Access Report – 2008 - Organization of American States · Global Commerce Strategy ... our businesses and investors tap into global ... increasing by 3.2% to reach $502.5

Canadas International MarketAccess Report 2008

Please visit our online database on foreign commercial barriers at

www.cimar-database.gc.ca

Cover photos, second and fourth from left: Bombardier Inc or its subsidiaries

This publications is printed on recycled paper.

Her Majesty the Queen in Right of Canada, as represented by the Minister of International Trade, 2008.

Catalogue Number: FR2-7/2008ISBN: 978-0-662-05730-7

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Search for trade barrier by keyword sector,product code or country.

Provides a description of the trade barrier.

List of trade barriers.

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http://www.cimar-database.gc.ca

Canadas International MarketAccess Report 2008

Table of Contents

Message from the Minister of Foreign Affairs and International Trade and Minister for the Pacific Gateway and the Vancouver-Whistler Olympics . . . . . . . . . . . . . vi

1. Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1Global Commerce Strategy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2Trends in Canadian Trade and Investment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3

2. Canadas Trade in Goods and Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5Improving Access for Trade in Goods . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5Improving Access for Trade in Services. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6

3. Current Issues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7Canada-U.S. Border . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7Softwood Lumber . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8BSE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8

4. Regional and Bilateral Free Trade Agreements and Other Initiatives . . . . . . . . . . . . . . . . 10Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10European Free Trade Association . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10Peru. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11Colombia . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11Dominican Republic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11CARICOM . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12Central American Four . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12South Korea . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13Singapore . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13Jordan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14Panama . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14Other Initiatives . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14

5. Getting the International Rules Right . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16Canada and the World Trade Organization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16The Doha Round and Canadas Objectives. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17Accessions of New Members to the World Trade Organization . . . . . . . . . . . . . . . . . . . . . . 17Dispute Settlement. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18Trade Policy Review Mechanism . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18

6. Opening Doors to North America . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19United States . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19Mexico . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21North American Free Trade Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23

Canadas International Market Access Report 2008 iii

iv Canadas International Market Access Report 2008

7. Opening Doors to Asia . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26Asia-Pacific Economic Cooperation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26China . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27Hong Kong . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28India . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29Japan. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30Chinese Taipei (Taiwan) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31Association of Southeast Asian Nations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32South Korea . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33Singapore . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33Vietnam . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34

8. Opening Doors to Europe . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35European Union . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35European Free Trade Association . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37

9. Opening Doors to Latin America and the Caribbean . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38Argentina . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38Brazil. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39Venezuela . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40Chile . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40Andean Community. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41Peru. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42Columbia . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43Central America . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43Panama . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44CARICOM . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45Cuba . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46Dominican Republic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46

10. Opening Doors in Other Key Markets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47Australia . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47New Zealand. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48Russia . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48Ukraine. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49Kazakhstan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50Sub-Saharan Africa . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50The Middle East and North Africa . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51Gulf Cooperation Council . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52The Maghreb . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53Jordan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53Israel . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54

Table of Contents

Canadas International Market Access Report 2008 v

Table of Contents

11. Government Procurement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55WTO Agreement on Government Procurement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55Bilateral and Regional Agreements. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56

12. Investment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57Bilateral Investment Agreements. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57Other Regional and Bilateral Initiatives . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57Corporate Social Responsibility. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58

13. Innovation, Science and Technology . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59

Glossary of Terms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61

List of Acronyms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64

As Canadas Minister of Foreign Affairs andInternational Trade and Minister for thePacific Gateway and the Vancouver-WhistlerOlympics, I am pleased to present the 2008edition of Canadas International Market AccessReport, which outlines market-access issues for 2008 and highlights the many successesachieved last year.

Canada is a trading nation. Our prosperityand quality of life hinge on success in theglobal marketplace. We need our businessesand investors reaching out to the markets of theworld to capture new opportunities to generatethe wealth upon which we all depend.

The Government of Canada is committed tohelping Canadians compete effectively in theglobal marketplace. We are implementing aGlobal Commerce Strategy to help Canadianbusinesses and investors benefit fromeverything the global economy has to offer.This includes an aggressive agenda of freetrade negotiations that will give Canadians theaccess they need to dynamic markets aroundthe world.

This annual report is an important part of this pursuit. It contains useful market accessinformation and trade policy highlights, andoutlines important issues relating to investment,innovation, science and technology.

In 2006, we implemented a new onlinedatabase (www.cimar-database.gc.ca) to helpCanadian exporters better understand thetrade barriers they face. We are extremelypleased with the positive feedback receivedfrom Canadas business community on this

database, and we look forward to working withthem in the year ahead to ensure that theyhave the tools and information they need tosucceed and thrive in the global marketplace.

I encourage you to make this report and the online database an active part of yourbusiness planning for the next year and beyond.

Working together, we can continue buildingon Canadas proud legacy as a trading nation,and ensure that our nation remains successfuland prosperous into the future.

The Honourable David L. Emerson, Minister of Foreign Affairs and InternationalTrade and Minister for the Pacific Gatewayand the Vancouver-Whistler Olympics

Message from the Minister of ForeignAffairs and International Trade andMinister for the Pacific Gateway andthe Vancouver-Whistler Olympics

vi Canadas International Market Access Report 2008

http://www.cimar-database.gc.ca

Canadas International Market Access Report 2008 1

There is no doubt that Canadas economy, jobsand quality of life all depend on our businessesand investors reaching out to the markets ofthe world to capture opportunities. Internationalcompetition has been good for the economy,attracting investment to Canadian communities,spurring innovation and the creation ofcutting-edge technology, and opening the eyes of Canadian businesses to the world of opportunity beyond our borders.

By extension, our future prosperity can beenhanced through government efforts to helpour businesses and investors tap into globalopportunities and succeed in markets aroundthe world. These efforts involve providingsupport in the key global markets using theright tools and business intelligence, includingtimely and accurate information about tradeand investment barriers in these markets.

Canadas International Market Access Report(CIMAR) is an important part of theGovernment of Canadas ongoing work to helpfirms and investors understand what they canexpect in international markets, and what isbeing done to provide the market access theyneed to succeed on the world stage. Alongwith the accompanying Internet databasefound at www.cimar-database.gc.caCIMARoffers the most up-to-date information on thekinds of trade barriers Canadian companiesand investors can encounter in marketsaround the world, and is a valuable tool forthem as they plan their global operations.CIMAR is also an important component of theGovernment of Canadas Global CommerceStrategy, which is outlined in the next section.

CHAPTER 1Introduction

http://www.cimar-database.gc.ca%E2%80%94CIMAR

Foreign Affairs and International TradeCanada (DFAIT) is committed to ensuringthat CIMAR and its database continue to meet the needs of Canadian exporters andinvestors, and welcomes input on commercialbarriers being encountered in foreign markets.Individual companies, industry associationsand other interested organizations areencouraged to contact us with specificinformation on tariff and non-tariff barriers,as well as other business irritants. We invitebusinesses to report any problems they areexperiencing to:

Foreign Trade and Investment Barriers AlertForeign Affairs and International TradeCanada (CSL)Lester B. Pearson Building125 Sussex DriveOttawa ON K1A 0G2Fax: 613-944-7981

Email: [email protected]

Global Commerce Strategy

The Global Commerce Strategy is thegovernments overarching plan to helpCanadians prosper in the global marketplaceby giving them the tools and support theyneed to succeed in an increasingly complexand competitive global economy. It is acomponent of Advantage Canada, thegovernments national strategy for buildingfiscal, tax, education, infrastructure andentrepreneurial advantages at home.

