Government to End Preferential Tariffs for China and 71 Other coutnries
The government has proposed shrinking a list of countries eligible for tax breaks on imports by more than a third, a plan that could see companies hit with millions more dollars in taxes—costs that could be passed on to Canadians.
The government is proposing to drop 72 countries and territories, including significant trading partners like China, Brazil, and South Korea, from a list of 175 now eligible for lower duty rates through a program called the General Preferential Tariff. Other countries slated for removal include Thailand, Malaysia, and Singapore.
For example, if the planned changes take place, it could mean a company that used to pay 8.5 per cent in duty at the border on every bicycle it imported from China might then have to pay 13 per cent instead. That could amount to hundreds of thousands of dollars more per year in duty.
Some manufacturers and exporters have expressed concern about how the government is going to handle bringing about such changes without damaging relations with the emerging markets it and Canadian businesses have worked so hard to cultivate.
All of the emerging BRICS countries—Brazil, Russia, India, China, and South Africa—are slated to be cut from the list. But the government says the 39-year-old program is meant to help developing countries boost economic growth through expanding their export earnings and industrialization. It’s been almost 20 years since the last big review of the General Preferential Tariff program, and the global economy has changed.
“We want to ensure that this type of development assistance is focused on those countries most in need of tariff preferences for trade and economic growth,” Finance Minister Jim Flaherty was quoted as saying in a Dec. 21 news release.
Who will take a hit
Of the 72 beneficiaries slated to be scrapped from the list, China was the most shocking, said Joy Nott, president of IE Canada, a national advocacy group made up of importers and exporters including manufacturers, wholesalers, distributors, and retailers.
“People’s eyebrows shot up when they read it,” said Ms. Nott.
Not surprisingly, a lot of her members import goods from China, she said. Other countries of concern include Brazil, Colombia, Costa Rica, Indonesia, South Korea, Thailand, and Mexico.
The top countries to benefit from the General Preferential Tariff in 2011 were China, Thailand, India, Malaysia, Brazil, and Vietnam, according to Finance Canada.
While IE Canada has been receiving feedback about the proposed changes from members across all sectors and from medium-sized companies to large multinationals, retailers and the food import industry are signalling a particularly significant blow to their bottom lines, said Amanda Neadow, IE Canada’s committees director.
– Embassy