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Canada To Review Developing Country Tariff Regime

by Mike Godfrey,, Washington

27 December 2012

The Canadian Finance Ministry has launched consultations on the future of its tariff regime for developing countries.

The review was first announced as part of Finance Minister Jim Flaherty's 2012 Budget. The last comprehensive review took place almost 20 years ago, and Canada still operates under the system it put in place in 1974. Since then, Canada has granted unilateral preferential tariff concessions to imports from developing countries through the General Preferential Tariff (GPT). The aim of the system was to promote the industrialization of such countries, increase their export earnings and promote their economic growth.

Under the GPT, Canada offers duty-free or preferential market access to imports of most products from 175 designated beneficiaries. At present, tariffs are lower than the standard most-favored-nation (MFN) rates on more than 80% of tariff items. Imports under the GPT treatment totaled CAD15.2bn (USD15.3bn) last year.

However, the GPT is currently legislated for on a 10-year cycle, and is set to expire on June 30, 2014. The Finance Department says that Canada must now respond to the major shifts in the global economic landscape that have taken place since the GPT was introduced in 1974.

As part of a reform package, the government is proposing to modify the list of beneficiary countries, in order to reflect shifts in the income levels and trade competitiveness of certain countries. GPT treatment will be withdrawn from countries that have been classified as "high income" or "upper-middle income" countries by the World Bank for two consecutive years, or have had a share of world exports that is equal to or greater than 1% for two consecutive years.

These changes may impact on product coverage, along with the rules of origin system. The government is also considering whether country coverage should be amended on an annual basis.

Flaherty said of the consultation that: “Our aim is to ensure that the tariff regime focuses on the countries most in need of Canada’s assistance to help promote their economic growth and increase their exports. We want to ensure that this type of development assistance is focused on those countries most in need of tariff preferences for trade and economic growth.”

Submissions are due by February 15, 2013. Any reforms the government decides to adopt will be publicly announced in advance of the proposed implementation date of July 1, 2014.

TAGS: Finance | tax | tariffs | ministry of finance | tax authority | agreements | Canada | import duty | tax reform | trade

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