Canada’s Federal government recently unveiled its 2016 Federal Budget. We’ve compiled the following key points as they relate to trade:
Deficit – 29.4 Billion in 2016-17
- The budgetary balance is expected to show deficits of $5.4 billion in 2015–16 and $29.4 billion in 2016–17. Over the remainder of the forecast horizon, deficits are expected to decline gradually from $29.0 billion in 2017–18 to $14.3 billion in 2020–21.
Import Duties & Excise Tax Projections
- Customs import duties are projected to increase by 13.2 per cent in 2015–16, reflecting strong year-to-date overall import growth and the removal of benefits for certain countries under Canada’s General Preferential Tariff regime, effective January 1, 2015. Customs import duties are projected to decrease slightly over the remainder of the projection period, mainly as a result of the expected impacts of the ongoing implementation of the Canada-Korea Free Trade Agreement, as well as the planned introduction of the Canada-European Union Comprehensive Economic and Trade Agreement and the potential introduction of the Trans-Pacific Partnership.
- Other excise taxes and duties are projected to increase by 2.4 per cent in 2015–16, consistent with year-to-date results, and decline slightly thereafter, due to lower projected excise taxes on tobacco and the expiry of the 2006 Canada-United States Softwood Lumber Agreement in October 2015. The expiration of the Softwood Lumber Agreement has no impact on the budgetary balance as export taxes collected under the agreement are a flow-through item with an equal and offsetting impact on expenses.
Tariff Relief
- The Government will eliminate tariffs on about a dozen manufacturing inputs, providing an estimated $9 million in tariff savings over the next five years to Canadian manufacturers in the consumer goods and transportation sectors.
- Budget 2016 also announces the Government’s intention to launch public consultations on eliminating tariffs on food manufacturing ingredients other than supply-managed products. These ingredients are primarily used in the agri-food processing industry, Canada’s largest manufacturing employer and an important contributor to Canada’s economy.
Food Safety
- Budget 2016 proposes to provide $38.5 million over two years, on a cash basis, starting in 2016–17 to further strengthen and modernize Canada’s food safety system. With this funding, the Canadian Food Inspection Agency will invest in systems that will help target inspection activities to the highest-risk domestic and imported foods. The Agency will also enhance inspection activities abroad to assist in responding to food safety risks before they reach domestic consumers.
Motor Vehicle Safety
- Transport Canada works with industry and government partners to make Canada’s roads the safest in the world. This includes setting safety standards for the design, construction, and importation of motor vehicles.
- Budget 2016 proposes to provide $7.3 million over two years to increase inspection capacity and support the development of a regulatory framework for emerging technologies such as automated vehicles.
Trade Agreements
- The Government recently completed the final steps of the Canada-European Union Comprehensive Economic and Trade Agreement. Canada and the European Commission are committed to swift ratification so that our citizens can quickly reap the benefits of this high-quality agreement. The Trans-Pacific Partnership (TPP) would offer opportunities to grow Canadian trade with Asia-Pacific countries, enhance North American production and improve job quality in Canada. The Government continues to consult Canadians in an open and transparent manner on the merits of ratifying the TPP.
- Going forward, the Government is also committed to deepening trade relationships with large emerging markets, including China and India.
Unfair Trade
- Fostering the conditions for manufacturing growth and new investment requires open markets both in Canada and abroad, as well as the ability to address unfairly traded goods entering the Canadian market. As part of Budget 2016, the Government is taking steps to improve its ability to effectively remedy dumped and subsidized imports, including through specific legislative amendments. Further, the Government will consult stakeholders to ensure that Canada’s trade remedy system offers Canadian businesses the ability to respond to changing global trade conditions.
Transfer Pricing
- Budget 2016 proposes new legislation to strengthen transfer pricing documentation by introducing country-by-country reporting for large multinational enterprises;
- The Canada Revenue Agency is applying revised international guidance on transfer pricing by multinational enterprises, which provides an improved interpretation of the arm’s-length principle; and
- Canada is participating in international work to develop a multilateral instrument to streamline the implementation of treaty-related BEPS recommendations, including addressing treaty abuse.
CBSA Export Verifications
- The Canada Border Services Agency’s export verifications support this objective by preventing the proliferation of weapons of mass destruction and the export of goods that have been obtained illegally. Budget 2016 proposes to provide $13.9 million over five years, starting in 2016–17, to improve export verifications by enabling the Agency to enhance identification processes and increase examination rates of high-risk shipments.