Making it Simple

Introduction
Like almost all countries, Canada places taxes
on some goods entering the country, known
as import tariffs, with the rate of tax varying
depending on the type of product and its country
of origin. In theory, each tariff should satisfy at
least one of three commonly cited purposes: 1
Furthermore, our businesses will become more
productive through reduced regulatory barriers
and our manufacturers in the clothing and food
sectors (just to name two) will become more
competitive through lowered input costs.
1) As a sanction to remedy trade distortions or
disputes 2
2) To raise revenue for the government
3) To assist domestic industries
The first of these is only used in exceptional
circumstances. For example, in 2014 Canada
threatened to place tariffs on American wine,
ketchup and orange juice during a dispute over
country-of-origin labeling. 3
Non-exceptional tariffs, then, should either
generate significant levels of government revenue
or serve to assist domestic industries. There is a
credible argument that tariffs should be rejected
even for these purposes, but these two purposes
at least offer a coherent rationale for maintaining
a tariff. But, as we will see, many tariffs do not
fulfill these purposes while imposing significant
administrative burden on businesses.
This paper advocates reducing tariff burdens on
Canadian businesses and consumers by setting
tariff rates to zero on some goods. We examine
past trade deals and, using the data in the World
Bank’s World Integrated Trade Solution, identify
tariffs with little obvious strategic value and find
that Canada could, using a process similar to
past tariff reductions, eliminate 4 nearly half of its
remaining tariffs for a cost to the treasury of $100
million per year, a tax cut which would go into the
pockets of Canadian consumers and businesses.
The Mowat Centre | 1