CANADA GENERAL PREFERENTIAL TARIFF AND POLICY ALTERNATIVES FOR EQUITABLE BENEFIT DISTRIBUTION

Canada's General Preferential Tariff (GPT) was introduced in 1974 to h elp developing countries increase their exports by providing tariff re ductions up to one-third of the Most Favoured Nation (MFN) rates. Cana da's GPT is scheduled to expire in July 1994. Should it be allowed to expire or renewed with revision? If revised, how should it be done? In order to address these specific questions, the GPT has been evaluated . It appears that the GPT has achieved its objective largely due to th e simplicity, transparency, and open-ended nature of the system. It is therefore suggested that the system be renewed, but with some revisio n. The GPT benefits are distributed among beneficiary countries mainly in favour of newly industrialized countries. A graduation system base d on a pre-determined level of per capita income will improve the bene fit distribution. This type of graduation scheme, once introduced, wou ld substantially decrease the overall benefit accorded by Canada's GPT to its beneficiaries below the current level. Thus, the extent of the tariff reduction can increase up to the full extent of the MFN rates without seriously affecting the Canadian economy.