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22 August 2008
The Department of Foreign Affairs and International Trade has released Canada’s 2008 International Market Access Report. This annual report is meant to inform businesses and investors of foreign market opportunities and existing trade barriers, as well as to describe the steps the Canadian government is taking to improve market access. Chief among the ways the government is attempting to achieve its goal of opening up markets, as articulated in the Global Commerce Strategy, are the negotiation of new free trade agreements (FTAs) and foreign investment protection agreements (FIPAs).
The bulk of the report is devoted to describing Canada’s trading relationship with specific countries and regions. However, the government also comments on broad trade issues and concepts. For procurement and investment, the commitments are general. The government suggests that it is working on improving market access with respect to procurement, both through the World Trade Organization (WTO) Agreement on Government Procurement and, bilaterally, through the negotiation of applicable provisions in FTAs. Similarly, with investment, the goal of increasing market access for Canadian investors is being fulfilled through the establishment of new FIPAs and relevant parts of new FTAs. The government also notes that it is trying to improve regulatory cooperation with other countries, particularly with regard to health, safety and the environment.
Initiatives in these areas include the non-binding North American Regulatory Cooperation Framework and the non-binding Framework on Regulatory Cooperation and Transparency with the European Union.
The government also notes that the Department of Foreign Affairs and International Trade is developing a global innovation strategy as part of the government’s science and technology strategy. The global innovation strategy will attempt to improve the innovation performance of Canada’s private sector in a variety of ways, including by helping to establish international research and development partnerships and helping Canadian companies to commercialize new products. As a part of the strategy, Canada has identified priority jurisdictions with which to negotiate bilateral science and technology agreements (the United States, the United Kingdom, France, the European Union, Switzerland, Israel, Korea, China, India, Brazil and the Nordic nations).
While the government recognizes the continued importance of US trade to the Canadian economy, several problems with the relationship are identified. Agricultural trade issues are highlighted, such as the 2007 US Farm Bill process and concerns about US agricultural subsidies (which have resulted in a WTO panel, at Canada’s request). Also noted are the ongoing issues faced by dual nationals because of the International Traffic in Arms Regulations. Further, the government notes that administrative procedures by US patent authorities, as well as judicial interpretation of US patent law, have necessitated a reliance on patent litigation and an associated increased cost of doing business in these areas. Moreover, US border security measures have increased the cost of cross-border trade. On the positive side, the Canada-US Softwood Lumber Agreement is described as successful and the government indicates its commitment to the agreement for its duration. The government confirms that C$467.5 million in export charges was collected under that agreement and distributed among the provinces in 2007. With respect to beef, the United States opened up the vast majority of its market to Canadian beef and cattle exports in November 2007, with its final Bovine Spongiform Encephalopathy (BSE) Second Rule, implemented by the US Department of Agriculture.
The government notes several areas of concern with respect to trade with Mexico. There is concern that with the further elimination of tariffs under the 2008 North American Free Trade Agreement (NAFTA) provisions, protectionist tendencies may take hold. The government has committed itself vigorously to monitor the situation. A new framework for BSE issues is being discussed, as well as concerns about the continuing lack of access to the Mexican market for Canadian live poultry and poultry products.
Certain changes to the NAFTA rules of origin have been agreed and are expected to be implemented by the end of 2008. These liberalized rules could affect C$95 billion of trilateral trade. A further package of changes is already under negotiation.
The government says that negotiating an FIPA with China is a priority. The success of the 2007 Canada-China Science and Technology Agreement is mentioned and promises of joint projects undertaken under that agreement are made. However, several problems in the trade relationship with China are noted, including portions of China’s economy that do not operate as a market economy and Chinese policies that are aimed at the support of state-owned and state-controlled enterprises, which serve to distort the market. These policies have been the cause of a number of disputes, some of which are ongoing. In addition, Canada has continuing concerns about the enforcement and protection of IP rights in China and has joined a WTO panel to examine this situation.
Canada has concluded negotiations and is expected to sign an FIPA in 2008 with India, an increasingly important trading partner. In addition, the government has commited to further Canadian access to the Indian market, citing the Atlantic Gateway Mission launched in 2008 (to promote the ports of Atlantic Canada as the fastest way to ship goods to Canada) as an example of steps already taken.
