How to boost Canadian competitiveness for very little money: Selectively eliminate tariffs.

Free Trade Isn’t Free

A Simple Solution

Why “Selective” Tariff Elimination? Why not Eliminate All Tariffs?

  1. Some tariffs exist as a backbone for other policies, such as supply management; these tariffs are not wholly eliminated even in trade deals.
  2. Some tariffs generate a great deal of revenue for the government. In 2017, the government raised $4 billion in revenue from tariffs. Even with CPTPP and CETA coming on board, this number is likely to stay above $3 billion per year, unless the government signs a trade deal with China (imports from China generate over half of all tariff revenue, keeping in mind that the tariff is paid by the Canadian importer). The federal government likely does not have billions of extra dollars to devote to tariff elimination.
  3. Canada may want to keep some tariffs behind as a bargaining chip for future trade deals. Specifically, there are 12 countries that Canada has significant non-oil imports from (the tariff on oil is zero, so while we import a great deal from Saudi Arabia, the federal government only collected roughly $100,000 in tariffs from Saudi imports in 2017). These Big-12 countries are as follows: China, Taiwan,Brazil, India, Thailand, Argentina, Indonesia, Turkey, Bangladesh, Philippines, Cambodia and Dominican Republic.

How Much Would it Cost?

If This Is Such a No-Brainer, Why Hasn’t it Happened Already?

  1. There hasn’t been a comprehensive tariff elimination in at least a decade (past tariff eliminations were based on themes, such as “manufacturing inputs”).
  2. Some of these tariffs may have had a use prior to CETA and CPTPP, but no longer serve a useful purpose now.
  3. Some of these tariffs act to protect domestic industries. (I’ll leave it to the reader to decide the validity of that reason). Most of those should fall into the large dollar amount category, but there’s likely a handful of tariffs that don’t generate much money, but do act as a barrier to entry. One way to isolate these would be to filter out any tariff that is over a certain percentage, say 8 or 10%. There’s surprisingly few of these higher percentage tariffs, but they probably should be filtered out.

Cost Your Own Tariff Cut

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Senior Director, Smart Prosperity. Assistant Prof, Ivey Business School. Exhausted but happy Dad of 2 wonderful kids with autism. I used to do other stuff.

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Mike Moffatt

Mike Moffatt

Senior Director, Smart Prosperity. Assistant Prof, Ivey Business School. Exhausted but happy Dad of 2 wonderful kids with autism. I used to do other stuff.

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