A Look at Canada's Import Tariffs
It’s one thing to oppose the various iterations of recently threatened U.S. tariffs: many of those carry the potential to inflict serious harm on Canada and Canadians and we’re right to be nervous. However, whether or not Canada’s many external-facing policies use the term tariff in their titles, we have more than a few protectionist trade barriers of our own. I thought it would be useful to list some of Canada’s more obvious protectionist policies.
Unfortunately, one thing these examples lack is context. It’s no secret that international trade is complicated. Some of the trade barriers I’m going to describe are policy responses to legitimate safety issues. And, even among those restrictions that were designed to protect local industries, I couldn’t usefully estimate whether there are enough of them to define our total trade ecosystem.
Nevertheless, here’s what I did find.
The Customs Tariff Act governs Canada’s import tariffs. All goods entering Canada from countries on the Most-Favored-Nation list that aren’t eligible for lower rates through trade agreements are subject to tariff charges as high as 17 percent. Here are some practical cases of imports from the U.S. that aren’t covered by the CUSMA trade agreement:
U.S. t-shirts using imported fabric could face an 18 percent tariff, adding $18,000 to a $100,000 shipment.
A $30,000 U.S.-assembled car with Asian parts incurs $1,830 in duties.
$50,000 of U.S. strawberries could face $4,250 in seasonal duties if applied.
$200,000 of steel wire from the U.S. could face $108,000 in extra anti-dumping duties.
Canada’s supply management system for dairy, poultry, and eggs is a notorious example of a policy that looks, walks, and quacks just like a duck an import tariff. Supply management is governed by a combination of federal and provincial laws, including the Export and Import Permits Act and the Farm Products Agencies Act. Regulations can hit over-quota imported cheese with rates as high as 245.5 percent and chicken can be taxed at 238 percent. And that’s assuming you somehow manage to score an import permit from Global Affairs Canada.
The Canadian Food Inspection Agency enforces strict sanitary and phytosanitary (SPS) measures that often require layers of inspections or certification requirements that can significantly raise compliance costs. The differences between some of those requirements and an economic tariff are not always obvious.
The Canada Border Services Agency collects an excise tax on imported liquor. For example, a U.S. exporter looking to ship 100 litres of 40 percent ABV whiskey to Canada will face a duty of $467.84 (100 × 0.4 × $11.696). That duty must be paid by the importer.
In addition, various provincial liquor control boards apply fees and markup costs on imported alcohol, which effectively create price barriers for foreign products (when they’re even allowed on store shelves).
Book Importation Regulations limit parallel imports of foreign editions in order to protect Canadian publishers. I assume this is why so many major international publishing companies maintain Canadian offices and, on paper at least (so to speak), publish special Canadian editions.
The various Canadian Content (CanCon) rules governing broadcast media will also undermine the principle of free trade, even if those rules won’t necessarily increase import costs.
Here are some examples of regulatory compliance rules that aren’t always just about safety:
Electrical product safety certification rules sometimes requires foreign electronics manufacturers to repeat testing despite already having UL certification, adding 3-6 months to market entry.
US medical device companies can face duplication of regulatory submissions and maintenance of separate quality systems due to Health Canada requirements.
Chemical manufacturers must submit detailed testing data specific to Canadian requirements in order to register their products.
Small US food producers must implement separate packaging lines for Canadian-bound products to satisfy nutrition labeling requirements.
This isn’t to say there’s necessarily anything morally wrong with any of those rules. And, as I noted, I’m not sure whether Canada’s overall trade profile is more restrictive than our international peers. But, when faced with foreign tariffs, it can’t be said that Canada’s hands are perfectly clean.
It should be self-evident that nobody’s hands are clean with respect to tariffs and non-tariff barriers. That is hardly a revelation. This post would have been much more honest and useful if it managed to compare the Canadian situation with the United States and our international peers. Simply highlighting some elements of the Canadian situation with the final disclaimer that you don’t know how we compare is a cop out. It certainly leaves the impression that we have somehow been telling the world we are free traders when we are not.
Don’t know if these stats are correct but here is a link to a Statista chart suggesting our average tariff rate in 0-1.9% range. We have 10 negotiated free traders agreements in place with an 11th with the EU provisionally in effect. ChatGPT suggests our non-tariff trade barrier level is moderate and transparent compared to the international norm. This is possibly because of our many free traders agreements.
Finally, I have no opinion as to whether supply management for dairy is of significant value of Canada to keep it. But the United States and the EU have their own similar systems and significant agricultural subsidies, so I find our constant focus on this part of the economy, largely because of American complaints, a specious debate. Let’s look at the system for whatever benefits or disadvantages it produces for Canada by all means but don’t immediately seek to get rid of it because of US rhetoric and threat.
The more information like this we have the better. Not self-evident to many. I suspect many barriers or tariffs have built up over time with no one checking from time time on their impact and whether they are still justified, and no one putting together an overall picture of tariff and non-tariff barriers, let alone one that compares Canada to other countries. Thanks for kick starting this.