Canada: Canada Contemplates Innovative Bilateral Trade Initiatives

Last Updated: June 21 2005

Article by Greg Kanargelidis and Prakash Narayanan, ©2005 Blake, Cassels & Graydon LLP

This article was originally published in Blakes Bulletin on International Trade - April 2005.

Canada pursues trade opportunities beyond the U.S. by entering into a number of traditional and innovative bilateral agreements. Free trade agreements have become an integral part of the trading system. The World Trade Organization (WTO) permits such agreements, as long as certain conditions are met (Article XXIV, General Agreement on Tariffs and Trade). Some countries, such as the United States, which completed three free trade agreements in 2004, have been active in entering into such agreements. As discussed in this article, Canada is attempting a more balanced approach between bilateralism and multilateralism.

The Canada-Japan Economic Framework

Prime Minister Paul Martin issued a joint statement with Japanese Prime Minister Junichiro Koizumi to launch discussions for a Canada-Japan Economic Framework.

While not being a trade agreement per se, the framework is intended to allow for effective ways to take into account the interests raised by Canadian and Japanese private sectors, focus on a select number of key strategic issues of particular relevance every year, and develop a more detailed process to address specific trade and investment issues. Priority areas include a bilateral social security agreement, co-operation on anti-competitive activities, food safety, customs co-operation, trade facilitation, transportation, investment, science and technology, e-commerce, e-government, energy and natural resources, climate change, the existing bilateral tax convention and tourism.

The two governments have agreed to develop this framework within a period of six months.

The parties have also agreed to conduct a Joint Study on Bilateral Trade, Investment and Co-operative Issues to identify and consider pursuing various co-operative bilateral trade and economic initiatives.

CANADA-EU Trade and Investment Enhancement Agreement

At the Canada-European Union Summit in Ottawa last year, a framework for a new Canada-EU Trade and Investment Enhancement Agreement (TIEA) was agreed upon. This agreement is intended to create opportunities to broaden the trade, investment and overall relationship with the European Union (EU).

This Agreement comes in the context of the EU’s rejection of calls from different business organizations for a Free Trade Agreement (FTA) with Canada.

The mutually agreed framework provides a list of areas for inclusion under the TIEA that includes regulatory co-operation, regulation of services, recognition of professional qualifications, trade in financial services, e-commerce, government procurement, bilateral and multilateral trade facilitation, investment, competition, sustainable development, intellectual property, and science and technology co-operation.

Negotiations on the TIEA are expected to begin later in 2005, but are not expected to conclude before the results of the WTO negotiations on the Doha Development Agenda are known.

Current Free Trade Agreement Negotiations

At the same time, Canada is also in the process of negotiating FTAs with a number of countries.

Delegations from Mercosur (Argentina, Brazil, Paraguay, Uruguay) and Canada held preliminary discussions for the negotiation of enhanced market access in the areas of goods, services and investment. While maintaining their commitment towards a Free Trade Area of the Americas (FTAA), Canada and Mercosur hope that these negotiations will expand trade and investment relations between them. The parties have agreed to meet again in Asunción in April 2005.

Canada is in negotiations with the Central American countries of El Salvador, Guatemala, Honduras and Nicaragua to develop a FTA. Officials from all parties met in Ottawa for the 10th round of negotiations where the parties agreed to most of the general provisions regarding services and investment. The more difficult issues of market access for textiles, and apparel products benefiting from export subsidies, as well as market access for agricultural products, remain outstanding. No date has been fixed for the potential final round of negotiations.

Canada launched FTA negotiations with EFTA countries (Iceland, Norway, Switzerland and Liechtenstein) in 1998 but negotiators reached an impasse on the treatment of ships and industrial marine products.

More promising are the negotiations for an FTA with Singapore. Five rounds of negotiations have already occurred. The ongoing negotiations are taking place on topics including: trade in goods, trade in services, financial services, investment, government procurement, dispute settlement and competition policy. In 2004, the Canadian government completed its mandatory Initial Environment Assessment of the negotiations and concluded that the environmental impact of any new economic activity due to the FTA is not expected to be significant.

Possible Negotiations

The Government of Canada recently announced a possible FTA with South Korea, for which initial exploratory discussions were held between the two parties in January, with another expected to be held in March 2005. The government has announced the beginning of public consultations to obtain Canadians’ views on the feasibility of the FTA.

Exploratory discussion are also ongoing for a Canada-Andean countries FTA (with Bolivia, Colombia, Ecuador, Peru and Venezuela), a FTA with the Caribbean Community and Common Market (CARICOM), and with the Dominican Republic.

Comment

By entering into agreements that are not traditional FTAs with some of the largest economies in the world, while pursuing FTAs with other small economies, Canada is attempting a balance between meaningful multilateral negotiations and more focussed bilateral arrangements. These efforts signify an attempt to diversify trade relations with other countries apart from the United States. Given the number of discussions and negotiations that are ongoing, businesses should carefully watch the negotiations for increased trade opportunities.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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