TARIFFS

last updated 2008 Jan 23
 

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LEARNING OBJECTIVES

When you are reading the material for this section, pay careful attention to the way that tariffs are effected by circumstances of the Competitive Environment and the Political / Legal / Regulatory Environment - particularly the rulings of the WTO and analysis by the OECD. The purpose of this unit is to explain     o what tariffs are, with some specific examples    o what role they have in supporting a national economy    o the consequences of NGOs (like the WTO) making rules and regulations that effect the ability of countries to have tariffs

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INTRODUCTION

Tariffs - the taxing of imported goods and services is a technique used by national and regional governments to help make vulnerable businesses more competitive.  In Canada there are several tarfiffs on imports from American and European and Asian countries.  The controversial Canadian tariffs are the ones we use to protect our automotive, agricultural industries, forest products, and mining and steel. All of these sectors are noted for the geographic concentration of their activity, which translates into a local constituency which may or may not re-elect the local member of parliament - depending on whether that person "can keep the saw mill running...". . There is a lot of pressure on elected politicians to fight to keep tariffs since it can mean the difference between getting re-elected, and not - if the main business in your constituency becomes uncompetitive and starts to lay off employees, the dislocation in the community can be very significant. . WTGR

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Automotive industry

The auto industry employees thousands and thousands of people in Canada and is very "sensitive" to changes in the  economic environment wages, gas prices, interest rates competitive environment lower priced cars imported competition among major brands for marketshare technologicial environment technology used to improve productivity technology that effects workforce layoffs improved operation of the vehicle accessories and devices, eg. in-car GPS, DVD etc. politicial / regulatory environment regulation changes on safety rebates regulations and extra taxes tariffs and quotas on imports subsidies geographic environment winter weather, driving conditions social / cultural environment family size, effects car size lifestyle and image, cars vs SUVs, vs pick-up trucks styling, colour, design, materials and trim WTGR

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Automotive industry

Tariffs is one of the ways that government have traditionally protected their domestic auto manufacturing and parts industries from cheaper imports. In January 2008, the premier of Ontario announced that they will "explore slapping tariffs on Hyundai and Kia cars if Ottawa signs a free trade pact with South Korea that's unfavourable to Ontario automakers" The point being that the federal government might want a Free Trade situation with Korea for larger purposes that benefit the country as a whole, but Ontario, which is the center of the automotive industry has had a disadvantage in the auto business with Korea. Canada is importing more than 100,000 cars from Korea each year and only exporting 100 cars to R.O.K. If the province wanted to put a tariff on Korean cars, the question is (in the context of the political environment) can they? Ithas been suggested that the federal government may not allow this, further more it may be contrary to WTO rules and regulations. Tariffs on foreign vehicles now average 6 per cent WTGR

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