Making it Simple: Boosting Canadian Competitiveness through Selective Tariff Elimination

Produced by the Mowat Centre at the School of Public Policy and Governance, University of Toronto.This report examines the incredibly complicated world of Canada’s Customs Tariff and the burden it places on Canadian businesses and consumers. We advocate simplification of the tariff system by unilaterally eliminating many import tariffs. Such tariff elimination has the additional benefit of signaling to our trading partners Canada’s interest in free trade. However, this report does not advocate the immediate abolition of all tariffs, as doing so would interfere with Canada’s supply management system for dairy and poultry products, cost the treasury several billions of dollars in revenue, and limit our bargaining chips in trade negotiations. Rather, this paper identifies tariffs that generate little revenue for the government and have no obvious business value to Canadian manufacturers or strategic value in trade negotiations and proposes a process for their elimination: setting their rates to zero. Using data from the World Bank, we determine that the federal government could eliminate nearly 90 per cent of remaining tariffs, removing a sizable regulatory burden on Canadian businesses while saving them $600 million in taxes each year. Alternatively, a more modest cut of $100 million would eliminate nearly 50 per cent of all tariffs, reduce input costs for manufacturers, while allowing border resources to be shifted to areas of greater government importance such as food safety