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04 July 2008
On June 7 2008 Canada announced the conclusion of a free trade agreement with Colombia as part of its Global Commerce Strategy. The agreement will offer a number of significant benefits to Canadian importers, exporters, service providers and investors, including increased market access for agricultural products, industrial products and key sectors of the services trade. It also requires the elimination of both tariffs and non-tariff barriers to trade and aims to foster a more secure investment environment for investors of both countries.
Once in force, the agreement will require the immediate elimination of tariffs on most Canadian industrial products, which at present average 11.8%. Paper, machinery, equipment, textiles, apparel and some chemicals will fall into this category. In addition, many Canadian agricultural products will no longer be subject to tariffs, which at present average 16.6%; this category will include wheat, barley, peas and lentils. Within specified volume limits, beans and beef (among other products) will also become duty-free. Tariffs on other products will be gradually phased out, including pork, canola oil, other oilseeds, animal fat, frozen french fries and whiskey. Colombia will eliminate the use of a price-brand mechanism in relation to certain products, including wheat, pork and barley.
The service industry also stands to benefit from the agreement, with increased market access promised for mining, energy and professional services. The agreement contains a provision on comprehensive disciplines for the financial services sector, including banking, insurance and securities. Canadians will stand to benefit from the provisions on procurement, which guarantee Canadian suppliers the right to bid on goods, services and construction contracts offered by the Colombian government.
The agreement seeks to strengthen the investment climate for Canadians by providing for the free flow of capital to investments, protection against expropriation without compensation and non-discriminatory treatment of Canadian investments. Investors will also have access to binding international arbitration for dispute resolution.
Since Colombia is a developing country, many of its products are already exempt from Canadian duties. Nonetheless, the agreement provides increased market access for a wider range of Colombian products and also contains provisions that will facilitate trade-related capacity initiatives through trade measures. Corporate responsibility is encouraged through provisions addressing corruption and bribery. The Canadian government has stated that it hopes that the agreement will improve human rights and encourage democracy within the Americas.
Two related agreements were signed alongside the free trade agreement: one on labour and one on the environment. The Labour Cooperation Agreement will seek to protect core labour standards set out by the International Labour Organization, such as the elimination of child labour, forced labour and workplace discrimination, as well as encouraging freedom of association and collective bargaining. The labour agreement contains measures related to occupational health and safety, minimum wages and working hours. Under the labour agreement, migrant workers are to be extended the same protection as nationals. The labour agreement requires that these laws not be weakened for the purposes of encouraging trade or investment. Canada has committed $1 million to assist Colombia in implementing this agreement.
The Canada-Colombia Agreement on the Environment represents a commitment by both countries to protect the environment, primarily through provisions that require the effective enforcement of domestic environmental laws. Like the labour agreement, the environment agreement expressly prohibits the relaxation of environmental laws for the purpose of encouraging trade and investment. Canada has also recognized the biological diversity of Colombia and is committed to maintaining and protecting it for the benefit of local and indigenous communities.
The three agreements strengthen existing trade ties between Canada and Colombia. In 2007 two-way merchandise trade between the countries totalled $1.14 billion and Canadian direct investment in Colombia totalled $739 million. This investment is primarily in the oil and gas and mining sectors, although important links also exist in the printing sector.
Negotiators have agreed to the texts that will undergo a legal review, a process that could take a number of months. In Canada, the texts of the three agreements will be made public after the Cabinet has reviewed the legal copy and given signed approval. The federal government will then propose all three agreements in the House of Commons for a period of 21 sitting days. After this 21-day period of Parliamentary review, the government will introduce legislation to implement the agreements.
The agreements are part of Canada’s Global Commerce Strategy, which seeks to develop Canada’s access to foreign markets through aggressive international negotiation. An important facet of this strategy is the negotiation of free trade agreements in the Americas. The agreement with Colombia will join those already in place with Chile, Costa Rica and Mexico (as part of the North American Free Trade Agreement), and the recently completed Canada-Peru Free Trade Agreement.
For further information on this topic please contact Cliff Sosnow or Elysia Van Zeyl or David Peaker at Blake Cassels & Graydon LLP's Ottawa office by telephone (+1 613 788 2200) or by fax (+1 613 788 2247) or by email (firstname.lastname@example.org or email@example.com or firstname.lastname@example.org).
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Elysia Van Zeyl