Question Period Note: USTR Remarks to « reset WTO tariffs »

US Trade Representative Testimony to House Committee on Ways and Means Calling for “Broad Reset at the WTO”

• The WTO has been an important vehicle to lower tariffs and address other barriers affecting trade in Canadian goods and services

• Canada is already a low tariff jurisdiction, which contributes to our economic growth

• Canada actively supports tariff liberalization at the WTO and through its bilateral and regional free trade agreements

• Canada continues to engage constructively with the United States and other countries on WTO reform efforts

• Ongoing WTO negotiations, e.g. on agriculture, fisheries and e-commerce, are an important opportunity for all WTO Members to make new rules that support the global economy.

On Wednesday, June 17, 2020, U.S. Trade Representative Robert Lighthizer appeared before Congress to testify on the President's 2020 Trade Agenda. In his prepared remarks, Ambassador Lighthizer touched upon the need for countries to "reset" their bound tariff commitments at the WTO to provide better market access for the U.S. Bound rates are binding tariff commitments at the WTO, whereby all Members have agreed to cap the tariff rates they can charge on products to a certain amount. Applying a tariff on a good above a bound rate contravenes WTO rules and almost always results in a dispute. Members' commitments to cut tariffs and to “bind” their tariff rates to levels was one of the major results of the Uruguay Round.

Ambassador Lighthizer told the House Ways and Means Committee that "In addition to reigning in the Appellate Body, the United States will also seek a broader reset at the WTO. Currently, outdated tariff determinations are locked in place that no longer reflect Members' policy choices and economic conditions. As a result, many countries with large and developed economies maintain very high bound tariff rates, far above those levied by the United States. The United States must ensure that tariffs reflect current economic realities to protect our exporters and workers.”

Canada and the U.S. have relatively low bound and applied tariffs. According to its WTO Member profile, the U.S. currently has an overall simple average final bound tariff of 3.4% (4.9% for agricultural goods, 3.2% for non-agricultural goods). For Canada, the overall simple average final bound tariff is higher at 6.5% (15% for agricultural goods, 5.1% for non-agricultural goods). However, Canada generally applies tariffs well below its bound rates for many goods. 70% of Canadian tariff items are currently applied MFN Free. Based on 2019 imports, 89.3% of imports entered Canada duty-free (all tariff treatments). Based on this, the average applied duty rate is less than 1% (0.9).

Renegotiating bound rates for all WTO Members would be a significant undertaking and would likely require several years to complete. This proposal is unlikely to be well received by most WTO Members.

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