Collateral damage may accompany removal of GPT tariff status

More harm to more countries?

In a recent piece Finance Minister Jim Flaherty hinted that the recent removal of GPT tariff status from 72 countries may be a negotiating tactic by the Federal government to get trade deals signed:

“The recent changes will provide an important incentive for many countries to open their markets to Canada through reciprocal trade agreements that will allow for more export opportunities–meaning better jobs for Canadians–and further tariff reductions for Canadian consumers.”

I cannot speak to the wisdom of raising tariffs on countries as a general trade negotiating tactic. If it is a tactic, however, it is a particularly poor one in this instance as it mostly affects countries we are not in trade negotiations with, and ignores the majority of countries currently at the bargaining table.

Of the 72 countries losing their GPT status some countries are affected far more than others. There are 20 countries of the 72 that have preferential tariff access through means other than the GPT. Colombia, Costa Rica, Chile, Israel, Jordan, Mexico, Peru have existing free trade deals with Canada, while 13 of the other countries losing GPT status fall under the Commonwealth Caribbean Countries Tariff (CCCT) program. Removing those 20 from our list leaves 52 countries significantly affected by removal of GPT status.

Those 52 countries match up poorly with Canada’s ongoing trade negotiations. None of the 52 countries belong to the 27 member European Union, so the move gives us no extra negotiating power in the ongoing CETA talks. Canada has ongoing talks with 15 countries in the Caribbean Community, but none of those 15 are on our list of 52, since many of them also fall under the CCCT. The Trans-Pacific Partnership may be Canada’s most ambitious trade negotiation; of the 11 other countries in that negotiating group, three are in our list of 52: Brunei, Singapore and Malaysia.

Canada is also attempting to sign eight bilateral trade agreements, though two of the eight are with countries also in TPP: Singapore and Japan. Of the remaining six countries, four are on our list of 52: Dominican Republic, India, South Korea and Turkey while two are not: Morocco and Ukraine. This gives us a total of seven countries where the GPT changes affect a country where there are ongoing trade negotiations.

To recap: There are 52 countries which are significantly affected by losing GPT status, and Canada is currently negotiating trade deals with less than 14% of them (7 of 52). Those seven countries represent less than 12% of the 59 countries that sit across from Canada in ongoing trade negotiations. The GPT changes affect imports from major trading partners such as Argentina, Brazil, China, Indonesia and Russia, where Canada has no ongoing trade negotiations. If these tariff changes are truly a negotiating tactic then it is a tactic with a great deal of collateral damage.