The Harper government is hiking duties on imported goods from more than 70 countries including China to help retire the deficit faster – a move that could cost Canadian consumers $330-million more per year in higher retail prices.
The 2013 budget measure overshadows a $76-million tariff-rate break for foreign sports gear and baby clothes also announced Thursday that the Harper government played up as an effort to address consumer frustration about excessively high retail prices.
The higher duties will be applied to rapidly developing countries – six dozen in all – that Ottawa argues don't need a special discounted duty rate any more. These include China, Russia, Brazil and India.
Since 1974, Canada has granted developing countries a break on the barriers to selling goods here as a means of promoting their economic growth and helping diversify their exports. These shipments enjoyed what is called the General Preferential Tariff, which was roughly 3 percentage points lower – $3 per $100 of value – than that applied to imports from major industrialized countries.
The government expects many companies will respond to the tariff change by sourcing their product from other countries that still enjoy a discounted duty rate in Canada.
The change will reap a gold mine for Ottawa: It's estimated in the budget at nearly $1-billion over three years alone in additional tariff revenue.
Ottawa, in statements explaining the measure, said "the global economic landscape has changed considerably."
The Retail Council of Canada, which applauded the tariff eliminations for sports equipment and baby clothes, said it has raised caution flags with the government over hiking import tariffs on foreign food. "Changes in tariff rates of up to 4 per cent for items such as canned tuna will negatively affect the cost of those products and may pose additional hardship for consumers on a budget who use these products as an economical source of protein to provide for their families," the council said in a recent letter to the Finance Department.
Talking up the sports gear and baby clothing tariff cuts, Finance Minister Jim Flaherty served notice that he expects retailers to pass on the savings, calling the move a "test case." He wants to see whether Ottawa can reduce a price gap between U.S. and Canadian retail prices.
The Conservative government's new enthusiasm for free trade in sports gear has its limits, though.
The Tories are keeping in place a tariff on assembled bicycles to protect domestic bike assemblers and manufacturers. It's an industry with a relatively large presence in Quebec.
Most other imported sports equipment – and baby clothes – will be tariff-free as of April 1.
This includes tariffs on hockey equipment – which are 18 per cent for skates – as well as golf clubs, ski poles, clay pigeons, archery gear and snowboard boots. The rates of duty applied currently range from 2.5 per cent to 20 per cent.
The Conservatives are trying to demonstrate they're sensitive to consumer anger over stubbornly higher retail prices in Canada than in the United States despite the strengthened loonie.
A Senate committee report last month examined the price gap between Canada and the U.S. retail prices and urged Ottawa to cut tariffs that contributed to this differential.
Asked why he limited the reductions to sports equipment and baby clothes, Mr. Flaherty called this a first step.
He described the tariff cuts as a pilot project to see whether retailers pass on the reductions to consumers.