I am a right amateur when it comes to understanding how the economy works, but the one thing that has always been perplexing to me is the concept of duties and how they supposedly help the Canadian economy. The concept seems simple enough on paper, if you want to buy something that we don't make in Canada, you don't have to pay duties, because you are not potentially harming an existing domestic industry. If you choose to buy something American for example that is also manufactured in Canada, you're going to pay duties on it as a means of both paying restitution to the industry you're harming, and as a deterrent against buying something not made in this country. So for example, if Canada has a linen industry, and you choose to buy linens made in Malaysia, you're going to pay duties for your purchasing choice, because theoretically you have caused harm to a domestic industry. That sounds great, doesn't it? Buy local and save money. Well, I have observed two glaring flaws in this strategy.
If I am in the linen industry and I only make lower grade linen, if I am receiving funds from duties because people chose to buy luxury linens from another country, this doesn’t motivate me to make luxury linen. I make money from selling what I do make, and I also receive money from the grade of products I choose not to make. This is based on my assumption that some of the tariffs collected somehow make their way to the harmed industry. If this isn’t how it works, please educate me, I’ll gladly set the record straight. Also, if this is not how it works, I’d like to know where these duties end up and who benefits from them.
But here’s what bothers me the most about the scheme. If there are duties on footwear, to protect the Canadian footwear manufacturing industry, all types of footwear are lumped together. Which means that if there is a specialized type of footwear that no Canadian companies offer, your only choice is to buy from another country. But you’ll still pay duties. Let’s expand on that. There are a couple footwear companies based in the US that specialize in shoes for people with severe foot problems. Some of these shoes are even sold in Canadian stores. But they are much more expensive than other shoes, and the Canadian retailers don’t carry every style or size that the shoe brands make. So, you buy from the source, in the US. Regardless, you pay through the nose because you’re not only paying duties, you’re paying the horrible exchange rate between Canadian and US currency. But the local industry doesn’t make these kinds of shoes. For this we are punished as consumers?
Worse, there is no recourse. If you feel that you are paying duties on something that shouldn’t have duties applied under the circumstances, there is nowhere to go to appeal that I am aware of. You either pay the duties and get your product, or don’t pay and the product is sent back to the source. Maybe. Meanwhile, the protected industry is free to continue making what they do, and not making what they won’t, and we pay the ultimate price.
One last thing. If you recall, many decades ago, our governments promised that the free trade agreement would eliminate most if not all tariffs on goods crossing the border. Unless I misunderstand, this hasn’t happened. Duties on American products continue to this day.
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