The following is excerpted from an 1 April 2013 editorial, authored by Michael Hart, the Simon Reisman chair in trade policy at the Norman Paterson School of International Affairs at Carleton University, published in the Financial Post.
In his 2013 budget, Finance Minister Jim Flaherty announced that Canada would “graduate” some 72 developing countries and eliminate their eligibility from Canada’s general preferential tariff (GPT), a program first introduced in 1974 to give developing countries a slight competitive edge in the Canadian market. In the budget, Flaherty suggested that countries that had reached the World Bank’s threshold as middle-income countries should no longer benefit from this lower tariff treatment. The GPT will remain in place for the remaining poor countries, a largely meaningless gesture because these countries are at best very minor trading partners. Some critics have pointed out that this move amounts to a potential increase of $330-million in duties on products imported from middle-income countries, a tax burden that will fall on Canadian consumers.
Others have suggested that this move creates greater incentive for these countries to come to the negotiating table and conclude a free trade agreement with Canada, the net result of which would be better trading conditions for everyone. Both points are trivially true, but are mismatched to today’s trading realities. Flaherty would have been more on point if he had announced that he was phasing out all tariffs from all sources and their related administrative procedures — from classification and valuation requirements to rules of origin — and inviting other countries to join Canada in focusing their negotiating energies on more important matters.
Canada needs to focus its limited resources where they are likely to make a difference. Changes in both Canadian and global trade and production patterns indicate that, in addition to continued efforts to reduce border and regulatory impediments in North America, engagement with East Asia should be a priority. To that end, Ottawa should avail itself of both existing and emerging opportunities to strengthen transpacific relations, from the TPP initiative to new institutional links and agreements with the most important players in Asia.
Meaningful agreements with these emerging economies should focus on integrated disciplines on state trading, investment, and competition behaviour rather than on the customs issues of the past.
This article is available in its entirety at: http://opinion.financialpost.com/2013/04/01/a-better-trade-strategy/.
