Food Manufacturing Gets Tariff Break: $48M in Cuts to Boost Industry

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Food Manufacturing Gets Tariff Break: $48M in Cuts to Boost Industry

As President Trump’s new administration has been openly sharing its intention on piling on new tariffs in order to protect American jobs and discourage importation, the Liberal government of Justin Trudeau up in Ottawa has quietly put in place action to counter the protectionist maneuvers of its southern neighbors. Ottawa will be moving forward with eliminating $48M in tariffs related to the food manufacturing industry.

Trudeau’s move, to save and support Canadian jobs in the industry, was announced through a customs tariff order published in the Canada Gazette last December 28th. The order mentions how roughly 200 different tariffs on various imported food ingredients will now be repealed or amended. It is estimated that currently the ingredients aimed by the order allow the Canadian government to collect $48 million in tariffs. So that’s $48M less in government coffers, but that’s how much manufacturers will also save. Implementation of the cuts detailed in the order have begun on January 16, 2017.

Although some of the ingredients were already included in the current North American Free Trade Agreement (NAFTA) as tariff-free ingredients, the government had estimated that roughly 57 per cent of the ingredients were subject to tariffs which usually averaged around 5 per cent.

The idea of eliminating tariffs in order to boost Canadian manufacturing isn’t such a revolutionary idea, the former government of Stephen Harper had included similar cuts in its budgets of 2009 and 2010 for imported machinery and equipment. The current Liberal government simply added agri-food ingredients to the mix.

The move was done somewhat quietly, in comparison to the previous government’s addiction to blown-out public announcements: the idea was brought up during last spring’s budget, which was followed by a consultation, but no official communications regarding the final decision had been published afterward.

The list of ingredients of long and contains fruits, vegetables, cereals, grains, spices, fats, oils, food preparations and chocolate products. The dairy, egg and poultry sectors, which benefit from Canada’s supply management system, were left out.

Industry group Food & Consumer Products of Canada, are rejoicing about the news of the tariff cuts as they have been lobbying the government of these changes for the past several years. As international demand for food is on the rise, Carla Ventin, vice-president of federal government affairs for the group, touted the move as “very positive” adding “This government is moving in a different direction” recognizing how the North American manufacturing industry is highly integrated, “We don’t grow everything in Canada. We don’t process everything in Canada.”

Surely enough, there are no banana trees in the Great White North.

How will the changes impact local Canadian suppliers? The answer is hard to come by as most of them weren’t even aware of the changes themselves. The Canadian Horticultural Council, which represents domestic growers, says it hadn’t heard about the government’s consultations held last spring.

From the manufacturing point of view, the president of Food Processors of Canada, an association that represents roughly 100 Canadian-owned businesses that deal in frozen foods and beverages, mentions “It’s one step to becoming more competitive” adding “What I find gratifying is that the government recognizes that food manufacturing is important.”

The government is showing some love to the industry and making sure that the 30,000 Canadians that work in the food manufacturing community keep their jobs, but they still can’t do anything about getting banana trees to grow in Winnipeg.