Anomalies Requiring Attention

"I don't think Canada or any of the other industrialized countries would be able, politically, to remove China as a GPT recipient."  

China, along with other countries of the world whose economic and trading fortunes have changed dramatically in the past decade, gets preferential tariff treatment thanks to an agreement worked out with the Organization for Economic Co-operation and Development.  The World Bank informs that the gross domestic product (GDP) per capita in China last year was close to $8,500.

That doesn't sound like much for a developed country, and it isn't.  But it's a huge step forward for a country like China with its 1.3-billion population, the majority of which lived in penurious squalor not all that long ago.  China may now be a growing economic, political and military powerhouse, rivalling the U.S. for energy consumption, manufacturing and trade, preparing its self-appointed role as a world power, but it is also among 175 countries privileged with special tax exemptions for goods entering Canada.

In fact, the Conservative-led federal government of Canada is in the process of reviewing whether the general preferential tariff should be lifted for trade with China, along with other emerging economies such as Russia, Brazil and India.  That's the growing powerhouse of the BRIC countries, challenging the manufacturing and trade supremacy of developed countries like Canada, the United States, the European Union.

"There's an argument from Canadian industries who are competing with these industrialized developing countries that they don't need protection or the additional preference", says a former Canadian trade official.  Still, "if you try to take it away, you'll find out how significant it can be" to those countries who are benefiting from this largess.  It is a benefit that will be difficult to slide out from under.

Introduced in 1974 by developed economies to assist developing economies in poorer countries as a general preferential tariff, the exemption has application to most products, exempting dairy, poultry, egg and refined sugar products, along with most textiles, apparel and footwear.  Duty-free entry to the Canadian market applies through the special exemption to roughly 75% of goods.  Other types of tax breaks apply to the remainder.

These emerging industrialized countries playing catch-up to the developed countries of the world are still considered to be technically developing.  As a comparison, Canada's GDP per capita is $40,500.  Compared to China's $8,500.  Which translates as Canada being far more wealthy per capita than China.  And, according to trade analyst Lawrence Herman, "there's probably little debate about whether China is still a developing country", but their GDP leaves them in the developing country status.

It's a problem of conflicting definitions and how each fits into the larger picture.  And it's a headache.  One that benefits that manufacturing/trade giant China which can still claim developing status, while proudly burnishing its new power status.  The question is how determined the Government of Canada is to proceed with its intention to remove preferential tax treatment for China.

Particularly at a time when this government is trying to weave a new era of trade and investment co-operation with the powerhouse that China has become.  That China is still listed through CIDA as a recipient of foreign aid represents another anomaly that requires attention.