The Opposite of a Made-in-Canada Strategy

As Andrew suggests, the largest of Harper’s promises for manufacturing could aggravate the manufacturing crisis by widening Canada’s largest trade deficit.

Eliminating the few remaining tariffs on machinery and equipment imported from outside of North America would encourage purchases of foreign-made machinery and equipment instead of Canadian-made machinery and equipment.

From January through July 2008, Canada’s trade in machinery and equipment consisted of:
– $37 billion of imports from, and $31 billion of exports to, the US and Mexico; and
– $32 billion of imports from, and $11 billion of exports to, non-NAFTA countries.

Therefore, the vast majority of Canada’s $27 billion trade deficit in machinery and equipment was with non-NAFTA countries. Unilaterally dropping tariffs from these countries would likely increase this deficit, which already exceeds our trade deficits of $9 billion in automotive products and $24 billion in consumer goods.

Canada will begin trade negotiations with the European Union on October 17. Harper promises more “bilateral and regional free trade and economic agreements.” Announcing the unilateral removal of some Canadian tariffs leaves Canada with fewer bargaining chips for such international negotiations.

Finally, it is unclear how much Harper’s proposal will cost in lost tariff revenue. Some reports indicate “$345 million over four years”. Others indicate “$345 million annually”.