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Scrapping trade and investment barriers would boost economy by $61 billion a year, study finds

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Date: August 4, 2016

Related Issues Trade and Investment

Scrapping trade and investment barriers would boost economy by $61 billion a year, study finds

Dismantling Canada’s remaining barriers to trade and foreign investment would boost economic growth, create new jobs and position Canada as a global production hub, a new study concludes.

The study – “Freeing trade: why a unilateral approach makes sense for Canada” – argues that Canada’s existing tariffs and other trade restrictions hurt consumers and businesses, while generating relatively little revenue for Ottawa.

The authors call on the government to adopt a unilateral free trade policy, dropping all existing barriers to incoming goods, services and investment. Doing so would reduce import prices while making Canada a more attractive place to invest, since firms would no longer pay tariffs on imported inputs.

Dan Ciuriak, former deputy chief economist at Global Affairs Canada, co-wrote the study with research associates Ali Dadkhah and Jingliang Xiao.

Canada currently imports more than $500 billion worth of merchandise a year, most of which already enters the country tariff-free under the terms of existing trade agreements. As a result, the federal government takes in less than $5 billion a year in customs duties – an amount that will decline further once the proposed Canada-European Union trade agreement goes into effect.

Canadians also purchase more than $100 billion worth of imported services.  Services are not subject to duties but can face other barriers such as investment restrictions and domestic regulations.

The study concludes that eliminating all of Canada’s remaining import barriers and adopting an open approach to foreign investment would generate $61 billion a year in additional Canadian economic activity by 2035. That amount is four times greater than the combined projected impact of the Canada-EU deal and the Trans-Pacific Partnership, a proposed agreement involving Canada and 11 other Pacific Rim nations.

“Canada’s current tactic of negotiating trade agreements one country or region at a time is rapidly reaching its natural limits,” Mr. Ciuriak said. “Each deal has its own unique rules for accessing the benefits. This makes our trade policy increasingly complex – both for Canadian businesses and for the countries that want to do business here.”

The Business Council of Canada commissioned the study as part of a series exploring the future of Canadian trade policy. The views expressed in the paper are those of the authors and do not necessarily represent those of the Council or its members.

About the Business Council of Canada

Founded in 1976, the Business Council of Canada is the senior voice of Canada’s business community, representing 150 chief executives and leading entrepreneurs in all sectors and regions of the country. Member companies employ 1.4 million Canadians, account for more than half the value of the Toronto Stock Exchange, contribute the largest share of federal corporate taxes, and are responsible for most of Canada’s exports, corporate philanthropy, and private-sector investments in research and development. Through supply chain partnerships, service contracts and mentoring programs, Business Council members support many hundreds of thousands of small businesses and entrepreneurs in communities of all sizes across Canada.

 

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