The Global Commerce Strategy is founded on the notion that higher productivity andbetter access to North American and global

markets will strengthen Canadas position as a destination and partner of choice forinternational business. It acknowledges that,in the new global economy, businesses competewith businesses and governments competewith governments to create conditions that will help their private sectors to invest, innovateand succeed globally. The Global CommerceStrategy positions Canada to meet thesecompetitive realities, focusing on three inter-related priority objectives and action plans:

Reinforcing Canadas North Americanadvantage by facilitating exchanges offoreign direct investment, innovation andtalent between Canada and the rest of the world.

Deepening Canadian access to globalmarkets and networks through a renewedand aggressive international tradenegotiations agenda.

Better connecting Canadian companies toglobal opportunities by realigning Canadasinternational commercial network to meetthe needs of modern, internationallyengaged business.

This framework will bring a more strategicfocus to our efforts to help Canadian firmssecure access to markets, capital, technologyand talentone that will enable them to bemore competitive and productive. The GlobalCommerce Strategy is the Government ofCanadas ambitious answer to the ever-changingchallenges faced by Canadian business intodays global market.

2 Canadas International Market Access Report 2008

Chapter 1Introduction

mailto:[email protected]

While overall exports increased, the sectorsshowed varied performance, with brisk growthin industrial goods and materials and inagricultural and fisheries products, anddeclines in automotive and forestry products.Growth in industrial goods was fuelled bycontinued high world prices in metals andincreased export volumes.

Imports of goods and services rose faster thanexports, increasing by 3.2% to reach $502.5billion. As a result, the trade balance declinedby $6 billion to $30.2 billion. The goodssurplus with the U.S. dropped by about 11.5%to $85 billion but, as in previous years, was still$40 billion larger than the Canadian globaltrade surplus and the sole source of the overalltrade surplus. Canadas goods trade deficitwith non-U.S. destinations decreased slightlyto $35.3 billion, down from $44.8 billion in2006. By geographical area, 76.4% of goodsexports were destined for the U.S., with about8.5% and 2.2% of goods exports bound forthe European Union and Japan, respectively.

Trends in Canadian Trade and Investment

Canadas economy posted solid gains in 2007,with real gross domestic product (GDP) risingby 2.7%, driven by consumer spending, whichexpanded by 4.7%. GDP growth in 2007matched average growth for the past five years.However, the appreciation of the Canadiandollar and slowdown in the U.S. economybegan to show their impact in the fourthquarter of 2007.

Exports of goods and services increased by1.9% to top $532.7 billion in 2007, equivalentto about 34.8% of Canadian GDP.



-15

-12

-9

-6

-3

0

3

6

9

12

Consumer goods

Automotive

Machinery

Industrial goods

Forestry

Energy

Agri-food

Source: Statistics Canada

Per c

ent

GROWTH IN GOODS EXPORTS BY MAJOR GROUPS,2006-2007

10.1

5.6

-12.8

11.2

5.4

0.6

-6.1

0

100

200

300

400

500

600

20072006200520042003


$ bi

llion

CAD

EXPORTS AND IMPORTS OF GOODS AND SERVICES,2003-2007

Imports G&SExports G&S

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

20072006200520042003


Per c

ent

CANADA REAL GDP GROWTH, 2003-2007

1.9

3.1 3.1

2.8 2.7

In 2007, the United Kingdom was the secondmost important single country destination forCanadian goods exports, taking 3.2%.

Although services exports increased slightly to$67.5 billion in 2007, imports rose to a record$86.9 billion, bringing the services deficit to anew high of $19.5 billion, up from $15.2 billionin 2006. The bulk of the deficit was due totravel, which has been trending up sharplysince 2002 as Canadians take advantage of thestrong Canadian dollar to travel to the UnitedStates. The deficit in transportation alsoexpanded, whereas that in commercial servicesremained steady.

The flow of Canadian direct investmentabroad reached $53.1 billion in 2007, thefourth highest level historically. Most of thisinvestment was concentrated in the financeand insurance industry, followed by energyand metallic minerals, and was directed to theUnited States and the European Union.

Capital flows into the Canadian economy from foreign direct investors reached anunprecedented level of $115.4 billion in 2007.Cross-border mergers and acquisitions werethe driving force behind foreign directinvestment in Canada in 2007, reflectingconsolidation of some sectors on a worldwidescale. Reinvested earnings were equivalent toabout 15% of all net flows. Foreign directinvestments in Canada were mostly directed tothe energy and metallic minerals industries,finance and insurance, and came mainly fromthe European Union and the United States.



-12

-10

-8

-6

-4

-2

020072006200520042003


$ bi

llion

CAD

SERVICES TRADE BALANCE BY CATEGORY

TransportationTravel Commercial services

-20

0

20

40

60

80

100

120

20072006200520042003200220012000

InflowsOutflows

$ bi

llion

s

CANADA FOREIGN DIRECT INVESTMENT (FLOWS)


Improving Access for Trade in Goods

Canadas growth and prosperity depend onopen world markets and a stable, predictableand transparent trading environment. Becauseof this, the Government of Canada aggressivelypursues improved market access for goodsthrough negotiations at the multilateral,bilateral and regional levels.

In the non-agricultural market accessnegotiations under way at the World TradeOrganization (WTO), for example, thegovernment is seeking the elimination orsignificant reduction of tariffs. In agriculture,the government continues to press for a morelevel international playing field, in particular,the elimination of export subsidies, substantialreductions in trade-distorting domestic supportand real market access improvements. Inaddition, in pushing for the development ofcommon rules of origin, Canadas objective is to establish rules that provide transparencyand certainty and reflect the global nature ofsupply chains.

Another priority for Canada at the WTO is to secure strong, binding rules on tradefacilitation to maximize transparency andstreamline customs procedures. As well asseeking improved and clarified rules on traderemedies in the current WTO negotiations,the government also monitors the traderemedy laws and practices of Canadas keytrading partners and intervenes whereappropriate. Such interventions address policiesor practices that could hurt Canadian exportersin trade remedy cases. The government providesCanadian exporters involved in trade remedyinvestigations with information and advice.

Canada is also pursuing improved marketaccess for trade in goods on a bilateral basis,including through ongoing bilateral andregional free trade negotiations (see Chapter 4,Regional and Bilateral Free Trade Agreementsand Other Initiatives). As well as strengtheningmarket access for Canadian goods in a varietyof foreign markets by eliminating tariffs, freetrade negotiations also provide an opportunity


CHAPTER 2Canadas Trade in Goods and Services

to address non-tariff barriersparticularly in the area of standardsthat affect varioussectors, including the automotive sector. In ongoing and future trade negotiations,Canada will aim for high-level agreements that enhance Canadian economic prosperityby eliminating tariffs on all non-agriculturaland a range of agricultural goods, and byeffectively addressing any non-tariff barriersconfronting Canadian companies.

Improving Access for Trade in Services

Canada works to expand market access forservices providers through various mechanismsincluding the General Agreement on Trade inServices (at the World Trade Organization) anda number of bilateral free trade agreements.These types of agreements facilitate servicestrade by gradually removing impediments totrade, and they support a rules-based tradingsystem rooted in predictability, transparencyand fairness. Canada continues to seek anambitious outcome for services trade in theDoha Round of WTO negotiations and tonegotiate services chapters in bilateral tradeagreements with selected partner countries.

The increased trade in services made possible byfree trade agreementswhich promote accessto foreign markets and reduce regulatorybarriers within Canada and abroadbenefitsCanada through job creation, increasedproductivity, greater business activity andmore consumer choice in services. Increasedtrade in services, including transportation,distribution, communications and even legalservices, can also benefit trade in other sectorsof the economy by increasing efficiency in theexport of Canadian manufactured goods andprimary sector products.