Canada’s access to Japan is described by the government as “threatened” because of Japan’s bilateral negotiations for preferential access with other countries, as well as the existence of numerous non-tariff barriers to trade between the two countries. In January 2008 the two governments established a Japan-Canada Joint Economic Committee to promote dialogue on these issues. The government has further commited to press for access for beef products and the reduction of duties on several key exports, including vegetable oils, processed foods, red meats, fish, forest products, non-ferrous minerals and leather footwear.
Several other negotiations are ongoing in Asia. There are negotiations for FIPAs with Vietnam, Indonesia and Malaysia and negotiations for a trade and investment framework with the Association of Southeast Asian Nations. Moreover, in 2007 Canada concluded a new memorandum of understanding (MOU) with Taiwan dealing with investment promotion. It also renewed two MOUs with the same country: one on the sharing of information and communications technology and the other in regards to science and technology cooperation.
On the other hand, the government does not sound optimistic about finding resolutions to the stalled negotiations for FTAs with Singapore or South Korea. Furthermore, in 2008 Canada imposed economic sanctions on Burma.
An FTA between the European Free Trade Association (comprised of Iceland, Liechtenstein, Norway and Switzerland) and Canada was completed in 2008 and is expected to enter into force in early 2009 (for further details please see “Canada Concludes Two New Free Trade Agreements”). Despite this achievement, several problem areas for trade with the European Union are identified, including:
The government has commited to study closer economic cooperation, negotiate a regulatory cooperation agreement as soon as possible and negotiate a comprehensive air service agreement.
Canada is also considering negotiating an upgrade of the FIPA with Russia. Among the issues facing investors in that country are difficulties in obtaining permits, licences and other approvals in a timely fashion. In addition, the Russian government has been increasing its level of ownership in several strategic sectors, but the International Market Access Report does not specify which sectors.
The government describes several ongoing efforts to increase trade in Latin and Central America, as well as the Caribbean. An FTA with Peru was completed in January 2008 (for further details please see “Canada and Peru Enter into Free Trade Deal and Related Agreements”). The report also describes the negotiations for an FTA with Colombia as ongoing, although the agreement was in fact concluded in June 2008 (for further details please see “Free Trade Deal Concluded with Colombia”). The government also notes its commitment to a comprehensive FTA with the Dominican Republic, for which negotiations have already begun. A potential FTA with the Caribbean Community is expected to undergo its first full round of negotiations as early as Summer 2008 and the government intends to deepen Canada’s trade relationship with Brazil.
An intention to establish an FTA with Panama is also noted. The government affirms its commitment to completing an agreement with the Central America Four (El Salvador, Honduras, Nicaragua and Guatemala), but also notes that these negotiations have been ongoing since 2001 and many significant issues remain deadlocked. Making representations to Venezuela about Canada’s concerns surrounding Venezuela’s discretionary import licensing is considered a priority. The government concluded new chapters to the existing FTA with Chile, including chapters on government procurement and financial services, which are now awaiting ratification. Goals for the relationship with the Andean Community include a resumption of trade in beef and seeking market access to the region under the General Agreement on Trade in Services at the WTO.
The Department of Foreign Affairs and International Trade is working to improve the trade framework with the Gulf Cooperation Council. Air agreements have been established and discussions about an FIPA are ongoing. The Canada-Jordan FIPA has been concluded and is awaiting ratification and the countries have recently commenced negotiations on an FTA.
Although many obstacles to international trade remain, Canada’s 2008 International Market Access Report identifies a plethora of new and emerging opportunities for businesses seeking to gain a foothold in foreign markets. In 2008 FTAs have already been concluded between Canada and the European Free Trade Association, Peru and Colombia, and the signing of a Joint Action Plan between Canada and France may signal future agreements with other EU countries (for further details please see “Canada-France Joint Action Plan: Baby Steps to Potential EU Trade Deal”). The report suggests that there may be more such agreements and opportunities yet to come.
For further information on this topic please contact Greg Kanargelidis at Blake Cassels & Graydon LLP's Toronto's office by telephone (+1 416 863 24 00) or by fax (+1 416 863 2653) or by email (email@example.com). Alternatively, contact 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).
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Elysia Van Zeyl