Does a regulatory barrier impede your access to an export
market? Does a government measure discriminate against or otherwise
harm your business operations? In recent years, there have been
significant developments in international trade and investment
protection law that offer potential responses to regulatory
measures that have a negative impact on business. These changes
have enhanced both the scope of the obligations under these
agreements and their enforcement.
Trade and Investment Treaty Obligations
The disciplines in these agreements no longer apply just to
trade in goods, but also trade in services, intellectual property,
government procurement, technical barriers and other impediments to
trade, and foreign direct investment. Dispute settlement and
enforcement mechanisms contained in these treaties have also been
strengthened. Obligations under most trade agreements are
"binding" in the sense that one country's failure to
comply with them will permit other countries to impose sanctions,
most often by suspending benefits and concessions accorded to the
offending country under the particular trade agreement at issue.
Further, most bilateral investment treaties (BITs), including
Canada's, enable private investors to sue governments for
losses arising out of a violation of their treaty obligations.
Most developing and industrialized countries are subject to
obligations arising from these agreements, because they are World
Trade Organization (WTO) members or parties to regional free trade
agreements or BITs. These obligations apply to government policies,
administrative and legislative measures, and even judicial action.
They apply not only to national governments but also in many cases
at the provincial, state and other sub-federal levels.
Canada, in addition to being a WTO member and party to the
North American Free Trade Agreement (NAFTA), is also a
party to regional free trade agreements with Chile, Israel and
Costa Rica, and to BITs with over 20 developing countries. Almost
all of these agreements have come into force in the last 10 to 15
years. A complete listing of these agreements, as well as ongoing
negotiations for additional trade and investment treaties can be
To date, at the WTO alone, Canada has brought 27 cases against
other member countries who have taken measures alleged to violate
WTO obligations. Canada has been the target of 14 WTO complaints by
other countries and, as a result, has had to terminate or revise
offending measures across a wide range of sectors, including
automotive products, magazine publishing, pharmaceuticals, dairy
products and regional aircraft.
So far, Canada has been sued by investors 13 times under
NAFTA's investment chapter, the template for most of
Canada's BITs, with awards amounting to US$27 million.
Impact on Strategic Decision-Making
Business decisions must take into account the impact of, and the
opportunities afforded by, these agreements. The strategic benefits
of staying abreast of developments in this area is at least
(i) Identifying market opportunities: For
example, an exporter may become aware of, and seek to improve its
access to, new geographic or product markets as a result of trade
negotiations under prospective or existing agreements. More than
ever before, governments encourage input into the negotiations from
(ii)Tools to deal with market access
or competitive issues: Importers encountering difficulties
in accessing the Canadian market can look to Canada's
obligations under these agreements as one of the available avenues
for addressing the situation. Foreign investors may also rely on
the investment dispute provisions of BITs or Canada's free
trade agreements, including NAFTA, to sue governments imposing
discriminatory or expropriatory measures.
(iii)Planning for the potential
negative or positive impact: If a measure that has
protected a domestic producer's market must be removed (either
through negotiations or as required by a trade agreement ruling),
or if importers find themselves in the crossfire of a trade
dispute, the result of which can be the imposition of sanctions in
the form of import surtaxes, all players in the market can use this
information to jostle for market advantage.
As the significance of trade and investment agreements grows,
companies will need mechanisms in place to ensure that this
information is fed into their strategic decision-making process and
in their business planning systems. This distant early warning
system should cover all trade and investment agreements, including
the NAFTA, the WTO agreements, Canada's regional and bilateral
agreements, and agreements currently being negotiated as set out at
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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While that agreement mandated export measures on Canadian softwood lumber exports destined for the United States, it also protected those lumber exports from the potential imposition of onerous import measures by the U.S.
On September 29, 2016, the Supreme Court of Canada issued its first tariff classification decision since Canada signed the International Convention on the Harmonized Commodity Description and Coding System in 1998.
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