In 2007, Canada made significant progress on bilateral air services agreements. Under its Blue Sky international air policy, Canadacontinues to participate in bilateral airtransport agreement negotiations to expandopportunities for airlines to add or improvepassenger and all-cargo services in response to market demand. For information on theBlue Sky policy, please visit www.tc.gc.ca/pol/en/ace/consultations/bluesky.htm. For information on bilateral air agreementsconcluded in 2007, please visitwww.international.gc.ca/trade-agreements-accords-commerciaux/agr-acc/facts-air-eclair.aspx?lang=en.


Chapter 2Canadas Trade in Goodsand Services

http://www.tc.gc.cahttp://www.international.gc.ca/trade-agreements-accords-commerciaux/agr-acc/facts-air-eclair.aspx?lang=enhttp://www.international.gc.ca/trade-agreements-accords-commerciaux/agr-acc/facts-air-eclair.aspx?lang=enhttp://www.international.gc.ca/trade-agreements-accords-commerciaux/agr-acc/facts-air-eclair.aspx?lang=enhttp://www.international.gc.ca/trade-agreements-accords-commerciaux/agr-acc/facts-air-eclair.aspx?lang=enhttp://www.international.gc.ca/trade-agreements-accords-commerciaux/agr-acc/facts-air-eclair.aspx?lang=en

Canada-U.S. Border

There is a long history of Canada-U.S. bordercooperation based on principles of riskmanagement, consultation, effectiveness andefficiency. In recent years, Canada and theUnited States have made significant commit-ments to new border security initiatives,including the Shared Border Accord (1995),the Smart Border Declaration and Action Plan (2001), and the Security and ProsperityPartnership (2005). In addition, we havesuccessfully formalized several facilitationprograms to identify low-risk travellers and goods.

The Government of Canada is working withkey Canadian allies to advance border solutionsthrough interdepartmental, trilateral andbilateral working groups, close monitoring ofthe work of the North American CompetitivenessCouncil, and an assessment of the BorderWait-Time Management Project. We are alsoimproving measurement, monitoring andanalysis of the border environment. For

example, we are using better metrics tomeasure delays at crossings and conductingtimely economic analysis.

However, Canada continues to face challengesflowing from some unilateral U.S. securityinitiatives that seek to secure the northernborder. This issue is significant for Canada,given our integrated economic relationshipwith the U.S. and our people-to-people ties.Increased border security has increased the costs of cross-border trading for manycompanies and may affect future investmentdecisions.

Recently introduced U.S. security measuresfor example, the Western Hemisphere TravelInitiative, the collection of agriculturalinspection fees, increased inspections as partof risk-management programs, and increasedsecurity resources and surveillancetogethersignal significant compliance costs for ourintegrated manufacturing and transportationsectors. They also potentially devalue theattractiveness of risk-management trade and


CHAPTER 3Current Issues

trusted traveller programs; cause investmentand job losses; and could lead to larger futurecosts such as those resulting from diminishedeconomic confidence. Because the implicationsof increased compliance costs are of seriousconcern to Canada, we are continuing tocollaborate closely with the U.S. via a range of channels to address ongoing border-relatedchallenges.

Softwood Lumber

Since it came into force on October 12, 2006,the Canada-U.S. Softwood Lumber Agreementhas functioned well, providing a stable andpredictable trade environment for Canadiansoftwood lumber producers. The agreementprovides for the imposition of a volume restraintand/or an export charge on exports ofsoftwood lumber products to the United Stateswhen the price of lumber is at or belowUS$355 per thousand board feet. The fundscollected from the export charges stay inCanada. In January 2008, $467.5 million inexport charge amounts were disbursed amongsix Canadian provinces.1 Canada remainscommitted to the success of the SoftwoodLumber Agreement for its seven-to-nine yearlifespan.

BSE

Following Canadas announcement of its firstbovine spongiform encephalopathy (BSE)case in Alberta on May 20, 2003, most of ourtrading partners banned imports of Canadiancattle, beef and related products. Since then,Canada has been working with these tradingpartners toward a resumption of trade based

on science and standards established by the World Organisation for Animal Health(OIE). The OIE is the relevant internationalstandards-setting organization for animalhealth referenced in the WTO Agreement onthe Application of Sanitary and PhytosanitaryMeasures.

On May 22, 2007, at the OIEs 75th GeneralSession in Paris, Canada was officiallyrecognized as a controlled risk country forBSE. This recognition was the result of acomprehensive evaluation by the OIEs BSEexpert panel of Canadas BSE risk mitigation,surveillance and eradication measures. Havingachieved this designation, Canada is able tocertify that its beef and cattle exports meet theconditions for safe trade under the OIE Code.On this basis, Canada has been requestingtrading partners to resume full trade in beefand cattle.

On July 12, 2007, Canada announced theimplementation of an enhanced feed banunder which certain cattle tissues that arecapable of transmitting BSE, known asspecified risk material, are banned in allanimal feed, pet food and fertilizer. The banrepresents a significant step toward acceleratingthe elimination of BSE from Canadian cattle,and supports Canadas status as an OIE-recognized controlled-risk country for BSE.

On November 19, 2007, the U.S. Departmentof Agriculture implemented its final BSESecond Rule. As a result, the U.S. market isnow open to the vast majority of Canadianbeef and cattle exports.


Chapter 3Current Issues

1 Industry Canada, Government of Canada Delivers on the Promise of the Softwood Lumber Agreement [online], news release, January 11, 2008,www.cra-arc.gc.ca/newsroom/releases/2008/jan/nr080111-e.html.

http://www.cra-arc.gc.ca/newsroom/releases/2008/jan/nr080111-e.html

Live cattle for breeding

Beef from animals under 30 months

All beef

All beef and all cattle

Boneless beef from animals under 30 months

All boneless beef

Beef from animals 20 months and under

Boneless beef from animals under 30 monthsand Live cattle for breeding

Algeria

Antigua andBarbuda

Bahrain

Barbados

Bermuda

Cayman Islands

Cuba

Egypt

El Salvador

Guatemala

Honduras

Hong Kong

Indonesia

Jamaica

Japan

Lebanon

Macau

Macedonia

Mexico

Morocco

New Zealand

Philippines

Russia

Saint Kittsand Nevis

Serbia

Taiwan

Thailand

Trinidadand Tobago

Tunisia

Ukraine

United Arab Emirates

United States

Vietnam

Croatia

The following markets have now resumed full or partial trade in beef and cattle with Canada:


Chapter 3Current Issues

CHAPTER 4Regional and Bilateral Free TradeAgreements and Other Initiatives

Introduction

Canada has reinvigorated its regional andbilateral free trade agreement (FTA) agendain line with the governments resolve to ensurethat Canadian businesses can compete inworld markets.

With its trade-oriented and globally integratedeconomy, Canada benefits from an open,transparent and rules-based internationaltrading systemat the multilateral, regionaland bilateral levels. FTAs help level the playingfield for Canada vis--vis competitors who haveagreements with markets of interest, and alsohelp to secure Canadian investments. Theyoffer enhanced market access for a broadrange of Canadian goods and services. Andthey encourage Canadian businesses toexpand into foreign markets and boost livingstandards by creating jobs in Canada.

In addition to the North American Free TradeAgreement (NAFTAwhich entered intoforce on January 1, 1994), Canada has FTAs

with Israel (January 1, 1997), Chile (July 5,1997) and Costa Rica (November 1, 2002).Canada will continue to look for ways to create new market opportunities that willmake the Canadian economy stronger andmore successful within the rapidly changingglobal economy.

European Free Trade Association

Canada and the European Free TradeAssociation (EFTA) signed an FTA on January 26, 2008, on the margins of the World Economic Forum in Davos, and entry into force is expected by early 2009. Free trade negotiations with EFTA, whichcomprises Iceland, Liechtenstein, Norway and Switzerland, were launched in 1998.

