The Conservatives’ recent decision to raise tariffs on imports illustrates the incoherent – and harmful – approach that the Harper government has taken toward trade and taxation.
The federal General Preferential Tariff policy has been in place since the early 1970s. It was initially designed as a measure to help less developed countries build export industries by lowering Canadian tariffs on their goods when they enter Canada. The countries are reviewed every 10 years and are removed based on whether or not the countries continue to merit favourable treatment. This was done in 1984, 1994, 2004 and it has just been completed for the 2014 tax year.
There is another important benefit to this program: by reducing tariffs on thousands of goods, it also makes many products less expensive for Canadians.
This year, without any advance debate, the Conservatives decided to remove 72 countries from this list.
This means that the Harper government will be raising tariffs on goods from these nations – and hence prices for Canadians. Not only will the federal government receive revenue from higher tariffs, it will also effectively hike taxes on businesses who import these goods.
The Conservatives argue that this is justified by pointing to countries like China, India, Brazil and Korea who no longer need such favourable treatment.
However, what is not explained is why the Conservatives also removed countries like Botswana, Tunisia, Gabon, Namibia and Ecuador from the list. These are countries that clearly are not developed nations. Removing them – and dozens of countries like them – reveals that the real motive was increasing federal revenues.
This is a tax grab by the Conservatives, pure and simple. It is a violation of the Harper government’s pledge not to raise taxes – and a particularly duplicitous one, at that.
And it won’t hurt the countries we import most of our goods from. We will still get our iPods, cell phones, computers and thousands of other goods from these countries.
However, it will hurt Canadians, as the products will cost Canadians more.
This move also reflects a trade policy that is simply incoherent.
Consider just two examples.
Only a few months ago, Prime Minister Stephen Harper led a trade mission to India where we are currently negotiating a trade agreement aimed at reducing tariffs. What message does it send to our Indian partner when we return to Canada – and then raise tariffs on the very goods we are supposed to be reducing?
Canada just joined the Trans-Pacific Partnership, trade talks aimed at reducing tariffs between the participant nations. Within months of joining, Mr. Harper is raising tariffs on goods from five of the 11 other nations: Chile, Peru, Brunei, Malaysia and Singapore.
These countries must truly be shaking their heads at such policy confusion.
It should come as no surprise, however, that such a disorganized trade policy has yielded very poor results.
Since the Conservatives assumed power in 2006 they have turned a healthy trade surplus into a $62-billion deficit – one of the worst records of any country in that same time period. They have focused massive government resources on securing trade deals and have little to show for it, reaching agreements with only a few, very small economies such as Jordan, Panama and Honduras, and none with a major economy.
The Conservatives say opposition parties must “explain to local manufacturers … why any government worth its salt would continue to give our major competitors special access to the Canadian market, putting our own Canadian companies and workers at a clear disadvantage.” This is absurd coming from a government that is engaged in over 50 negotiations with countries around the world aimed at precisely that objective.
Worse, it is bitterly ironic coming from a government that long ago abandoned any focused strategy to support manufacturing in Canada. Under Conservative trade and industrial policies, Canada has seen our trade deficit in manufactured goods explode nine times to over $100-billion. Our exports of raw and barely-processed resources are up, and our value-added products are down by $30-billion a year.
It is time the Conservatives come clean. If they want to raise taxes on consumer goods, they should be honest and tell Canadians. If they believe in reducing tariffs, they should stop raising them.
Most importantly, they should get on with the job of building a sensible trade policy that actually helps Canadian exporters and consumers, and creates good jobs in value-added industries here in Canada.
Don Davies is the MP for Vancouver Kingsway. He is the NDP international trade critic.