Canadian Elections: Further Proof that Our Northern Neighbors Are Smart (and that Free Trade Isn't Political Poison)

Tue, 05/03/2011 - 21:01 EDT - Scott Lincicome

The news about the timely death of what's-his-face has dominated American TV, so you may be excused for failing to notice that Canada had a big national election yesterday, and that the results of that election provided further proof that, when it comes to trade and tax policy, Canada is putting its southern neighbor to shame:
The Conservatives have finally captured their coveted majority government in an historic election that vaulted the NDP to a stunning second-place finish, making them the official Opposition, pushing aside the Liberals to a humiliating third.

At the Telus Convention Centre in Calgary, Conservative Leader Stephen Harper expressed elation at his huge win.

"What a great night," Harper told more than 1,500 cheering Conservative supporters.

"A strong, stable, national Conservative government," he said.Readers of this blog may recall the not-so-subtle man-crush I've harbored for the Harper government's smart corporate tax and trade policies over the last couple years. As I said last summer:
Since the global recession hit two years ago, Canada has implemented a broad array of free market tax and trade policies....

At the onset of the recession, Prime Minister Stephen Harper’s government moved aggressively to improve Canadian manufacturers’ global competitiveness. After extensive consultations with Canadian industries, Ottawa unilaterally eliminated tariffs on 1,755 different types of machinery, equipment and other manufacturing materials.

The Department of Finance presented a straightforward rationale for the move: “By reducing the cost of importing key factors of production, tariff relief encourages innovation and allows businesses to enhance their stock of capital equipment.” The Department projected that Canada’s complete liberalization of more than C$5 billion in imports will provide an additional C$300 million in annual duty savings for Canadian businesses.

Canada didn’t stop with tariffs. It also slashed the corporate tax rate to 18 percent. And the rate will fall farther -- to 16.5 percent next year and to 15 percent a year later.

The Harper government reasoned that such tax cuts would help make Canada one of the world’s most attractive destinations for international business investment. And they certainly have a point: Canada’s 2010 marginal effective tax rate is more than 16 percentage points lower than the United States’ 34.2 percent rate and two points below the OECD average.

And Canada has pursued free trade agreements (FTAs) with a passion....And what, pray tell, was the super-awesome Conservative campaign platform that secured this surprising landmark victory? Oh, right:
Harper campaigned on a message that the New Democrats stood for higher taxes, higher spending, higher prices and protectionism....

One outcome of Harper’s victory is that planned corporate income tax cuts will move ahead. Canada reduced the federal rate by 1.5 percentage points to 16.5 percent on Jan. 1, and it will fall to 15 percent in 2012 under legislation passed in 2007…

Canada is relying on business investment to help lead the recovery. Energy companies have been a main driver of spending, allowing the country to grow in the fourth quarter at a faster pace than any other Group of Seven country.To recap: low corporate taxes, free trade and other business/investment-friendly regulatory policies have led to impressive economic growth, and publicly promoting those policies has catapulted Harper's Conservatives to a groundbreaking new majority government in Canada.

Canadians are smart people, eh?This feed originates at the personal blog of Scott Lincicome (http://lincicome.blogspot.com).

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Readers of this blog will know that I've long celebrated Canada's recent commitment to lowering government-induced costs on domestic industries in order to boost their global competitiveness. The Canadian government has been lowering corporate taxes and tariffs on imports industrial inputs for a few years now, and a recent Reuters article indicates that the Canadians have no intention of reversing course.