The agreement is Canadas first FTA with any European countries and our first FTA inmore than six years. It will bolster our existingcommercial relationships with the EFTAcountries, and broaden Canadian access tothese valuable European markets. The direct


commercial benefits to Canada will come fromthe elimination of duties on all non-agriculturalgoods and from the elimination or reductionof tariffs on selected agricultural exports. The FTA also provides a platform forCanadian business to tap into EuropeanUnion value chains.

Peru

The conclusion of free trade negotiations withPeru was announced by Minister Emerson onthe margins of the World Economic Forum inDavos, Switzerland, on January 26, 2008.Negotiations began in June 2007.

Under the agreement, Peru will providegreater market access for a range of Canadianagricultural products, as well as non-agriculturalproducts such as paper products and machineryand equipment. The agreement also containsprovisions on cross-border trade in services of interest to Canada in sectors includingmining, energy and professional services. Inaddition, the FTA will provide greater stability,transparency and protection for Canadianinvestments in Peru, creating a more receptiveenvironment for the rapidly growing stock ofCanadian investment in that economy.

Provisions on the environment, biodiversity andcorporate social responsibility are included in an environment agreement. A labourcooperation agreement, which includesenforcement obligations and associatedpenalties, has also been negotiated. Thiscomprehensive agreement sets a new standardfor labour provisions in Canadas FTAs.Following a legal review of the negotiatedtexts, the FTA will be signed by the parties and proceed to each countrys respectivelegislatures for ratification.

Colombia

Free trade negotiations with Colombia(launched in June 2007) are ongoing. Canadaremains committed to concluding a deal inthe near future.

A number of Canadas competitors have alreadyconcluded FTAs with Colombia. A Canada-Colombia FTA would help level the playingfield for a broad range of Canadian goods and services, and also help secure Canadianinvestments. There is potential for gains in a variety of sectors including agriculture and agri-food, mining, machinery and equipment,and financial and professional services. As well as providing new market opportunities for Canadian business, an FTA would fosterincreased cooperation between Canada andColombia to help Colombia maximize theopportunities and benefits deriving from the Agreement.

Dominican Republic

In June 2007, Canada announced the launchof FTA negotiations with the DominicanRepublic. The first full round of negotiationswas held in December 2007 in Ottawa.Canada anticipates that a second round ofnegotiations will take place following theDominican Republics presidential elections,scheduled for May 2008. To date, negotiatorshave made considerable progress on a rangeof issues, including market access for goodsand services, investment, rules of origin andtrade facilitation.

The Dominican Republic is an established and growing destination for Canadian goods(e.g. mineral fuels, equipment, machinery,agri-food and fish products) and for services


Chapter 4Regional and Bilateral Free TradeAgreements and Other Initiatives

and investment (e.g. in the financial, mining,tourism and engineering sectors). A free trade agreement with the Dominican Republicwould strengthen the bilateral economicrelationship, and better position Canadianbusiness vis--vis competitors that currentlyhave preferential market access (e.g. theUnited States and European Union). It wouldalso promote a more stable and predictableenvironment for investors.

Canada is pursuing a comprehensive FTA,which would cover a wide range of areasincluding trade in goods and services,investment and government procurement.Canada is seeking tariff elimination on arange of commercially significant agriculturaland industrial products, and is working toaddress non-tariff barriers.

CARICOM

In July 2007, Prime Minister Harper andCaribbean Community (CARICOM) heads of government announced the launch ofnegotiations toward a comprehensive FTA.The inaugural meeting was held in October2007 in Kingston, Jamaica. The first full round of negotiations may take place in earlysummer 2008, although a firm date has not yet been set.

CARICOM (consisting of Antigua andBarbuda, the Bahamas, Barbados, Belize,Dominica, Grenada, Guyana, Haiti, Jamaica,Montserrat, Saint Lucia, Saint Kitts and Nevis,Saint Vincent and the Grenadines, Suriname,and Trinidad and Tobago) is an establishedmarket for Canadian goods, services andinvestment. A comprehensive agreement

would create market opportunities forCanadian exporters of goods and services anda more transparent, stable and predictableenvironment for Canadian business.

There are potential gains in several goodssectors including industrial goods (e.g.pharmaceuticals and electrical equipment),agriculture (e.g. french fries, pork and pulses)and fish and seafood. Potential gains are also expected in various services sectors (e.g. professional services and research and development) and in investment (e.g.financial services, oil and gas, and tourism).

Canada is seeking a comprehensive andmodern trade agreement with CARICOM that would cover issues besides trade in goods,services and investment. Canada will take into account different levels of development,the vulnerabilities of island states, and trade-related capacity challenges during thenegotiation process.

Central America Four

FTA negotiations between Canada and theCentral America Four (CA4) countries of El Salvador, Honduras, Nicaragua andGuatemala were launched in November 2001.After 10 full rounds, the negotiations are well-advanced. A number of chapters in theagreement have been completed or are nearcompletion, while some of the more sensitiveissues require further work. Officials last metin October 2006 in Ottawa. Although thediscussions were useful, considerable differencesremain on key issues, including market access.A date for the next meeting has not been set.



Canada remains committed to concluding acomprehensive and balanced FTA with theCA4 countries that yields benefits to all parties.Canada is seeking an FTA that will allowCanadian exporters to compete on a levelplaying field with competitors in the region, in particular the United States, which has anFTA with these countries.

Canada is seeking to reduce or eliminate CA4tariffs on exports of key Canadian interest,including petroleum products, wood andpaper products, industrial and electricalmachinery, beef, pork, pulses and frozenpotatoes, and to create a more stable andpredictable business environment forCanadian investors.

South Korea

In July 2005, Canada and South Korea (Korea)launched negotiations toward a comprehensiveFTA. Thirteen full rounds of negotiations have been conducted, the latest in March 2008in Ottawa.

A conclusion to the negotiations is withinreach, but the remaining issues will be difficultto resolve. The government will continue toconsult with Canadian stakeholders and willnot conclude negotiations until it has anagreement that meets the needs of Canadians.Canada is seeking an ambitious and high-qualityFTA with Korea that provides real marketaccess opportunities for Canadian exporters,including Canadian automotive manufacturers.The majority of responses to Canadasdomestic consultations have been positive.

An FTA with Korea would deliver significantcommercial benefits to Canada. Results frommacroeconomic modelling suggest that if theFTA had been fully in place in 2005, Canadiangoods exports to Korea might have been 56%higher and Canadian GDP $1.6 billion greater.Sectors that could benefit from an FTA includeagriculture and agri-food, fisheries, forestryand other natural resources, machinery andequipment, and financial and professionalservices.

The signing of the Korea-U.S. FTA (KORUS)last June, coupled with Koreas ongoingnegotiations with the European Union,underlines the importance of maintainingCanadas competitiveness in this strategicAsian market, as well as the significance of Korea as a strategic trading partner inNortheast Asia.

Singapore

The Canada-Singapore FTA negotiations were launched in 2001. Canada and Singaporecompleted the eighth round of negotiations in August 2007 in Ottawa. Negotiations are at an advanced stage, with many elementsalready finalized. Despite progress, more workremains to be done on issues such as marketaccess for services and investment in order tosecure a satisfactory outcome for Canadians.

An FTA would raise Canadas profile inSingapore, facilitate goods and services trade,and improve Canadas ability to participate in global value chains. High-growth, export-oriented services sectors such as financial andprofessional services stand to benefit the mostthrough improved access to opportunities inSingapore, a pre-eminent hub in the region.



