Flaherty gives and takes away on tariffs
OTTAWA - A little noticed tariff change on imports in the budget is likely to fatten Ottawa's coffers for years to come, but wind up costing Canadian consumers.
The federal government made much of a shiny bauble in the budget that eliminated tariffs on sporting and athletic equipment such as hockey pants and gloves as well as baby clothes.
Ending the tariffs was described by Jim Flaherty as a test to see if they really would make a difference in closing the price gap between Canada and the United States, something that was recommended by a Senate committee in February.
But, the budget also served notice that as of Jan. 1, 2015, the government intends to "graduate" 72 countries — including China, India, Brazil, Russia and Indonesia — out of a discount tariff category designed to help poorer countries. Starting in 2015, imports from those countries will be subject an about three per cent higher border duty.
According to the government's own calculations, the elimination of duties on sports and baby clothes will cost it $76 million a year, but it will gain $333 million annually by its other measure.
Bank of Montreal chief economist Doug Porter, who regularly tracks the U.S.-Canada price gap, says the changes may actually widen the differences between the two countries rather than narrow them.
While the changes don't effect industrialized nations such the United States, China is now by a wide margin Canada's second biggest source of imports, responsible for 11 per cent of all goods entering the country, and that share is rising.