Finance Minister Jim FlahertyGraham Hughes
The Harper government is set to eliminate all import tariffs on machinery and equipment, reinforcing its commitment to freer trade even as other members of the Group of 20 nations slip on their pledge to maintain open markets.
Finance Minister Jim Flaherty today will announce consultations on his plan to expand a previous tariff reduction initiative to all the gear that automotive parts makers, sawmills, printers and other companies might seek to become more productive as the economy recovers.
While Mr. Flaherty remains open to keeping some levies if the seven-week consultation period generates a compelling reason to do so, his starting premise is to create a "Canadian advantage" by clearing the way for companies to retool with cutting-edge equipment from around the world without worry of paying customs duties.
In his January budget, Mr. Flaherty did away with $440-million in tariffs on $2-billion worth of machinery and equipment.
Eliminating the remaining border taxes could save companies as much as $300-million, according to government estimates.
"The tariff relief initiative now being considered follows from our economic action plan in January and would reduce production costs even further, providing both a short-term boost and a long-term competitive edge for Canadian industry," Mr. Flaherty says in a statement prepared to accompany the announcement. "It also demonstrates once again Canada's solid commitment to open global markets."
The announcement comes as Prime Minster Stephen Harper prepares to meet his G20 counterparts in Pittsburgh next week.
It is an important gathering at which leaders will attempt to maintain the extraordinary unity on stimulus spending and other policies that have helped ease the financial crisis.
Mr. Flaherty's tariff plan wasn't timed to coincide with the Pittsburgh summit, and is seen by the government first and foremost as an important policy initiative that could boost Canada's productivity.
Still, a pledge to eliminate tariffs stands in stark contrast to the U.S. government, which last week said it would apply punitive tariffs of 35 per cent on $1.8-billion (U.S.) of lower-end Chinese tires.
The G20, a collection of economic powerhouses such as Germany and Brazil, have pledged twice since November to refrain from policies that would impede world trade to avoid exacerbating the worst global recession since the Second World War.
A report released this week by the World Trade Organization and two other government bodies said there has been "policy slippage" on the free-trade commitment since G20 leaders last met in April.
"It's a meaningful step," Daniel Schwanen, deputy executive director at the Waterloo, Ont.-based Centre for International Governance Innovation, said of Mr. Flaherty's plan to eliminate tariffs. "It's not going to turn the tide of protectionist pressure in and of itself, but it's smart, really smart."
Mr. Flaherty's initial stab at eliminating tariffs proved extremely popular with industrial companies, which import most of their machine tools and other equipment.
"Anything that helps to lower costs for manufacturers is very good," said Jonathon Fischer, chief executive officer of Mold-Masters Ltd., a Georgetown, Ont., company that builds equipment used by plastic parts makers.
To be sure, current tariffs aren't particularly high because of the North American free-trade agreement and other trade pacts. Still, economists generally applauded Mr. Flaherty's January initiative, saying border taxes keep companies from upgrading to the best gear available.
There are still "bits and bobs we end up paying duty on, that we'd prefer not to pay," said Mike Barry, chief financial officer at Vecima Networks Inc. in Victoria.
Killing off the remaining tariffs "is the right kind of move to make," he added, because it will set an example for other countries that maintain tariff barriers.