This summer, the federal government held consultations on the future of Canada’s preferential trade programs for developing and least developed countries (LDCs).
Two of these programs—the General Preferential Tariff (GPT) and the Least Developed Country Tariff (LDCT)—were last reviewed by Canada 10 years ago and are set to expire at the end of 2024. Both offer zero or reduced tariffs on imports from lower-income countries to encourage their industrialization.
Apparel accounts for over 80% of LDCT imports to Canada (valued at $2.9 billion between 2019 and 2021) and nearly half of that comes from Bangladesh, one of several countries set to graduate from least-developed country status in 2026. While Canada was due to review its preferential tariff programs, the effect on Western clothing producers and importers of Bangladesh losing LDC status—and therefore zero-tariff preferences—lends this review more urgency in the eyes of the government.
Workers inside and outside Canada also have a strong stake in Canada’s preferential trade regime. Since the last review of these programs in 2015, major global disruptions including the COVID-19 pandemic, Russia’s attack on Ukraine, ongoing supply chain bottlenecks, the climate emergency, and the rise of right-wing extremism bring into focus the strategic priorities of labour rights and environmental standards in all of Canada’s trade and trade-related activities.
If Canada’s trade preference programs can be improved to raise living standards and improve working conditions and environmental policies, then they should be. This is why the Canadian Labour Congress is encouraging the federal government to include strong labour, human rights, and environmental conditions on access to tariff preferences in GPT and LDCT beneficiary countries, as suggested in the recent consultation.
Creating a new GPT+ program
Unlike in the United States, where the granting of internationally recognized workers’ rights is a mandatory consideration for trade preference status, Canada’s tariff preference programs are based solely on economic development factors. This is no longer a sound approach.
The current crisis period has exacerbated an erosion of labour rights internationally and seen a rise in forced labour and child labour. The worse deterioration in working conditions and human rights has occurred at the intersection of inequalities based on gender, race, class, ability, and migrant status. Canada is seeking to address these circumstances of production in lower-income countries through a proposed new GPT+ category of trade preferences for developing countries.
In the Canadian proposal, GPT+ status would be granted to countries that meet and adhere to a list of international standards on labour rights. This approach is in line with the European Union’s GSP+[1] program, which include a requirement that zero- or low-tariff beneficiary countries have ratified and implemented a list of 27 international instruments on human rights, labour rights, good governance, and environmental protection. Under its own review of its trade preferences regime, the EU is considering adding six further criteria to this list of 27.
The CLC supports Canada moving in the same direction as the European Union and proposed to the government a list of commitments that beneficiary countries would need to make under a future GSP+ program.
These should include respect for the ILO Declaration on Fundamental Principles and Rights of Work (e.g., freedom of association and collective bargaining, elimination of forced labour and child labour, elimination of discrimination in respect of employment)—whether or not the beneficiary country has ratified the relevant conventions—and ratification of all ILO fundamental conventions that Canada has ratified.
The CLC proposes that Canada go further by aligning our trade preferences regime with the commitments and obligations in the following articles from the labour chapter of the Canada-U.S.-Mexico Agreement (CUSMA), which significantly improved on NAFTA’s labour outcome. They include articles 23.6 to 23.9 covering forced or compulsory labor, violence against workers, coverage of migrant workers under labour laws, and support for policies against discrimination in the workplace.
Through these reforms, the CLC seeks to ensure that the proposed GPT+ program incentivizes beneficiary countries to strengthen the provision of rights, protections and safety for workers, and strengthen human rights due diligence in supply and value chains.
We are also provisionally supportive of extending tariff benefits to products not currently covered by Canada’s low-income country programs (e.g., some apparel and footwear, and ships, for which most-favoured-nation tariffs range between six and 25 per cent). However, Canada should not move in this direction without thoroughly collecting and analyzing data on how such an expansion would affect Canadian producers and workers, and thoroughly consulting with unions, workers and other key civil society voices.
Other considerations in reforming trade preferences
Canada’s consultation document further proposes to shorten the current 10-year timeframe for reviewing Canada’s general preferential tariff (GPT) program. Strong monitoring and enforcement of the GPT and the GPT+ programs are paramount to their effectiveness and to providing accountability, transparency and stability.
With that in mind, the CLC urges the government to fully review all of its trade preference programs every five years instead of every 10. In addition, we would like to see an annual administrative review of the GSP programs and an annual report, including the beneficiary countries’ ratification of, and adherence to or progress towards, international labour rights conventions.
The United States annually conducts and reports on its GSP scheme. The five-year and annual GSP reviews that we are proposing will be responsive to changes in international trade and will strengthen the stability and predictability of the GSP scheme.
Further, the CLC recommends a structured complaint and enforcement mechanism, accessible by Canadian unions and civil society organizations, which would strengthen the implementation of the GPT, GPT+ and the LDCT programs.
Lastly, the CLC recommends the government incorporate a proposal in the renewal of Canada’s GPT, GPT+ and LDCT programs to compel large Canadian firms importing from beneficiary countries to implement human rights due diligence in their businesses and supply chains, preventing and mitigating forced and child labour and any risks of it occurring.
Conclusion
Like most other Western countries, Canada has been providing low- or zero-tariff treatment to imports from low-income countries under the UN-sanctioned generalized system of preferences. Unlike the United States, the European Union and others, however, our system was ambivalent as to whether tariff preferences were improving labour standards or merely encouraging the outsourcing of low-value manufacturing to countries with more lax labour and environmental laws.
The current review of Canada’s trade preference programs opens the door to a better system that rewards countries with higher labour and human rights standards and enforcement in line with the government’s “inclusive trade” agenda.
To be most effective, these incentives must come with increased financial assistance—in addition to official development assistance—and technical support tied to improving the livelihoods of all workers everywhere.
This article draws from the CLC’s submission to Finance Canada’s consultation on the renewal of Canada’s tariff preference programs for developing countries.
