Finance Committee on May 9th, 2013

[Dean Beyea]

I think that's fair.

Really, what we're talking about is about $10 billion of imports out of $460 billion of imports into Canada, so it's about 2% of imports. I think retailers have asked for the opportunity to shift to a duty-free source of supply, and two years is seen as a significant amount of time to do that.

[Brian Jean, Conservative, Fort McMurray—Athabasca, AB]

Based on what you've seen in the economy, would you say that China doesn't need any more help or any more preferential treatment against our manufacturers? Would that be fair to say?

[Dean Beyea]

I think that's fair. For example, the United States doesn't offer a beneficial—

[Brian Jean, Conservative, Fort McMurray—Athabasca, AB]

When did the United States take China off the GPT system?

[Dean Beyea]

They've never applied their general system of preferences to China.

[Brian Jean, Conservative, Fort McMurray—Athabasca, AB]

All right. That makes sense. Thank you very much.

[The Chair, Conservative, James Rajotte]

Thank you, Mr. Jean.

We'll go to Monsieur Caron.

[Guy Caron, NDP, Rimouski-Neigette—Témiscouata—Les Basques, QC]

Much has been said about China and Brazil. The BRIC countries, as well as Korea, have been discussed at length. Is there an economic reason for removing other countries from the list? We are talking about 72 countries, including Gabon, Equatorial Guinea, Botswana and Venezuela. Those are not countries like China. Why have 72 countries been removed? We are not just talking about China, Brazil, other BRIC countries and Korea. We are talking about 72 countries. Many of them are not as developed as China.

[Patrick Halley]

We conducted consultations in late December. We used two criteria to determine the eligibility for the general preferential tariff. Countries had to either have an economy below high income or upper-middle income—according to the World Bank standards—or have less than a 1% share of overall exports.

Those criteria are generally applied by other countries. For instance, the European Union overhauled its generalized system of tariff preferences and adopted essentially the same criteria. In the case of income, the same criterion imposed by the World Bank is used. The same lists are used.

[The Chair, Conservative, James Rajotte]

Ms. Glover, please.

[Shelly Glover, Conservative, Saint Boniface, MB]

Thank you, Mr. Chair.

I want to give you the opportunity, Mr. Beyea. No tariffs on specific items are being increased, correct?

[Dean Beyea]

Correct.

[Shelly Glover, Conservative, Saint Boniface, MB]

This wild allegation being made, not only here but in the media, is in fact just that: a wild insinuation, an assumption, a prediction that has absolutely no basis in BIA or budget 2013. There are no increases to tariffs in budget 2013.

[Dean Beyea]

That's correct, there are no increases at all. In fact, there is the elimination of 39 tariffs on sporting goods and baby clothes, but no increases.

[Shelly Glover, Conservative, Saint Boniface, MB]

Very good. Thank you.

I want to make sure Canadians understand that tariff rates apply to all countries in an equal manner unless they are on the general preferential tariff list, because it was originally designed to help developing and poor countries, correct? So these are additional breaks. We're just saying that for those economies that have grown and are actually doing better than Canada, our manufacturers ought to be able to be on a level playing field. Our manufacturers compete with many countries that don't get the special tax break, because they are set at a specific tariff rate, and these ones that are getting special treatment, additional special breaks, are being reduced to the same tariff rate as other countries Canada competes with. Is that correct?

[Dean Beyea]

That is correct. The 72 countries that will no longer qualify for the general preferential tariff will now pay the most favoured nation tariff for those goods post-January 1, 2015.

[Shelly Glover, Conservative, Saint Boniface, MB]

Canadian manufacturers have said very clearly that it's about time. Why? Because they compete with all of these companies. This provides Canadian manufacturers with the opportunity to actually produce a competitive product. They don't have to then compete with China, Brazil, and India, which are getting extra value with special breaks. This levels the playing field for them in a way we haven't seen since the 1970s, which is why they are happy with this. Correct?

[Dean Beyea]

Yes, we've had very positive feedback on the program.

[Shelly Glover, Conservative, Saint Boniface, MB]

I appreciate that.

Now we haven't monitored this since the 1970s, when it was introduced for poor countries, although other western economies, other western countries, have in fact monitored this and have removed or graduated countries as they went along. Can you confirm and speak to this for us?

[Dean Beyea]

Sure.

I think what's happened in Canada—and we started out with this discussion about the dates—is that these have been in place for 10-year periods and have then continued on, generally with little review. For example, the last time was in 2004.

The Doha Round was a relatively new phase, and there was a decision made not to do a review because the most favoured nation tariffs would be implicated and have subsequent implications.

So there's no automatic threshold. The United States, for example, reviews the general system of preferences annually, including beneficiary countries and products on the list.

[Shelly Glover, Conservative, Saint Boniface, MB]

Have they removed countries from it, graduated countries from it over time?

[Dean Beyea]

On an ongoing basis.

[Patrick Halley]

Maybe I would just add this, to follow up on the example of the European Union, since they made the pretty recent significant change to their own system, along the same items as in budget 2013. They went from 176 beneficiary countries to 80.

[Shelly Glover, Conservative, Saint Boniface, MB]

Very good. Excellent.

Just for the benefit of all members here, can you tell us what the size of the economy is for...and I'll pick four: China, South Korea, India, and Brazil, which were in fact getting special breaks on top of the tariff rates and which are now being graduated? If you can compare them to Canada as well, that would be very helpful.

Let's start with China, if that's....

[Dean Beyea]

Sure, and maybe we'll just give Patrick a minute, if we've got this here. I know we've looked at this.