Let’s Import our Way to Manufacturing Recovery.
Today Stephen Harper announced that the Conservatives will support the hard hit manufacturing sectorÂ by “abolishing tariffs on a wide range of imported machinery and equipment.”
There’s no question that higher rates of real investment in new plant and equipment are essential to a manufacturing recovery.Â That’s why manufacturing unions,Â the CLC and all parties on the Industry CommiteeÂ of the House of Commons supported the two year fast write off for new investment in machinery and equipment introduced in the 2007 Conservative Budget.
Curiously, the Conservatives decided to phase outÂ the two year write off in the 2008Â Budget, starting in 2010.Â Jayson Myers, President of the industry group, Canadian Manufacturers and Exporters, responded as follows:
“Disadvantage Canada, that’s what this budget represents for Canada’s manufacturing and exporting sectors …”We were very specific in what the nation’s most innovative industry needed and we received recycled ideas and pocket change at a critical time when we needed tangible solutions. It’s disappointing.”
The new Conservative policy of tariff reduction is vague and fairly trivial. We already have zero tariffs with the US, the source of most of our M and E imports.
What is somewhat strange is that tariff reduction will surely undermine the competitive position of some Canadian M and E producers in the Canadian market, the opposite of a needed Made in Canada approach to recovery.
In 2007, Canada ran a large deficit of about $60 Billion in trade of machinery and equipment – with exports of $106.8 Billion and imports of $166.6 Billion. Do we want to increase this gap? Or should we be thinking about how to stimulate our few areas of stength in this area, such as manufacturing of equipment used inÂ our resource industries.
For my money, the better policy would have been to stick with a targeted incentive to machinery and equipment investment, and retain the small edge which Canadian equipment manufacturers retain from current tariffs.