Article by Greg Kanargelidis, ©2006, Blake, Cassels & Graydon LLP
Originally published in Blakes Bulletin on International Trade, July 2006
Introduction
It is estimated that one in five Canadian jobs are linked to international trade; therefore, market access and investment issues are a high priority for the Government of Canada. In this connection, the Government of Canada has recently published its annual summary of its priorities for improving access to foreign markets for Canadian traders and investors. The document, entitled Opening Doors to the World – Canada’s International Market Access Priorities 2006 (CIMAP), can be accessed from the Web site of the Department of Foreign Affairs and International Trade at http://www.dfait-maeci.gc.ca/tna-nac/cimap-en.as. CIMAP 2006 provides useful information for businesses engaged in international trade, whether importers, exporters, or investors. The document provides interested businesses with statistics on trade and investment, as well as an indication of the trends over time. Finally, the document sets out the Government’s priorities for trade and investment in 2006 and, in this regard, is important strategic information for global businesses.
Trends In Canadian Trade And Investment
Canada enjoys a surplus in its overall trade in goods. In 2005, the annual surplus remained relatively stable (at CAD 66.7 billion) as both exports and imports rose by about CAD 24 billion. The U.S. is Canada’s largest trading partner, and as CIMAP reports, the U.S. purchased 78% of Canada’s exports in 2005.
With respect to trade in services, it is interesting to note that as a proportion of total trade, Canada’s trade in services (14% in 2005) is less than the world average of 18.4%. In addition, Canada has a trade deficit in services trade as it imports more services than it exports. In 2005, the services deficit was about CAD 13.4 billion. In addition, Canada’s services trade is more diversified than its trade in goods. In particular, while the U.S. remains the dominant trade destination for Canada’s exports of services, more than 45% of Canada’s services exports go to Europe, Latin America and Asia. In addition, services exports to emerging markets such as China, India and Brazil are also increasing.
With respect to investment, foreign direct investment (FDI) in Canada reached a four-year high in 2005, but Canadian flows of direct investment abroad dropped sharply. The increase in FDI was lead by U.S. investors, and mainly in the energy and metallic minerals sector. The main sectors for Canadian direct investment were energy and metallic minerals, as well as finance and insurance.
Canada’s International Market Access Priorities
CIMAP provides details on the Government’s trade initiatives both at the World Trade Organization level, as well as by region. In the latter case, CIMAP includes chapters on North America, Latin America and the Caribbean, Asia, Europe, Other Key Markets and a chapter on Investment.
World Trade Organization
CIMAP re-affirms Canada’s commitment to the World Trade Organization and to seeking an "ambitious outcome" to the Doha Round of negotiations launched in November 2001 in Doha, Qatar. CIMAP also stresses Canada’s participation in the WTO Agreement on Government Procurement (AGP) and Canada’s efforts to pursue greater and more secure market access through that Agreement. Currently, the AGP is made up of 38 countries including Canada.
NAFTA and United States in Particular
Since the U.S. is Canada’s closest and largest trading partner, it is not surprising that CIMAP confirms Canada’s intention to deepen access to the U.S. market, and work with the U.S. to make North America more competitive. CIMAP makes note of a particular achievement in 2005 dealing with services. In October 2005, national representatives of the architectural profession in the three NAFTA countries signed a tri-national Mutual Recognition Agreement for International Practice, which outlines the circumstances under which an architect licensed and/or registered in the jurisdiction of one NAFTA party can practise architecture in another NAFTA party. It is hoped that other professions will use this architectural success story as a model on which to achieve success in other services areas.
While substantially all trade between Canada and the U.S. is dispute free, CIMAP does note current trade issues of concern between two countries. In the case of softwood lumber, the report notes that an agreement in principle was announced on April 27, 2006 and a final agreement is expected to be completed by the summer of 2006. While that timetable appears to be overly ambitious, it is hoped that Canada and the U.S. will be able to reach a final agreement that is acceptable to Canadian lumber companies.
CIMAP also notes another trade challenge that negatively affects Canadian traders. In particular, U.S. export controls in bilateral defence and aerospace trade are resulting in negative implications for Canadian firms. U.S. firms are deterred from working with Canadian firms, and the U.S. rules are hampering the ability of Canadian firms to compete for U.S. business. While the report sets out the problem, the report fails to indicate a plan or course of action to address the problem.
Other Bilateral Trade Initiatives
Elsewhere in CIMAP, the Government describes initiatives previously announced in other regions of the world, and includes references to certain specific new developments over the course of 2005. For example, in November 2005, Canada and Japan signed an Economic Framework aimed at reinforcing existing bilateral economic ties and addressing new and emerging commercial challenges and opportunities. A joint study of the implications of further promoting and liberalizing bilateral trade and investment is scheduled for completion by the end of 2006. In July 2005, Canada and the Republic of Korea launched negotiations toward a bilateral free trade agreement that will cover a wide range of industry sectors. Certain tariffs were reduced by Korea on January 1, 2006 and negotiations are continuing on other issues and sectors.
Investment
In the area of investment, CIMAP notes that Canada is a net exporter of capital and, as a result, Canada will continue to pursue the negotiation and conclusion of bilateral investment agreements to support Canadian direct investment abroad. CIMAP notes that since 1989, Canada has concluded 22 bilateral foreign investment promotion and protection agreements. In 2004, Canada introduced a new model FIPA and is currently engaged in FIPA negotiations with China, India and Peru.
Commercial Barriers Database
With the release of CIMAP 2006, the Government of Canada also announced the launch of the Commercial Barriers Database. The Database offers a search feature which identifies commercial barriers and other key information about export markets around the world. The Database is designed to assist Canadian exporting businesses by providing information relevant to exporting or investing decisions. The database can be accessed at the Web site of the Department of Foreign Affairs and International Trade at http://w01.international.gc.ca/CIMAP/Default.aspx?Language=en.
Comment
The annual CIMAP report is a welcome addition to the tools and information available to companies engaged in international trade, whether importers or exporters. When one reviews the current year’s report and compares same with previous annual reports, however, one gets the sense that Canada can, and should, be doing more than it currently is in the area of international trade and market access issues. In particular, relatively few new initiatives appear in the report. In addition, when the achievements and initiatives by Canada are compared to those of our principal trading partners – such as the U.S. – it is reasonably evident that Canada is falling behind in initiatives to support Canadian business in foreign markets.
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