The Opposite of a Made-in-Canada Strategy
As Andrew suggests, the largest of Harperâ€™s promises for manufacturing could aggravate the manufacturing crisis by widening Canadaâ€™s largest trade deficit.
Eliminating the few remaining tariffs on machinery and equipment imported from outside of North America would encourage purchases of foreign-made machinery and equipment instead of Canadian-made machinery and equipment.
From January through July 2008, Canadaâ€™s trade in machinery and equipment consisted of:
– $37 billion of imports from, and $31 billion of exports to, the US and Mexico; and
– $32 billion of imports from, and $11 billion of exports to, non-NAFTA countries.
Therefore, the vast majority of Canadaâ€™s $27 billion trade deficit in machinery and equipment was with non-NAFTA countries. Unilaterally dropping tariffs from these countries would likely increase this deficit, which already exceeds our trade deficits of $9 billion in automotive products and $24 billion in consumer goods.
Canada will begin trade negotiations with the European Union on October 17. Harper promises more â€œbilateral and regional free trade and economic agreements.â€ Announcing the unilateral removal of some Canadian tariffs leaves Canada with fewer bargaining chips for such international negotiations.
Finally, it is unclear how much Harperâ€™s proposal will cost in lost tariff revenue. Some reports indicate â€œ$345 million over four yearsâ€. Others indicate â€œ$345 million annuallyâ€.
I attended a briefing yesterday re the Canada – EU negotiations. One point that emerged is that (MFN) tariffs on both sides are low but non negligible on some machinery and equipment items, so, at a minimum, it hardly makes sense to lower ours before they reciprocate. Big potential losers on our side are Canadian (read Quebec) dairy producers. Quebec Conservatives should be called on this one – how will they defend throwing away a bargaining chip that could be used to defend their dairy farmers?
thanks Erin and Andrew.
any other sectoral insights? eg. ‘environment’ aka privatized water?