Copyright 2008, Blake, Cassels & Graydon LLP
Originally published in Blakes Bulletin on International Trade, August 2008
The Department of Foreign Affairs and International Trade (DFAIT) has released Canada's International Market Access Report – 2008 (CIMAR). This annual report is meant to inform businesses and investors on 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 very 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 co-operation with other countries, especially 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 (EU).
The government also notes that DFAIT is developing a Global Innovation Strategy (GIS) as part of the government's science and technology strategy. The GIS 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 GIS, Canada has identified priority countries with which to negotiate bilateral science and technology agreements. These countries are the U.S., the U.K., France, the EU, Switzerland, Israel, Korea, China, India, Brazil and the Nordic nations.
While the government recognizes the continued importance of U.S. trade to the Canadian economy, several problems with the relationship are identified. Agricultural trade issues are identified, such as the 2007 U.S. Farm Bill process and concerns about U.S. agricultural subsidies (which have resulted in a WTO panel, at Canada's request). Noted, too, are ongoing issues faced by dual nationals because of the International Traffic in Arms Regulations (ITAR). Further, the government notes that administrative procedures by U.S. patent authorities, as well as judicial interpretation of U.S. patent law, have necessitated a reliance on patent litigation and an associated increased cost of doing business in these areas. Moreover, U.S. border security measures have increased the cost of cross-border trade. On the positive side, the Canada-U.S. Softwood Lumber Agreement is described as successful, and the government indicates their commitment to the Agreement for its duration. The government identifies that C$467.5-million was collected as export charges under that Agreement and distributed amongst the provinces in 2007. With respect to beef, the U.S. 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 U.S. 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 NAFTA provisions, protectionist tendencies may take hold. The government has committed itself to vigorously monitoring 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 upon 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 a FIPA with China is a priority. The success of the 2007 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 not operating as a market economy and Chinese policies aimed at the support of state-owned and state-controlled enterprises serving to distort the market. These policies have been the cause of a number of disputes, some ongoing. Additionally, Canada has continuing concerns about the enforcement and protection of intellectual property rights in China, and has joined a WTO panel to examine this situation.
Canada has concluded negotiating and is expected to sign a FIPA with India in 2008, an increasingly important trading partner. Additionally, the government commits to furthering 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 of 2008, the two governments established a Japan-Canada Joint Economic Committee to promote dialogue on these issues. The government further commits to pressing 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 (ASEAN). 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 co-operation.
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 against 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. Despite this achievement, several problem areas for trade with the EU are identified, including restrictions by some member states on mergers and acquisitions, market distortions in agriculture, uneven harmonization of regulations among member states, and a number of EU-imposed bans and restrictions related to health, environmental and consumer protection concerns. The government makes commitments to studying closer economic co-operation, negotiating a regulatory co-operation agreement as soon as possible, as well as negotiating 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 the difficulties in obtaining permits, licences and other approvals in a timely fashion. Additionally, the Russian government has been increasing its level of ownership in several strategic sectors, but the CIMAR 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. The report also describes the negotiations for a free trade agreement with Colombia as ongoing, although the agreement was, in fact, concluded in June 2008. 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 (CARICOM) 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 a chapter on government procurement and on 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 (GATS) at the WTO.
The Middle East
DFAIT is working to improve the trade framework with the Gulf Cooperation Council. Air agreements have been established, and there are ongoing discussions about a FIPA. 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, the CIMAR identifies a plethora of new and emerging opportunities for businesses seeking to gain a foothold in foreign markets. In 2008, we have already witnessed the conclusion of FTAs between Canada and the European Free Trade Association, Peru and Colombia, and the signing of a Joint-Action Plan between Canada and France that may signal future agreements with other EU countries. The CIMAR suggests that there may be more such agreements and opportunities yet to come.
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.