Jordan

In July 2007, Prime Minister Harper and KingAbdullah II of Jordan agreed to study thefeasibility of an FTA. Canada and Jordan heldexploratory discussions in November 2007 to discuss the scope of a potential FTA, andnegotiations were launched on February 20,2008. The first round of negotiations was heldin Amman from April 13 to 17, 2008, with thesecond round scheduled for July 28 to August 1,2008, in Ottawa.

An FTA with Jordan could generate increasedexport opportunities for Canada in a variety ofsectors including manufacturing, agricultureand agri-food, and forest products. Jordan has FTAs with some of our key competitors(e.g. the United States and European Union),and a Canada-Jordan agreement would helpensure a level playing field for Canadianexporters.

Panama

Canada and Panama have strong, well-established economic ties and commercialrelations that continue to expand. At therequest of Panama and in accordance withCanadas re-engagement with the Americas,Canada has agreed to exploratory FTAdiscussions with Panama to better assess thepotential scope and benefits of a prospectiveFTA. If the outcome of the talks is positive, thegovernment would embark on comprehensiveconsultations with stakeholders across Canadabefore taking any decision to begin negotiations.

Other Initiatives

European Union-Canada Study on the Costsand Benefits of a Closer Economic Partnership

At the June 2007 Canada-European Union(EU) Summit in Berlin, the European Unionand Canada agreed, among other things, tocooperate on a study to examine the costs andbenefits of a closer economic partnership.This study will examine existing barriers,especially non-tariff barriers, to the flow ofgoods, services and capital, and estimate thepotential benefits of removing such barriers.The study will also identify how such apartnership could complement ongoingefforts to enhance bilateral cooperation inareas such as science and technology, energyand the environment.

Leaders will review the results of the study at the 2008 Canada-EU Summit, with a view to pursuing balanced and closer futureCanada-EU economic integration. Whileneither the European Union nor Canadashould presuppose the outcomes of the study,Canada hopes the study will help lay thefoundation for leaders to take ambitious stepstoward enhancing the Canada-EU economicrelationship at the summit.

Canada-Japan Joint Study

The Canada-Japan Joint Study was launched at the signing of the Economic Framework in November 2005 by the prime ministers ofeach country. The objective of the study was to assess the costs and benefits of furtherpromoting and liberalizing bilateral trade and investment. Released in October 2007, the study highlighted the positive economic



relations between Canada and Japan andindicated that more could be done tostrengthen our commercial ties. It identified a number of initiativessuch as enhancedcooperation on food safety and continuedefforts toward a double taxation agreementthat would promote future bilateral economicrelations. At the January 2008 meeting of theCanada-Japan Joint Economic Committee,Canada and Japan agreed to engage infocused discussions on the establishment of a trade and investment dialogue that wouldaddress regulatory cooperation, trade policyand the overall business environment. Suchdiscussions will enable us to strengthen ourcooperation efforts with Japan.

Regulatory Cooperation

Through various regulatory cooperationinitiatives, Canada continues to collaboratewith key partners with the goal of providinggreater economic opportunity for all partieswhile protecting the health and safety of itscitizens and their environment. Canada iscurrently at differing stages of broad-basedregulatory cooperation with its NAFTApartners (the United States and Mexico), the European Union and Japan.

With the implementation of NAFTA Canadahas achieved free trade with the United Statesand Mexico. However, the benefits could befurther enhanced through closer cooperationon regulatory issues. The non-binding NorthAmerican Regulatory Cooperation Framework(RCF) enables the NAFTA partners to pursuefurther regulatory cooperation aimed atlowering costs for North American businesses,producers, governments and consumers;

maximizing trade in goods and services acrossour borders; while protecting health, safetyand the environment. In order to enhanceNorth American competitiveness in globalmarkets, ongoing work is taking place toimprove regulatory cooperation in prioritysectors (such as the automotive sector), which includes the development of regulatoryapproaches that are compatible across ourborders. New areas for cooperation continueto be identified and pursued under the RCF,which was adopted in August 2007 at theNorth American Leaders Summit inMontebello, Quebec.

The non-binding Framework on RegulatoryCooperation and Transparency, implementedthrough the Canada-EU Roadmap forRegulatory Cooperation, continues to advanceregulatory cooperation in sector-specific areassuch as chemicals and food allergen labelling.The Canada-EU Framework and the Roadmapalso facilitate regulatory cooperation onhorizontal issues. New areas of cooperationcontinue to be identified for the Roadmap,which was adopted in June 2007 at theCanada-EU Summit in Berlin. Progress inregulatory cooperation with the EU could befurther strengthened by concluding a stand-alone regulatory cooperation agreement, as called for by leaders at the June 2007Canada-EU Summit.

Pursuant to the recently concluded Canada-Japan Joint Study, Canada is developing aregulatory cooperation initiative with Japan.In addition, Canada has a variety of issue-specific dialogues on regulatory matters with a range of other commercial partners and isopen to considering additional broad-baseddialogues where appropriate.



CHAPTER 5Getting the International Rules Right

Canada and the World Trade Organization

Canadas membership in the World TradeOrganization underpins Canadian tradepolicy and is an important avenue to achievingCanadas market access goals. The WTO rulesgovern the trade relations of the 152 membersof the organization.2 The WTO agreementsare the building blocks of the multilateraltrading system. They are negotiated andsigned by member countries, and then ratifiedby member countries elected representatives.

The two basic principles of the WTO are asfollows: equal treatment for all WTO members(the most-favoured-nation clause), underwhich countries cannot normally discriminatebetween their trading partners; and nationaltreatment (treating foreigners and locals

equally), under which imported and locallyproduced goods, foreign and domesticservices, and foreign and local trademarks,copyrights and patents must be treatedequally.

The WTO provides a forum for negotiatingmarket access and other trade rules.Importantly, it also provides the best forumfor monitoring the implementation ofobligations and commitments under varioustrade agreements, reviewing members tradepolicies and practices, and discussing trade-related issues that inhibit the free, fair andpredictable flow of trade. The WTO also offersa state-to-state dispute settlement system,whereby trade disputes are settled based oncommonly agreed-on rules, rather thanpolitical or economic power.


2 In December 2007, the WTO General Council approved the accession of Cape Verde to the WTO in July 2008. This accession willbring membership of the WTO to 153.

Photo courtesy of the World Trade Organization

The Doha Round and Canadas Objectives

The Doha Development Agenda (Doha Round)negotiations were launched in Doha, Qatar, in November 2001. This development-focusedround includes negotiations on agriculture;non-agricultural market access services; WTOrules on antidumping and subsidies disciplines,including fisheries sector subsidies; WTO ruleson regional trade agreements; and tradefacilitation. Development-related considerationsare to inform all negotiating areas.

Although deadlines in these negotiations havebeen repeatedly missed, progress has beenmade in some areas (e.g. an agreement toeliminate all agricultural export subsidies by the end of 2013), and members continue to work toward a successful conclusion of the round.

Canadas overall objective in these negotiationsis to secure an ambitious outcome that createsa level playing field for the agri-food sector;increases real market access for goods andservices; provides improved and clarified ruleson trade remedies and strong, binding ruleson trade facilitation; and secures a developmentoutcome that provides real benefits todeveloping countries. With respect to thedevelopment dimension of the round, Canadais seeking a balance between developmentobjectives, developing countries concerns and Canadian commercial interests. For thisreason, Canada supports effective special and differential treatment for developingcountries, the provision of trade-relatedtechnical assistance and capacity-building

activities, and greater institutional and policycoherence between the WTO and otherinternational institutions. These measures will help developing countries manage theirtransition to full participation in the globaleconomy. For more information on Canada andthe WTO, please visit www.international.gc.ca/tna%2Dnac/wto-en.asp.

