What does Canada抯 new budget mean for international supply chains and trade laws?Wednesday, April 06, 2016 > 10:06:09
(Lexology by Fasken Martineau DuMoulin LLP)
Expenditures related to international trade are reflected in the Government of Canada's Budget 2016, though not in an extensive manner. This bulletin highlights key budget expenditures or trade infrastructure projects that will affect international trade supply chains and the cost of trading across international borders.
International Trade Agreements: Ratification, Consultation and Emerging Markets
Budget 2016 confirms that the Government is committed to complete the final steps to the implementation of the Canada-European Union Comprehensive Economic and Trade Agreement ("CETA") including ratification to bring it into Canadian law, a process the government says will be "swift". Although the previous government had announced the intention to provide several billion dollars in compensation over a 15 year period to the supply managed agriculture industry for increased imports of certain products from the European Union due to CETA implementation (e.g., cheese), Budget 2016 is silent on the prior funding announcement or funding for any new initiatives or programs to this sector in the light of the pending ratification. The government also confirms that it will continue to consult Canadians on the merits of the ratification of the Trans-Pacific Partnership Agreement ("TPP"). Further, Budget 2016 explicitly indicates that the government is committed to deepening its trade relationships with large, emerging markets, including China and India.
Tariff Measures: Reducing the Cost of Imports
Budget 2016 states that the government will unilaterally eliminate tariffs on "about" a dozen manufacturing inputs. The government estimates this will produce the equivalent of $9 million in tariff savings over the next five years. Budget 2016 does not specify the particular tariff items, but notes that it will be "in the consumer goods and transportation sectors". Moreover, the government intends to commence public consultations on eliminating tariffs on food manufacturing ingredients for use in the agri-food processing industry other than supply managed products, i.e. dairy (including cheese), eggs, poultry products. Finally, Budget 2016 will waive the 25 per cent tariff on ferries of all sizes imported after October 1, 2015, which the government estimates will result in $118 million in duty savings over six years. More broadly, Budget 2016 anticipates that import duties will decrease "slightly" by 2020 due to the implementation of the Canada-Korea Free Trade Agreement, the CETA and the potential introduction of the TPP.
Trade Remedies: Changes to Canada's Anti-dumping and Countervailing Duty Regime
Budget 2016 states that the government is currently taking steps to "improve" its ability to respond to dumped and subsidized imports including through specific legislative amendments, which likely would involve changes to the Special Import Measures Act, the principal Canadian legislation regulating Canada's trade remedy system. Key stakeholder pre-budget submissions argue for several technical changes including clarification of what is an affiliated party transaction, the granting of the domestic industry the right to participate in any appeals on whether an imported product is like products being investigated for dumping, and transparency of import data. Consistent with the highly technical nature of any proposed changes, Budget 2016 announces that the government will consult stakeholders so as to offer Canadian businesses "the ability to respond to changing global trade conditions."
Budget 2016 notes that the Canada Border Services Agency's export verification process supports the objective of preventing the proliferation of weapons of mass destruction and the export of goods that have been obtained illegally. With this stated objective, Budget 2016 proposes expenditures of $13.9 million over five years, beginning in 2016 to improve the Canada Border Service Agency's export verification process. Budget 2016 states the expenditure is intended to enhance the Agency's identification processes, and increase its examination rates of high-risk shipments. Budget 2016 does not provide details, which are likely to be made known through stakeholder consultations.
International Trade Infrastructure: Gordie How International Bridge Project
The Windsor-Detroit corridor is one of Canada's most important trade conduits with the United States: In 2013, 2.4 million trucks carrying $100 billion in trade used this corridor. More than 99 percent of trucks in the corridor use the current Ambassador Bridge, which the government says will have difficulty handling forecasted traffic demand. Consistent with this view, Budget 2016 notes that the government has been working with the State of Michigan and the U.S. federal government to construct a new international crossing, called the Gordie Howe International Bridge, between Windsor and Detroit and that on January 20, 2016 three short-listed bidders were announced for the construction of the bridge. Budget 2016 advises that the government will be issuing in the coming months the Request for Proposals to select the private sector partner for the construction and ongoing operation of the new crossing.
Budget 2016 offers an indication of government intention on several international trade policy initiatives that are intended to have an impact on international supply chains. Because of the absence of specific details, government changes to trade laws and how these are to be administered are expected to be provided through consultations, notices and draft regulations. We suggest that it would be prudent for businesses to monitor and take advantage of opportunities to consult and communicate with the government, as appropriate, as these initiatives take legal shape.