Canada: Federal Budget Proposes Measures To Stimulate International Trade

Last Updated: January 30 2009

Article by Greg Kanargelidis , Roy Millen , Cliff Sosnow , Elysia Van Zeyl , Kathryn Aubrey-Horvath (Student-at-law) and Courtney Fitzpatrick (student-at-law)

Copyright 2009, Blake, Cassels & Graydon LLP

Originally published in Blakes Bulletin on International Trade & Investment, January 2009

On January 27, 2009, the federal government presented its Budget for 2009, which, as expected, contained a broad array of measures designed to stimulate economic activity and assist individuals and businesses in weathering the difficulties of the current economic climate. To this aim, the 2009 Budget includes a number of proposals that may increase the ability of Canadian industries and manufacturers to become and to remain competitive in the international marketplace, including spending on border infrastructure, the availability of additional financing from Export Development Canada, amendments to the Customs Tariff and support for certain 'key sectors' in Canada.

INVESTING IN BORDER INFRASTRUCTURE

In the 2009 Budget, the government signalled its intention to invest in several infrastructure projects intended to increase border security and facilitate cross-border trade. In particular, the 2009 Budget provides for up to C$14.5-million to alleviate traffic congestion and facilitate border crossing at two of the busiest U.S.–Canada border crossings: the Blue Water Bridge in Sarnia and the Peace Bridge in Fort Erie. The Budget also allocates C$80-million to ensure that Canada's shared border with the United States remains secure and efficient. In this respect, funding will be used to modernize and expand border service facilities at Prescott, Ontario as well as at Huntingdon, Kingsgate, and the Pacific Highway in British Columbia. These investments are intended to reduce the processing time for the inspection of commercial shipments and will also enable the Canada Border Services Agency to improve its infrastructure in northern British Columbia and the Yukon.

The government also indicated that it will expedite priority projects, that include two projects announced in the 2007 Budget to strengthen Canada's trade-related infrastructure: the Gateways and Border Crossings Fund and the Asia-Pacific Gateway and Corridor Initiative.

STRENGTHENING EXPORT DEVELOPMENT CANADA

In the 2009 Budget, the government announced plans to provide C$13-billion to allow Export Development Canada (EDC) and other financial Crown corporations to extend additional financing to Canadian businesses facing credit shortages. These funds will be used to:

  • increase the authorized capital limits of EDC by C$1.5-billion, and increase its associated borrowing limits as necessary;
  • increase EDC's contingent liability limit to C$45- billion in order to enable EDC to enhance its guarantee and insurance programs;
  • increase the Canada Account limit from C$13-billion to C$20-billion;
  • enable EDC to support financing in the domestic market for a temporary period in order to fill gaps and complement the activities of domestic financial institutions and insurance providers.

These actions follow on the C$350-million in capital committed to EDC and other financial Crown corporations in the November 2008 Economic and Fiscal Statement.

PROPOSED AMENDMENTS TO THE CUSTOMS TARIFF

The 2009 Budget also promises significant changes to the Customs Tariff that would eliminate duties on 214 different tariff classifications of imported machinery and equipment. This measure, which is designed to impact a wide range of industry sectors, would result in a savings to Canadian industry of C$440-million over the next five years. Moreover, the government indicated that it intends to further facilitate the movement of goods across Canada's border by amending rules in respect of the temporary importation of cargo containers, and through the initiation of a consultation process to consider further liberalizing the use of cargo containers.

The government is also pursuing changes to the Customs Tariff in respect of milk protein concentrations, thereby implementing the results of negotiations pursuant to Article XXVIII of the General Agreement on Tariffs and Trade.

SUPPORT FOR"KEY SECTORS": FORESTRY, AGRICULTURE AND AUTOMOTIVE INDUSTRY

In Budget 2009, the government pledged to take "significant action" to assist key sectors in responding to economic circumstances. With respect to Canada's forestry sector, Budget 2009 provides a total of C$170-million over two years to Natural Resources Canada, for a variety of projects:

  • C$80-million for the Transformative Technologies program that focuses on development of new technologies for the forestry sector;
  • C$40-million to develop pilot-scale demonstration projects of new products that can be used in commercial applications;
  • C$40-million for the Canada Wood, Value to Wood and North America Wood First programs to assist forestry companies with international marketing; and
  • C$10-million to support large-scale demonstrations of use of Canadian wood for construction in off-shore and Canadian markets.

With respect to the agricultural sector, the Budget restated the government's Budget 2008 commitment of C$1.3-billion over five years for Growing Forward, a new agricultural policy that emphasizes:

(1) increased investment in innovation,

(2) action on key regulatory priorities,

(3) environment and food safety programs,

(4) programs that serve local needs more directly, and

(5) measures that allow farmers to be proactive in managing risks.

Budget 2009 proposed C$500-million for a five-year flexibility program to facilitate the implementation of new initiatives, by providing funds for "non-business risk-management measures such as those that will reduce costs of production, improve environmental sustainability, promote innovation and respond to market challenges."

Of this C$500-million, C$190-million is allocated by Budget 2009 over the next two years and the balance of this will be funded by existing unallocated Agriculture and Agri-Food Canada resources. The government also committed to providing C$50-million over three years to strengthen slaughterhouse capacity, and proposed amendments to the Farm Improvement and Marketing Cooperatives Loans Act to make credit available to new farmers, support inter-generational farm transfers, and modify eligibility criteria for agricultural co-operatives.

Budget 2009 also recognizes Canada's automotive industry. Noting the December 20, 2008 agreement between the federal and Ontario governments to provide GM and Chrysler with up to C$4-billion in short-term repayable loans managed by EDC, Budget 2009 proposed:

  • to support the automotive parts manufacturers by improving their access to credit through accounts receivable insurance offered by Export Development Canada; and
  • to create the C$12-billion Canadian Secured Credit Facility to improve credit availability for consumers to purchase and lease new vehicles.

ENHANCED INTRA-PROVINCIAL AND INTERNATIONAL LABOUR MOBILITY

In the Budget 2009, the government announced plans to amend the Agreement on Internal Trade (AIT) by implementing provisions respecting labour mobility to enable workers who have been qualified to practice a particular occupation in one province to practice that same occupation in all jurisdictions across Canada. In this connection, the government has indicated its intention to "cut the red tape" on infrastructure projects, thus enabling the funds to flow as quickly as possible which, ideally, will increase opportunities for intra-provincial employment in a timely fashion. In addition to labour mobility concerns under the AIT, the government signalled its intention to address barriers to foreign credential recognition in Canada.

DUTY-FREE ARRIVALS

At present, international travellers have access to Canadian duty- and tax-free goods only upon their departure from Canada. As a means of increasing the competitiveness of Canada's major airports, the government has proposed and will initiate consultations in respect of the sale of duty- and tax-free goods to international passengers upon arrival.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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