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Canadian Tariff Policy*

Published online by Cambridge University Press:  07 November 2014

Clarence L. Barber
Clarence L. Barber*
Affiliation:
University of Manitoba
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Extract

During the recent session of Parliament a Conservative member flourished a small garment before the House to dramatize the fact that a Canadian baby is surrounded by the influence of our tariff from the time he is first wrapped in a tariff-protected blanket until at length he is driven out to some cemetery in a tariff-protected hearse and interred in a tariff-protected coffin. And yet I suspect that most economists have been less surprised at the continued importance of our tariff than at the consistency with which Canada has moved in the direction of freer trade during the past decade or more. One admittedly defective measure of tariff levels, the ratio of the total amount of duty collected to the total value of dutiable imports, has fallen from 29.6 per cent in 1933 to 18.6 per cent in 1953 and during the past few years has been at its lowest level since Confederation. Moreover, despite the acute import competition in a number of industries during recent years, the Government has steadily refused any openly protective measures on their behalf. The sharp declines in employment in our woollen textile and deep-sea shipping industries suggest a willingness to tolerate substantial readjustments in employment arising at least in part out of the changing pattern of international competition. The active role our Government has taken in supporting the General Agreement on Tariffs and Trade, the International Monetary Fund and the International Bank and in pressing for a removal of quantitative restrictions and the restoration of a more multilateral pattern of trade is further evidence of tins freer-trade attitude. After a regrettable lapse in 1947, Canada has been one of the few countries that has managed to avoid the use of import quotas since the end of the war and is almost alone in her abandonment of exchange controls. Then too, in line with the provisions of GATT, our regulations with respect to the valuation of goods for duty purposes and the application of dumping duties have been revised and in some respects made even more liberal than a strict interpretation of GATT would require. Even the party of Sir John A. Macdonald no longer gives outright support to the cause of protection. One European economist has suggested that Canada now has the most open economy in the world. Nowhere else is the international movement of goods, people, and capital as free as it is across the Canadian border.

Type
Research Article
Information
Canadian Journal of Economics and Political Science/Revue canadienne de economiques et science politique , Volume 21 , Issue 4 , November 1955 , pp. 513 - 530
Copyright
Copyright © Canadian Political Science Association 1955

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Footnotes

*

This paper was read at the annual meeting of the Canadian Political Science Association in Toronto, June 3, 1955. I am indebted to Professor D. W. Slater for his criticisms of an earlier draft.

References

1 Van der Valk, H. M. A., The Economic Future of Canada (Toronto, 1954), 118.Google Scholar

2 It is a mistake to suppose that the removal of the Canadian tariff would give the Canadian consumer the full benefit of the lower foreign prices on protected goods. To the extent that our currency depreciated, the effects of the removal of the tariff in reducing prices would be offset. This error partially vitiates some attempts that have been made to measure the regional effects of the Canadian tariff. A complete analysis of the regional effects would have to consider the favourable effects of the rise in export prices on the income of each region in addition to the fall in import prices.

3 Assuming no outflow of capital or labour as a result of the tariff's removal, this statement is strictly true for income defined as the total income produced within the geographic boundaries of Canada. It will normally also be true of income defined as the income of Canadian residents, which is the basis on which our official estimates of national income are constructed.

4 See Stolper, W. F. and Samuelson, P. A., “Protection and Real Wages,” Review of Economic Studies, IX, 11, 1941, 58–73.CrossRefGoogle Scholar

5 “International Factor-Price Equalisation Once Again,” Economic Journal, LIX, 06, 1949, 192.Google Scholar See also Samuelson's, earlier article, “International Trade and the Equalisation of Factor Prices,” Economic Journal, LVIII, 06, 1948, 163–84.CrossRefGoogle Scholar

6 Cf. Mackenzie, M. W., “Canada's Natural Resources” in Canada's Tomorrow, ed. Gilmour, G. P. (Toronto, 1954), 37–63.Google Scholar

7 Cf. Mr. K. W. Neatby's discussion of Mr. Mackenzie's paper, ibid., 295–7. For a discussion of the economic issues involved, see Scott, Anthony, “Conservation Policy and Capital Theory,” this Journal, XX, no. 3, 11, 1954, 504–13.Google Scholar

8 In discussing the Japanese problem, Professor Angus raises the same issue. Thus he says the Canadian people believe “That they are entitled, as of right, to the standard of living which they can achieve on the basis of the exclusive right to their natural resources. This was true in terms of the international law of yesterday. Will it be true in terms of the political doctrines of today and of the law which be their outcome?” “Japan's Economic Challenge,” International Journal, VII, autumn, 1952, 257.Google Scholar

9 See Rosenbluth, G., “Industrial Concentration in Canada and the United States,” this Journal, XX, no. 3, 08, 1954, 332–46.Google Scholar

10 See Mackintosh, W. A., The Economic Background of Dominion-Provincial Relations (Ottawa, 1939).Google Scholar

11 Ibid., 83–96.

12 For a similar view see Sandwell, B. K., “The Canadian People” in Canada's Tomorrow, 13–34.Google Scholar

13 The Australian Tariff: An Economic Enquiry (Melbourne, 1929), 5.Google Scholar

14 These estimates are based on data given in D.B.S., The Manufacturing Industries of Canada, 1937 (Ottawa, 1940).Google Scholar Capital includes cash and securities as well as real assets but it is unlikely that this would seriously affect the comparison.

15 These data exclude imports of alcoholic beverages because of the large revenue duties on these products.

16 Though it is generally recognized that the protection provided by a specific duty varies inversely with the level of prices it has not been commonly recognized that a similar though opposite effect may occur in respect to the effective protection provided by an ad valorem duty. Since prices of raw materials typically fluctuate more widely over a business cycle than other business costs, the ratio of costs of material to the value of the product may be significantly higher during prosperity than it is in depression with the result that the level of effective protection will be raised and lowered accordingly.

17 In 1953, imports as a percentage of Canadian consumption were 8 per cent for batteries and 44 per cent for refrigerators. See Knox, F. A., Barber, C. L., and Slater, D. W., The Canadian Electrical Manufacturing Industry: An Economic Analysis (Toronto, 1955), 22–3.Google Scholar

18 McDiarmid, O. J., Commercial Policy in the Canadian Economy (Cambridge, Mass., 1946), 381–3.CrossRefGoogle Scholar

19 See the budget, in Canada, House of Commons Debates, 04 6, 1954, p. 3727.Google Scholar