Canadas approach to the Doha Roundnegotiations includes close collaboration withprovinces and territories and consultationswith stakeholders and the public to obtaintheir views and build awareness of the benefits of trade liberalization through the WTO process. As part of this effort, the governments trade policy website(http://geo.international.gc.ca/cip-pic/menu-en.aspx) will continue to provide up-to-dateinformation on the status of the negotiationsand to invite public comments on negotiatingpriorities and objectives.

Accessions of New Members to the World Trade Organization

Canada participates in the accessionnegotiations for all countries seeking to jointhe WTO. Negotiations take place on twotracks: multilateral and bilateral. Canadasoverall objectives are to ensure that accedingcountries are fully compliant with WTOobligations and to seek more open, secure and predictable access for Canadian goodsand services. Further information on theWTO accession process can be obtained atwww.wto.org/english/thewto_e/acc_e/acc_e.htm.


CHAPTER 6Getting the International Rules Right

http://www.international.gc.cahttp://geo.international.gc.ca/cip-pic/menu-en.aspxhttp://geo.international.gc.ca/cip-pic/menu-en.aspxhttp://geo.international.gc.ca/cip-pic/menu-en.aspxhttp://www.wto.org/english/thewto_e/acc_e/acc_e.htm

Dispute Settlement

Dispute settlement is the central pillar of the multilateral trading system. The disputesettlement mechanism underscores the rule of law and makes the trading system moresecure and predictable. The system is based on clearly defined rules, with timetables for completing each case. Canadaone of the most active participants in the disputesettlement systemis currently engaged infive dispute settlement cases as complainant,two as defendant and eight as third party.Canadas complaints include those related to tariff and market access issues, agriculturalsubsidies and technical barriers to trade inintellectual property. This activity illustratesCanadas firm commitment to the WTO rules-based system. For more information ondispute settlement, please see www.wto.org/english/tratop_e/dispu_e/dispu_e.htm#intro.

Trade Policy Review Mechanism

The WTO Trade Policy Review Mechanism(TPRM) is a peer review exercise designed toenhance the transparency of WTO memberstrade policy regimes and improve adherenceby all members to WTO rules and disciplines.All WTO members are reviewed, with thefrequency of each countrys review varyingaccording to its share of world trade. Canadaparticipates in the reviews of all WTOmembers, and is itself reviewed every fouryears (most recently in March 2007). Forinformation on Canadas review, please seewww.international.gc.ca/trade-agreements-accords-commerciaux/agr-acc/wto-omc/tpr07.aspx?lang=en. Further information on the TPRM can be found at www.wto.org/english/tratop_e/tpr_e/tpr_e.htm.


Chapter 5Getting the International Rules Right

http://www.wto.orghttp://www.international.gc.ca/trade-agreements-accords-commerciaux/agr-acc/wto-omchttp://www.international.gc.ca/trade-agreements-accords-commerciaux/agr-acc/wto-omchttp://www.international.gc.ca/trade-agreements-accords-commerciaux/agr-acc/wto-omchttp://www.wto.org

United States

Canada has a long-standing and multi-dimensional relationship with the UnitedStates. Because of its size, proximity andfamiliarity to Canadians, the American marketremains the key to our economic prosperity.Canada and the U.S. share the largest bilateralflow of goods, services, people, capital andtechnology of any two countries in the world.

However, Canada can no longer take its specialposition in the U.S. for granted. Globalizationis making Canadas proximity advantage lesssignificant, and bilateral and multilateraltrade liberalization is reducing the margin of preference we enjoy as a result of NAFTA.Moreover, given the buoyancy of the Canadiandollar in the context of high commodity pricesand Canadas sound economic fundamentals,Canadian manufacturers are finding it toughto maintain their market shares. To meet thesechallenges, Canada must redouble its effortsto retain and improve its commercial positionwith the United States.


CHAPTER 6Opening Doors to North America

0

50

100

150

200

250

300

350

400

20072006200520042003

FDICDIA

Canadian Services ImportsCanadian Merchandise Imports

Canadian Services ExportsCanadian Merchandise Exports

2003

$ bi

llion

s

CANADA-UNITED STATES TRADE

UNITED STATES

Percentage change 2007 since 2006 (%)

Population 302 million 1.0

GDP $14.9 trillion 2.2

Canadian Merchandise exports $356.0 billion 0.9

Canadian Services exports $36.4 billion -2.7

Canadian Merchandise imports $220.4 billion 1.3

Canadian Services imports $49.9 billion 5.7

CDIA $226.1 billion -1.8

FDI $288.6 billion 8.0

All GDP figures in the tables are quoted at current prices, whereas annual percentage changes of GDP are calculated at constant prices.

There are always a number of complexbilateral issues at play in the Canada-U.S.relationship at any given time. Althoughseveral are currently garnering public attention,relations are in every other respect positiveand functioning well.

Current Issues

While we have resolved some commercialissues and made significant progress in othersover the past year, several challenges remain.For example, Canada is currently managing a wide variety of agricultural trade issues withthe U.S. These include the 2007 U.S. Farm Bill process, the establishment of a WTOpanel on U.S. agricultural subsidies atCanadas (and Brazils) request, market accessrelated to BSE, and concerns in the U.S. over the safety of imported products. AmongCanadas concerns is the lack of reform offarm programs in the 2007 Farm Bill, as wellas provisions on mandatory country-of-originlabelling and sugar. Canada will continue towork with the United States on a coordinatedapproach to food and product safety, and toactively engage on proposals introducing anynew import safety measures, such as additionalborder inspection fees, that could have asignificant impact on Canadian exports.

Another issue is the U.S. definition andtreatment of dual nationals within theInternational Traffic in Arms Regulations(ITAR), which has made it difficult for dualnationals in Canada to gain job-related accessto controlled technologies and data. As theCanadian Charter of Rights and Freedomsprotects against discrimination based onnationality, challenges have been broughtagainst Canadian organizations that havereassigned dual-nationality employees fromITAR-related projects. To address the issue, theU.S. State Department signed an exchange ofletters with Canadas Department of NationalDefence (on May 14, 2007) and with theCommunications Security Establishment,Canadian Space Agency and National ResearchCouncil (on June 19, 2007). While thesearrangements resolve the dual-nationalityproblem for the Canadian governmentdepartments that have signed an exchange ofletters, a solution is still needed for Canadiancompanies that provide support to theDepartment of National Defence and otherCanadian government operations. This is atop priority for the Government of Canada.

Additionally, administrative procedures byU.S. patent authorities, combined with judicialinterpretations of U.S patent law in circuitcourts, create a situation that encourageslitigation in the United States. Canadiancompanies that rely primarily on patents tocarry out operations in the U.S. may have todevote significant resources to litigation, whichin turn affects their ability to do business.


Chapter 6Opening Doors to North America

Western Hemisphere Travel Initiative

A key concern for Canada is unilateral U.S. border securitymeasures and their impact on cross-border trade and travel,including new document requirements for entry to the U.S. underthe Western Hemisphere Travel Initiative (WHTI). Canada has beenworking with the U.S. to ensure that implementation of the WHTIon land and sea, to be implemented in June 2009, is managed ina way that facilitates the flow of trade and travellers across theborder while ensuring the security of the two countries.

Canada was the largest energy supplier to theUnited States in 2007. Consequently, expectedclimate change legislation will need closemonitoring and possibly intervention toensure Canadian views and interests are takeninto consideration. Opportunities exist forcollaboration on conserving and sustainablydeveloping existing energy resources,increasing energy efficiency, developingalternative energy sources and representingNorth American interests at multilateralenergy meetings.

