- Duty-remission orders do not address the needs of all companies in the apparel industry, and have no effect on those manufacturers not covered by the remission orders. Witnesses told the Committee that the situation would be improved if apparel fabrics were permitted to enter Canada free of duty.
- The Committee was told that because of tariffs on their inputs, Canadian apparel manufacturers are being penalized for situating part of their manufacturing base in Canada; were they to relocate to Mexico, they could avoid the tariff and ship the finished goods to Canada or the United States, tariff-free. According to the President of Western Glove Works, one year ago his company employed 1,290 workers in Canada; today, that number is 587 and if duties on fabric are not relieved and if the situation continues into the future as it has in the past, in 18 months the company will employ 121 people. He told the Committee that this situation would not affect the company’s revenues, remarking that it does not “need Canadian employment to be profitable. But there’s a beauty and a wonderfulness about being able to manufacture and assemble a product in this country, and we’re losing it rapidly.”
- Witnesses also indicated that many, if not most, of the fabrics to which these tariffs are applied are no longer manufactured in Canada. The Vice-Chair of Peerless Clothing told the Committee that the company must import 90% of its textiles. From an industrial policy point of view, the President of Western Glove Works — which can no longer access a domestic supplier of denim to make its jeans — noted that there is no reason for many of these tariffs, which he suggested were put in place many years ago to protect the Canadian textile industry from an influx of imports. In his view, even with the duties, the textile industry has changed to the point that the Canadian apparel industry, which used to be 70% domestically supplied, now domestically sources only 35% of its fabric inputs and the companies who are trying to be protected by those specific duties no longer exist.
- Witnesses noted that, on 27 February 2004, the Minister of Industry, the Honourable Lucienne Robillard, committed about $26.7 over the next three years in tariff reductions for the apparel industry. The President of the Canadian Apparel Federation informed the Committee that the Canadian apparel industry pays more than $110 million in duties on inputs each year. This initiative will remove about $9 million of these duties. In contrast, the federal government’s elimination of duties on least-developed countries in the past year gave duty relief of about $100 million to imports of finished apparel from least-developed countries. In the President’s view, “ if the government could give $100 million of annual tariff savings to imported apparel, it should and could give the same amount of relief to Canadian apparel manufacturers. … [W]ithout tariff relief on fabrics and other inputs, we cannot eliminate the current tariff bias in favour of foreign apparel producers.”
- While the Committee believes that the action announced by Minister Robillard is a step in the right direction, more action is likely needed. Specifically, we believe that tariffs on inputs that are not — or no longer — manufactured in Canada have outlived their usefulness and, consequently, should be eliminated. It is for this reason that the Committee recommends:
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- With respect to the more general issue of tariffs affecting the Canadian apparel industry, the Committee feels that changes are required. Duty remission represents a second-best solution to the Canadian apparel manufacturers’ situation. Moreover, there are other issues that problematic, such as tariff differentiation on fabrics according to their end-use — or product differentiation — and the effect of tariff elimination on the domestic textile industry. We believe that the Canadian tariff regime is a subject that deserves more attention than was possible in this report and that has been given by us during our examination of Bill C-21. In our view, it is also a subject that requires the input of many stakeholders. Consequently, the Committee recommends:
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