Canadian Retailer - The Supply Chain & Logistics Issue - 14

DIANE'S CORNER
Sponsored by Canadian National Railway

NAFTA: WHAT'S NEXT
FOR CANADIAN RETAIL?
BY DIANE. J. BRISEBOIS, President & CEO, Retail Council of Canada

THIS is a new section in Canadian Retailer where
I will update you on developments in the industry
and how RCC is advocating on matters of interest and concern to our retail members, large and
small, across Canada.
As everyone knows, the North American Free
Trade Agreement (NAFTA) is one of the biggest
issues facing many sectors of the Canadian economy and retail is front and centre in the current
negotiations, facing direct threat from potential
changes to such matters as de minimis, supply
management and textile rules of origin.
NAFTA is the second largest trade agreement
in the world and Canada imported $365 billion of
merchandise from the USA in 2015 with $108 billion being retail-relevant goods such as food and
beverage, electronics, furniture, fashion and various other consumer goods. It is estimated that every 1% increase in tariffs on
goods entering Canada from the USA could equal $1 billion in
higher cost of goods sold in our country. The stakes are high.

CANADA IMPORTED $365 BILLION OF MERCHANDISE FROM THE USA IN 2015 WITH $108 BILLION
BEING RETAIL-RELEVANT GOODS...IT IS ESTIMATED
THAT EVERY 1% INCREASE IN TARIFFS ON GOODS
ENTERING CANADA FROM THE USA COULD EQUAL
$1 BILLION IN HIGHER COST OF GOODS SOLD IN
OUR COUNTRY. THE STAKES ARE HIGH.
Here are some of the possible outcomes (a) NAFTA could
be maintained with adjustments; (b) Canada could enter into
bilateral trade agreements with both the USA and Mexico; (c)
NAFTA could end and tariffs on imports from the USA would
change to rates applied on other nations' exports into Canada
under the World Trade Organization ("WTO"), or (d) protectionism and nationalist influences could see the USA exit both
NAFTA and the WTO.
The health of the Canadian economy is heavily dependent
on exports and the ripple effects of any change to the NAFTA
status quo would be impactful and require manufacturers, retailers to strategically re-position their businesses to adjust to
these possible changes.

14 |

CANADIAN RETAILER

| THE SUPPLY CHAIN & LOGISTICS ISSUE

RCC continues to be front and centre in funding research to provide
retailers with pertinent information
to adapt to our changing trading environment. Thanks to A.T. Kearny,
we know have data that shows how
the different NAFTA scenarios
could impact key segments of retail
and the economy. This data is available to RCC members and has been
shared with our Canadian NAFTA
negotiators to support the retail industry's position on matters affecting the sector.
RCC commissioned a study via
PwC to determine the impact of
an increase to the de minimis (currently at $20) on retailers in Canada.
U.S.-based online merchants and
couriers have been pushing hard for
an increase in the de minimis level
(ranging from $200 to $800), below
which courier or postal shipments
into Canada are exempt from sales
taxes and customs duties. Changes
to the de minimis level could be
devastating to retailers in Canada
here's why:
* De minimis creates a tax and
duty advantage for foreign shippers over retailers in Canada
(whether bricks-and-mortar or
online). Retailers in Canada are
required to collect sales taxes and
pay customs duties while their
foreign competitors can ship
tax-free and duty free up the de
minimis ceiling.
* The average tax advantage is
12.3%, being the average sales
tax rate across Canada. With
customers price-sensitive, even
comparatively small "all-in" price

Table of Contents for the Digital Edition of Canadian Retailer - The Supply Chain & Logistics Issue