Jim Flaherty, Minister of Finance, announced the launch of consultations on Canada’s tariff regime for developing countries as part of the comprehensive review of the regime announced in Economic Action Plan 2012.

“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,” said Minister Flaherty. “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.”

Since 1974, Canada has granted unilateral preferential tariff ­concessions to imports from developing countries through the General Preferential Tariff (GPT) to assist those countries’ economic development. The last comprehensive review of the GPT took place almost 20 years ago. Since then, the global economy has changed considerably and has seen significant shifts in the income levels and trade ­competitiveness of a number of developing countries. The review of the GPT is intended to better reflect the current global economy and to ensure that the GPT aligns with Canada’s international development objectives.

BACKGROUND

In the early 1970s, the United Nations Conference on Trade and Development (UNCTAD) recommended that developed economies grant autonomous and non-reciprocal tariff preferences to developing countries in order to increase their export earnings, promote their industrialization and promote their economic growth. Most developed economies, including the United States, the European Union (EU) and Japan, have preferential tariff regimes for developing countries, although these vary considerably with respect to countries and products covered.

Canada’s preferential tariff treatment for developing countries, the General Preferential Tariff (GPT), was implemented in 1974. Under the GPT, Canada currently offers duty-free or preferential market access to imports of most products from 175 designated beneficiaries. In 2011, imports under the GPT treatment totalled $15.2 billion. As provided for under the Customs Tariff, the GPT is set to expire on June 30, 2014.

The global economic landscape has changed considerably since 1974, including significant shifts in the income levels and trade competitiveness of certain developing countries. To respond to these changes in the global economic landscape and to ensure that this form of development assistance is aligned with Canada’s development policy objectives, Economic Action Plan 2012 announced that the Government was undertaking a comprehensive review of the GPT.

Guided by the objectives of the review outlined in Economic Action Plan 2012, as well as the original policy intent of the GPT to encourage imports from developing countries as a means to promote their economic growth and export earnings, the Government is seeking views on proposed changes to the various elements of the GPT.

PROPOSED CHANGES

Country coverage

In order to reflect the significant shifts in the income levels and trade competitiveness of certain developing countries, it is the Government’s intention to modify the list of beneficiary countries by withdrawing GPT treatment from countries that

• Are classified for two consecutive years as high income or upper-middle income economies according to the latest World Bank income classifications; or

• Have a share of world exports that is equal to or greater than 1 per cent for two consecutive years according to the latest World Trade Organization trade statistics.

Based on the above criteria, it is the Government’s intention to withdraw GPT eligibility from the following countries, effective July 1, 2014:

Algeria, American Samoa, Antigua and Barbuda, Argentina, Azerbaijan, Bahamas, Bahrain, Barbados, Bermuda, Bosnia and Herzegovina, Botswana, Brazil, Brunei, Cayman Islands, Chile, China, Colombia, Costa Rica, Croatia, Cuba, Dominica, Dominican Republic, Ecuador, Equatorial Guinea, French Polynesia, Gabon, Gibraltar, Grenada, Guam, Hong Kong, India, Indonesia, Iran, Israel, Jamaica, Jordan, Kazakhstan, Kuwait, Lebanon, Macao, Macedonia, Malaysia, Maldives, Mariana Islands, Mauritius, Mexico, Namibia, Netherlands Antilles, New Caledonia and Dependencies, Oman, Palau, Panama, Peru, Qatar, Russia, Saint Kitts and Nevis, Saint Lucia, Saint Vincent and the Grenadines, Seychelles, Singapore, South Africa, South Korea, Suriname, Thailand, Trinidad and Tobago, Tunisia, Turkey, Turks and Caicos Islands, United Arab Emirates, Uruguay, Venezuela, U.S. Virgin Islands.

Imports from the countries listed above which are entitled to other preferential tariff treatments, (e.g. under free trade agreements) will continue to be eligible for tariff preferences under those tariff treatments.

Based on the intended changes noted above, the following countries would remain GPT beneficiaries after June 30, 2014:

Afghanistan, Anguilla, Angola, Armenia, Ascension Island, Bangladesh, Belize, Benin, Bhutan, Bolivia, British Indian Ocean Territory, British Virgin Islands, Burkina Faso, Burundi, Cambodia, Cameroon, Cape Verde, Central African Republic, Chad, Christmas Island, Cocos (Keeling) Islands, Comoros, Congo, Cook Islands, Côte d’Ivoire, Democratic Republic of the Congo, Djibouti, Egypt, El Salvador, Eritrea, Ethiopia, Falkland Islands, Fiji, Gambia, Georgia, Ghana, Guatemala, Guinea, Guinea-Bissau, Guyana, Haiti, Honduras, Iraq, Kenya, Kiribati, Kyrgyzstan, Laos, Lesotho, Liberia, Madagascar, Malawi, Mali, Marshall Islands, Mauritania, Micronesia, Moldova, Mongolia, Montserrat, Morocco, Mozambique, Nauru, Nepal, Nicaragua, Niger, Nigeria, Niue, Norfolk Island, North Spanish Africa, Pakistan, Papua New Guinea, Paraguay, Philippines, Pitcairn, Rwanda, Saint Helena and Dependencies, Samoa, Sao Tome and Principe, Senegal, Sierra Leone, Solomon Islands, Somalia, Southern and Antarctic French Territories, Sri Lanka, Sudan, Swaziland, Syria, Tajikistan, Tanzania, Timor-Leste, Togo, Tokelau Islands, Tonga, Tristan Da Cunha, Turkmenistan, Tuvalu, Uganda, Ukraine, Uzbekistan, Vanuatu, Vietnam, Yemen, Zambia, Zimbabwe

Product coverage

Currently, the GPT offers duty-free or preferential tariff rates (i.e. lower than the standard Most-Favoured-Nation — MFN — rates) on more than 80 per cent of tariff items. Notable exclusions from product coverage include most apparel, footwear and certain agricultural products.

In light of proposed changes to country coverage, changes may also be considered to product coverage. The Government is seeking the views of interested parties on this issue.

Rules of origin

Rules of origin set out the level of content originating from a GPT-eligible country that a product must contain in order to benefit from the preferential tariff treatment under the GPT. The current rules of origin stipulate that to qualify for GPT treatment, at least 60 per cent of the value of a product must contain inputs originating in one or more GPT beneficiaries or from Canada. For more details, see www.cbsa-asfc.gc.ca/publications/dm-md/d11/d11-4-4-eng.html.

As part of its review, the Government is seeking views on whether these rules of origin remain appropriate.

Safeguards

The GPT safeguard mechanism provides a process by which tariff preferences under the GPT could be withdrawn if it is determined that imports under the GPT injure, or threaten to injure, domestic industry. Through this process, the Canadian International Trade Tribunal conducts investigations into domestic producers’ written complaints of serious injury, or threat thereof, from imports under GPT rates and ­provides recommendations to the Minister of Finance regarding

the withdrawal of GPT benefits. For more details, see www.citt.gc.ca/safeguar/index_e.asp.

As part of this review, the Government is seeking comments from all interested parties on proposed changes to the various elements of the GPT. Details of the proposed changes are outlined in a notice ­published in the December 22, 2012 edition of the Canada Gazette, Part I. Submissions are due by February 15, 2013 and can be sent to:

Comments should be sent to the following address:
General Preferential Tariff Consultations
Department of Finance
International Trade Policy Division
L’Esplanade Laurier, East Tower, 14th Floor
140 O’Connor Street
Ottawa, Ontario
K1A 0G5
Fax: 613-992-6761
Email: Tariff-Tarif@fin.gc.ca