Security and Prosperity Partnership

The Security and Prosperity Partnership of North America was a main theme at theNorth American Leaders Summit held inMontebello, Quebec, in August 2007. At thatmeeting, the leaders of Canada, the U.S. andMexico discussed the partnerships value as amechanism for achieving tangible results andnoted the progress made on the RegulatoryCooperation Framework, the IntellectualProperty Action Strategy, and the TrilateralAgreement for Cooperation in Energy Scienceand Technology. Further, they directed ministersto focus on five priority areas: enhancing theglobal competitiveness of North America, foodand product safety, smart and secure borders,sustainable energy and the environment, andemergency management and preparedness.

Mexico

Mexico is a strategic commercial partner forCanada. Over the past year, Mexicos economyhas continued to demonstrate macroeconomicstability. Mexico has also demonstrated itscommitment to trade liberalization at thebilateral, trilateral and multilateral levels andcontinues to make progress domestically indeveloping a competitive business environmentthat encourages and supports foreign directinvestment and job creation.



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MEXICO


Population 105.4 million (IMF est.) 1.1

GDP $960.2 billion 3.3


Canadian Services exports $635 million (2005)


Canadian Services imports $1.2 billion (2005)

CDIA $5.1 billion -2.3

FDI $294 million 3.5

NAFTA has propelled the Canada-Mexicorelationship to unprecedented levels of trade,investment and cooperation. Based on importstatistics from both countries, bilateralmerchandise trade has almost quadrupledsince NAFTA entered into force in 1994, andMexico is now Canadas fifth most importantmerchandise export market and third mostimportant supplier.

An increasingly reliable and transparentregulatory environment has led to the creationof more than 1,900 subsidiaries of Canadiancompanies in Mexico. According to Mexicanstatistics, Canada is the fifth largest investor inMexico overall, and the largest investor in themining sector. Mexican investment in Canadais small with some potential for growth.

Our trade and investment relations withMexico are critical to increasing ourcompetitiveness within North America and to meeting the challenges posed by newplayers in an increasingly integrated globaltrading network.

Trade relations between Canada and Mexicobenefit from the high-level engagement ofofficials from both countries. Canada andMexico work closely together as NAFTApartners but have increasingly looked for waysto expand the relationship through the use ofnew and innovative mechanisms such as thetrilateral Security and Prosperity Partnershipof North America and the bilateral Canada-Mexico Partnership.

Despite rapidly increasing levels of trade,Canada and Mexico have few trade irritants.Challenges over the next year include possibleprotectionist pressures resulting from the final NAFTA tariff elimination and increasedcompetition from China, although this isunlikely to affect Canada-Mexico trade. Toensure fair access for Canadian exporters, the Government of Canada will continue to monitor the implementation of the 2008NAFTA provisions, which include removal of remaining trade restrictions on the importof corn and beans. The government will beparticularly vigilant regarding any measuresimplemented by Mexico that could affectCanadian access. These and a number of other important issues are described in this documents associated database atwww.international.gc.ca/trade-agreements-accords-commerciaux/cimar-rcami/index.aspx?lang=en.



Canada-Mexico Partnership

The Canada-Mexico Partnership (CMP) was launched in October2004. This high-level public-private forum is strengtheningbilateral economic and policy cooperation and promotingdiscussion among the private and public sectors at the highestlevels. The partnership helps focus additional efforts on importantissues, such as economic development, in a manner thatcomplements existing work.

Additionally, the CMPs mandate includes identifying obstacles to trade and investment and making recommendations for theirremoval. The expanding partnership now includes seven workinggroups: trade-investment-innovation; agri-business; housing;human capital; energy; labour mobility; and environment and forestry.

The sixth CMP meeting took place on March 4 and 5, 2008, inOttawa. For more information, please visit www.mexico.gc.ca.

http://www.international.gc.ca/trade-agreements-accords-commerciaux/cimar-rcamihttp://www.international.gc.ca/trade-agreements-accords-commerciaux/cimar-rcamihttp://www.international.gc.ca/trade-agreements-accords-commerciaux/cimar-rcamihttp://www.mexico.gc.ca

Since 2006, Mexico has reopened its border toCanadian boneless and bone-in beef productsfrom cattle under 30 months of age and hasbeen working with Canada on negotiatingaccess for beef products from animals over 30 months. Canada and Mexico have now also negotiated a protocol for the export ofbreeding cattle from Canada into Mexico. TheGovernment of Canada will also continue towork with both Mexico and the United Stateson a coordinated North American approachto the regulatory and trade aspects of BSE.

Following the outbreak of avian flu in Canadain 2004, Canada has been working withMexico to regain access for Canadian livepoultry and poultry products to Mexico.

North American Free Trade Agreement

In January 1994, Canada, the United Statesand Mexico launched the North AmericanFree Trade Agreement, forming the worldslargest free trade area with a marketplace ofnearly 440 million potential consumers. Inaddition to eliminating virtually all tariffs on traded goods originating within the area,NAFTA has provided a framework to supportstrong growth in trade and investment for allthree countries:

Canadas merchandise trade with itsNAFTA partners has increased 122% since1993, reaching $598.4 billion in 2006.

Bilateral trade between Mexico andCanada reached $22.1 billion in 2007, a 387.6% increase from pre-NAFTA levels (1993).

NAFTA partners accounted for 80.1% ofour total merchandise exports in 2007.

Approximately 57% of Canadas servicesexports went to our NAFTA partners in 2005.

North American firms have taken fulladvantage of rapidly changing patterns inglobal value chains, with intra-firm tradeaccounting for 30.3% of Canada-U.S. trade in goods in 2005.

Efforts to further enhance and facilitateCanadas trade and investment partnershipsare ongoing. Some highlights are outlinedbelow.

Rules of Origin

Rules of origin (ROOs) enable customsofficials to determine which goods are entitledto preferential tariff treatment under NAFTA.Liberalizing the rules gives producers moreflexibility in sourcing inputs, making it easierfor them to qualify for preferential NAFTAtreatment.

In February 2008, the NAFTA Working Groupon Rules of Origin concluded negotiations on a third package of changes that wouldliberalize the rules of origin for a variety ofgoods representing as much as $95 billion in trilateral trade. It is expected that theliberalizing amendments will be implementedtrilaterally later this year, and work has alreadybegun on a fourth package of changes.



The NAFTA Sectoral Approach

At the August 2007 NAFTA Commissionmeeting, the three North American tradeministers committed to continuing to build amore competitive North American businessplatform that will ease the flow of goods,services and capital among our countries.Specifically, the ministers approved focusedwork in four key sectors: swine/hogs, steel,consumer electronics and chemicals.

To help North Americas swine sector competemore effectively, the trade ministers agreed to develop coordinated approaches to settingstandards, regulations and performanceobjectives; to work on ways to prevent borderdelays; and to share research. The ministersalso agreed to explore the possibility ofdeveloping protocols to ensure a predictable,coordinated response within North Americain the event of an outbreak of swine-relateddiseases.

Through the work of the North AmericanSteel Trade Committee, which comprisesgovernment and industry representatives, the NAFTA partners regularly exchangeinformation and views on developments andemerging issues in the North American steelmarket, with the goal of identifying mutuallybeneficial solutions. The committee iscurrently undertaking a comprehensiveanalysis of trade barriers in this industry. Once the analysis is complete, the partnerswill make recommendations to enhance the competitiveness of North Americas steel industry.

To help electronics firms succeed in all threecountries, the North American trade ministersagreed to work together to lower barriers totrade in the sector and to ensure it has thetools and market access it needs. The ministersalso agreed to work with the trilateralCommission for Environmental Cooperationto explore ways to address the environmentalimpacts of the disposal of consumer electronics.

With regard to the chemical sector, the trade ministers agreed to facilitate trade by developing a work plan to address tradeimpediments and to help make this industrymore globally competitive and cost-effective.

