End penny-pinching protectionism at the border

Over the past several decades, Canada’s federal governments have been superb at advancing free trade with the rest of the world. From Brian Mulroney’s government in the 1980s and the original Canada-U.S. free trade agreement in 1989, to NAFTA, negotiated by the Tories but inked by Jean Chretien’s Liberals in 1994, and on to other Liberal and then Conservative agreements, successive governments have understood that open markets spur productivity, create wealth, employment, and lower poverty. The most recent example is the Harper government’s free trade agreement with Panama.

But if there has been a notable omission in the free trade approach, it’s how it doesn’t apply at the border for consumers, something many Canadians notice this time of year as they vacation in the United States or elsewhere. When they return to Canada, they’re subject to continual protectionist penny-pinching.

To be sure, a free market in goods and services always benefits Canadians in the form of lower prices even when applied to business transactions. After all, if a Canadian restaurant buys kitchen equipment in the U.S. instead of being forced to choose just among Canadian suppliers, it benefits its clientele in the form of lower menu prices. The same applies in reverse to an American business that, for example, buys Blackberrys from Ontario-based RIM, instead of just being limited to a made-in-the-USA product.

That noted, successive federal governments have missed an opportunity to make free trade even more beneficial and popular than it already is by cutting consumers a break at the border.


Currently, if a Canadian crosses the border and returns the same day, we are dinged for duties. Stay on the U.S. side (or anywhere else in the world) for more than 24 hours, and you can bring back all of $50 worth of goods before border services collects taxes and duties for Ottawa and the provinces. Stay out of Canada for more than two days, and you can bring back $400 before being asked for spare change. And after a week, one can bring back $750 worth of goods.

But some of the very items many Canadians might like to bring back in bulk—inexpensive American beer, wine and spirits—are exempt from such limits. That means Canadians cannot bring back $750 worth of wine tax and duty-free. We’re limited to two bottles of wine or 24 cans of beer—even after a week or months abroad.


In general, how do Canada’s Grinch-like border restrictions for consumers compare to U.S. exemptions for Americans? Mostly poorly. An American can traipse up to Vancouver, Whistler, Banff, Montreal, perhaps the Niagara region, or anywhere else they find charming, and their government won’t nickel-and-dime them upon their return.


An American can bring back up to $200 worth of goods tax and duty free for cross-border trips of less than 48 hours. After that, they have an $800 exemption. So, for Americans, there is none of the immediate tax and duty imposts applied to Canadians’ day trips. Nor is there the chintzy $50 limit applied to our post-border hops of less than two days.


There are several useful reasons Canadian and American governments should drop duties and taxes at the border, or at least significantly raise the limits of what can be brought over tax- and duty-free.


First, there is the attraction of not being forced to pay tax and duty on the border for minor purchases. If Canada’s (mostly) free trade Conservative government wishes to persuade more consumers about the virtues and benefits of free trade, give them the non-punitive experience of choice between U.S. and Canadian retailers—that, and a more pleasant, hassle-free experience at the border.

Our federal government need not wait for American agreement. Canada’s federal government could free up Canadian consumers tomorrow by abolishing border taxes and duties on us as we return from trips abroad.

Second, and to speak in the currency politicians most care about—votes—such a move would be popular move around election time.

Third, and not unimportantly, it makes eminent sense to have Canadian and U.S. border guards spend less time analyzing consumer purchases. That would speed up cross-border flows for consumers and businesses alike. Critically, it would leave border guards free to concentrate on potential threats, instead of how much beer flows north across the 49th parallel.