Canada: Canada Concludes Free Trade Deal With Colombia

Copyright 2008, Blake, Cassels & Graydon LLP

Originally published in Blakes Bulletin on International Trade, June 2008

On June 7, 2008, Canada announced that it concluded yet another Free Trade Agreement (FTA) as part of the Global Commerce Strategy, this time between Canada and Colombia. The Canada-Colombia FTA will offer a number of significant benefits to Canadian importers, exporters, service providers and investors. Among those benefits will be: increased market access for agricultural products, industrial products, and certain key sectors of the services trade. The FTA will also require the elimination of both tariffs and non-tariff barriers to trade. Moreover, the FTA aims to foster a more secure investing environment for investors of both countries.

Once in force, the FTA will require the immediate elimination of tariffs on most Canadian industrial products, which are currently 11.8% on average. Paper, machinery, equipment, textiles, apparels, and some chemicals will all fall into this category. In addition, many Canadian agricultural products will no longer be subject to tariffs, which currently are an average of 16.6%. Included in this category will be wheat, barley, peas, and lentils. Within specified volume limits, beans and beef (among other products) will also become duty-free immediately upon the FTA's coming into force. Over time, the tariffs on other products will be gradually eliminated, including those on pork, canola oil, other oilseeds, animal fat, frozen French fries and whiskey. Finally, Colombia will eliminate the use of a price-brand mechanism in relation to certain products, including wheat, pork, and barley.

The service industry will stand to benefit from the FTA as well, with increased market access promised for mining, energy, and professional services. The FTA will contain a provision for comprehensive disciplines for the financial services sector, including banking, insurance and securities Canadians will stand to benefit from the provisions on procurement, which will guarantee Canadian suppliers the right to bid on goods, services, and construction contracts offered by the Colombian government.

The FTA seeks to strengthen the investment climate for Canadians by providing for the free flow of capital to investments, protection against expropriation without compensation, and by requiring non-discriminatory treatment of Canadian investments. Importantly, investors will also have access to binding international arbitration for dispute resolution.

Since Colombia is a developing country, many of its products are already exempted from Canadian duties. Nonetheless, the FTA will provide 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 this Agreement will improve human rights and encourage democracy within the Americas.

Two related agreements were signed alongside the FTA: one on labour and another on the environment. The Labour Cooperation Agreement (LCA) 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 LCA contains measures related to occupational health and safety, minimum wage and working hours. Under the LCA, migrant workers are to be extended the same protection as nationals. The LCA requires that these laws not be weakened for the purposes of encouraging trade or investment. Canada has committed C$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 will require the effective enforcement of domestic environmental laws. Like the LCA, the 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.

These 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 C$739-million. This investment is primarily in the oil and gas and mining sectors, although important links also exist in the printing sector.

At this stage, 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 FTA, the LCA and the Agreement on the Environment will be made public after the Cabinet has reviewed the legal copy and has given signing approval. The federal government will then table 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 treaties.

These Agreements are part of Canada's Global Commerce Strategy, which seeks to develop Canada's access to foreign markets through aggressive inter-national negotiations. 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, Cost Rica, Mexico (NAFTA), and the recently completed Canada-Peru Free Trade Agreement.

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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