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Trade News

Each day TFO Canada publishes a sample of trade news on the Canadian import market along with any new, updated or changed regulations and legislations regarding international trade; countries in which TFO Canada offers services and on the export sectors which it promotes.


[Canada] Import Tariff Elimination Fails to Benefit Consumers

Thursday, January 23, 2014 > 10:53:01

(CBC News)
When the federal government tabled its 2013 budget last spring, it eliminated import tariffs for certain goods and dangled the prospect of cheaper hockey gear and baby clothes in front of Canadian consumers.
CBC News took a cursory look at prices and found that despite those tariff eliminations, costs for goods such as ice skates have generally stayed the same or, in some cases, gone up.
For example, a Canadian Tire flyer from January 2013 showed the regular price for Bauer Supreme Pro hockey skates started at $69.99. A quick check on the Canadian Tire website for the same skates today shows the price hasn't changed. Likewise for other brands. Reebok XT hockey skates advertised in a Canadian Tire flyer from January 2013 were priced regularly at $119.99. This year, they are $129.99.
Most sporting equipment is imported and until last year, some things – including ice skates – were subject to an 18% tariff. Getting rid of those tariffs was the government's response to prices that are higher here than in the United States. It meant a potential $79 million a year in savings for Canadian businesses.
The caveat: consumers would only see savings if retailers passed them on.
According to Mathew Wilson, a vice-president with the Canadian Manufacturers and Exporters Association, the tariff is only applied when the item enters the country – it doesn't factor in the costs associated to distribute and sell.
"I think the reality is if you look at the retail pricing structure, only about 10 to 20 per cent of the actual cost of a good on the shelf of a store is actually the cost of manufacturing the product," said Wilson.
Eliminating the tariffs was what Finance Minister Jim Flaherty deemed an experiment, worth $76 million a year in tax revenue. "We're going to see what happens to prices in Canada. We'll see if we actually see a reduction in prices, we see the tariff savings flow through to Canadian consumers," Flaherty said when he announced the budget last spring.
But the NDP critic for small business, tourism and consumer protection says the lack of change in prices shows that the government "really had no plan," and said "more of the profits [are] going to corporations."
"We need to ensure that it's the consumer that's actually getting the break, because it's Canadians who are having a hard time right now making ends meet," said MP Glenn Thibeault.
In August 2013, the government commissioned market research company Nielsen Co. to study whether the tax cuts were being passed along to consumers. Nielsen is to release the report in August.
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