Tariff cuts ought to be a highlight of Budget 2015

Joe Oliver can halt those negotiations, save the province of Newfoundland and Labrador a pile of money, and help improve Canada’s reputation as a free trader by dropping this and other needless tariffs in Tuesday’s budget.

Hill Times - April 20, 2015

David Akin
OTTAWA—The late Jim Flaherty had a great sense of humour and one is reminded, on the eve of the first budget since his death last April, of the neat trick he tried to play on us in the 2013 budget.

You’ll recall that ahead of the budget there were some leaks that the government would cut the import taxes—tariffs—on porting goods and on baby clothes.

This would save those “hard-working families” that every politician is keen to impress about $76-million a year. This consumer-friendly initiative got good press in the news cycle leading up to the budget.

But inside the budget lockup, reporters, economists, and analysts started poring through the detailed budget plan and discovered something the government had not bothered to flag for us: That while Canadian consumers were getting a $76-million break on hockey skates and golf clubs, they were going to be paying an extra $330-million a year in tariffs on hundreds of consumer items—cans of tuna, for example—made in places like India, China, and Brazil. Those countries had enjoyed a “preferential tariff” rate but, that year, in Canada’s judgment, the economies of six-dozen countries were doing well enough that they no longer needed help from that preferential tariff.

I raise this point because Finance Minister Joe Oliver, in his first-ever budget Tuesday, should move to reduce tariffs, a move which, in the long run, is good for Canada’s economy and prosperity.

Canada, more than almost any other developed country, depends heavily on foreign trade for its prosperity and if it wants access to foreign markets for Canadian goods and services, it must demonstrate that it is prepared to open its market to foreign goods and services. The government itself often makes this point as it points out how active it has been negotiating new trade deals.

Indeed, just about every budget document in the last few years, had language about how the Harper government has been busy doing trade deals from Jordan to Peru to Lichtenstein.

In the 2009 budget, the Harper government unilaterally dropped tariffs on all machinery, equipment and all manufacturing inputs, a good sign that Canada was not only talking the talk on free trade, it was walking the walk. The boost in tariffs on consumer items in 2013 sent a different message.

And now, with the news last week that U.S. President Barack Obama has got the green light from Congress to fast-track negotiations of the Trans-Pacific Partnership, it’s more important than ever that Canada demonstrate its good faith as a free-trader.

The TPP has the potential to be huge free-trade zone for Pacific Rim countries and could be of immense benefit to Canada. But already reports are emerging that Canada refuses to even consider dropping the illogical and unhelpful tariff walls that protect our dairy, egg, and poultry sectors. This so-called supply management system has been shown to be not much more than a system to transfer wealth from Canada’s poorest families to a few thousand relatively well-off farm households. And now it threatens our chances to be part of the TPP.

But here’s one thing Oliver could do to demonstrate Canada’s commitment to free trade: Drop a tariff on medium-sized ferries.

Right now, any ferry operator who wants to buy a ship under 129 metres long, has to pay an import duty of 25 per cent. The province of Newfoundland and Labrador is having two ferries built in Romania right now to service Fogo Island and the Change Islands. St. John’s will cut a cheque to the Romanians for $100-million and, at the same time, have to cut a cheque of $25-million to Ottawa.

Why? Ottawa put this tariff in place to protect the one and only domestic shipbuilder who could make these medium-sized ferries. But that one and only shipbuilder, in Welland, Ont., has been out of business for a few years so this tariff is not protecting any Canadian business while hurting taxpayers in Newfoundland.

Indeed, the government scrapped the tariff on big ferries, over 129 metres, long ago because there was no domestic industry to protect.

This ferry tariff is going to disappear, in any event, when the free-trade deal with Europe is ratified. And the government in St. John’s has already filed an application with Oliver’s department to drop this needless tariff.

Oliver can halt those negotiations, save the province of Newfoundland and Labrador a pile of money, and help improve Canada’s reputation as a free trade by dropping this and other needless tariffs in Tuesday’s budget.