NAFTA has helped to create new market andpartnering opportunities for companies, aswell as new and more competitively pricedchoices for consumers. It has established astrong foundation for our prosperity and has paved the way for the NAFTA partners to further advance their trade liberalizationagenda.

Settling Disputes Under NAFTA

NAFTA provides a dispute settlement processto resolve the disputes that inevitably arise insuch a large trade and economic relationship.Under NAFTA, our businesses can trade andinvest with the assurance that rules are providedto ensure fair treatment and that proceduresare in place to settle disputes impartially, onthe rare occasions when they occur.



NAFTAs Chapter 19 on Antidumping andCountervailing Duties offers exporters aneffective and direct route for making theircase and appealing the results of trade-remedyinvestigations before an independent andobjective panel. NAFTAs Chapter 20 onGeneral Dispute Settlement can be used when the parties cannot, through informaldiscussions, resolve their differences regardingthe implementation or interpretations ofNAFTA provisions.

Other dispute settlement provisions underNAFTA include those in Chapters 11(Investment) and 14 (Financial Services).Chapter 11, in particular, focuses on disputesbetween investors and NAFTA parties. Itoffers a mechanism for settling investmentdisputes that assures both equal treatmentamong NAFTA investors (in accordance withthe principle of international reciprocity) and due process before an impartial tribunal.

A significant case involving Canada as a partywas recently resolved. In this case, the claimsof the U.S. investor, UPS, were rejected by thearbitration panel. Other cases have involvedCanadian investors using the Chapter 11process against Mexico or the U.S. Examplesof these cases include those brought by Glamis Gold, Canadian Cattlemen for FreeTrade and Thunderbird.

For more information on NAFTA Chapter 11investor-state dispute cases, please visitwww.international.gc.ca/trade-agreements-accords-commerciaux/disp-diff/nafta.aspx?lang=en. For more information on NAFTA Chapter 20 panel decisions andreports, please visit www.nafta-sec-alena.org/DefaultSite/index_e.aspx?DetailID=76.



http://www.international.gc.ca/trade-agreements-accords-commerciaux/disp-diffhttp://www.international.gc.ca/trade-agreements-accords-commerciaux/disp-diffhttp://www.international.gc.ca/trade-agreements-accords-commerciaux/disp-diffhttp://www.nafta-sec-alena.org

CHAPTER 7Opening Doors to Asia

Asia-Pacific Economic Cooperation

The Asia-Pacific Economic Cooperation(APEC) forum is a unique intergovernmentalmechanism encompassing major economieson both sides of the Pacific. Its membershipaccounts for close to 40% of the worldspopulation and over 50% of global GDP. Since its inception in 1989, APEC membereconomies average tariffs have decreasedsignificantly, from 16.6% in 1988 to 6.4% in 2004.3

Asian economic integration has been a key priority within Asia since the economic crisis in 1997, and there is some concern this integration will come at the expense oftrans-Pacific relationships. Because APEC isthe only trans-Pacific, leader-level forum inwhich Canada participates, Canada needs touse it to engage its Asian partners.


Population 2.7 billion 0.7

GDP $29.2 trillion

Canadian Merchandise exports $393.7 billion -0.1

Canadian Services exports $44.9 billion (2005)



Known CDIA $267.5 billion -1.0

Known FDI $308.1 billion 8.3

Note: Services Trade Statistics do not include Brunei Darussalem,Papua New Guinea and Peru.

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ASIA-PACIFIC ECONOMIC COOPERATION

3 Asia-Pacific Economic Cooperation, APEC at a Glance [online], 2006,www.apec.org/apec/publications/all_publications/apec_secretariat.html.


http://www.apec.org/apec/publications/all_publications

At the recent APEC Economic LeadersMeeting in Sydney, Australia, Canada continuedto pursue its trade policy objectives, includinga successful conclusion of the Doha Round ofWTO negotiations and greater market accessfor Canadian businesses, especially women-owned enterprises. This workcoupled with efforts made by other APEC membercountries on transparency within government,intellectual property rights, anti-corruptionmeasures and trade facilitationhasimproved prospects for Canadian businessesin the Asia-Pacific region.

China

In 2007, Chinas economy continued to poststrong gains, with GDP growing by 11.4% that year. Growth is expected to be moderatein 2008 amid domestic credit tightening,international economic uncertainty andweakening demand in major export markets.

Bilateral trade with Canada continued toincrease at a rapid rate, consolidating Chinasposition as Canadas second largest merchandisetrading partner. In 2007, China was our thirdlargest merchandise export market, followedby Japan.

Canada and China continue to work togetherto increase two-way flows of investment.Minister Emerson and Chinese Minister ofCommerce Chen Deming agree that theconclusion of a foreign investment promotionand protection agreement (FIPA) is a priority.A FIPA would be to both countries advantage,encouraging bilateral investment and protectinginvestors, while preserving the authority ofgovernment to regulate investments in thebest interests of the public.

China and Canada continue to deepencollaboration in innovation following theScience and Technology Agreement signed in January 2007. Joint projects will beundertaken in four agreed-upon prioritysectors (energy, environment, health and life sciences, and agricultural foods and bio-products). As well, two new areas forcollaboration have been identified:nanotechnology and information andcommunications technologies.

Chapter 7Opening Doors to Asia








Canadian Services imports $819 million (2005)

CDIA $1.8 billion 14.2

FDI $616 million

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CHINA

A number of issues continue to impede accessto the Chinese market for Canadian businesses,notably import requirements on agriculturaland food products. Although progress hasbeen made, some portions of the economy do not operate under market conditions.Furthermore, policies to encourage thedevelopment of prominent state-owned andstate-controlled enterprises are affectingmarket access in a number of Chinesedomestic sectors and raising worries regardingcompetition in export markets. For example, a number of Canadian industries have voicedconcerns regarding Chinese governmentsubsidies and support for certain Chinesemanufacturing sectors (e.g. steel production).Canada, along with other WTO members suchas the United States and the European Union,has raised these issues and sought clarificationregarding Chinese programs at the WTO and,in the case of steel, at the Organisation forEconomic Co-operation and Development.

Hong Kong

With its free and transparent market economy,Hong Kong has relatively minimal barriers toentry or doing business, though there remaincertain market access issues in the agricultureand services sectors. Hong Kong holds manyopportunities for Canadian businesses, notonly as a dynamic and wealthy market but alsoas a gateway to China.



China and Intellectual Property

China has taken steps to improve its legal framework onintellectual property since its accession to the World TradeOrganization in 2001. However, enforcement and protection ofintellectual property rights continues to be a concern affectingChinas domestic and export markets. This has prompted Canadato join, as a third party, the U.S.-led WTO panel examining Chinas intellectual property rights regime. Canada also recentlyannounced its participation in preliminary discussions toward apotential anti-counterfeiting trade agreement with like-mindedparties including the U.S., Japan, the European Union, Switzerlandand Mexico.


Population 6.98 million 0.9

GDP $222.2 billion 6.3

Canadian Merchandise exports $1.5 billion -3.3


Canadian Merchandise imports $532.2 million 3.8


CDIA $4.5 billion 9.4

FDI $6.2 billion (2005)

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Canada has a particular asset in Hong Kong:over 220,000 people in Hong Kong are ofCanadian nationality, and approximately 16% of Hong Kong citizens have studied inCanada.4 This creates an enormous reservoirof contactsof people familiar with Canadaand open to the idea of doing business withCanadian companies.

India

Business opportunities in India are virtuallyunlimited, and the world is taking notice. Theworlds largest democracy offers huge businesspotential with its large English-speakingworkforce and a middle class expected toreach almost 600 million by 2025.5 Canadiancompanies are already finding success in theIndian market, and many more opportunitiesare emerging for the application of Canadianexpertise.

Canada and India have concluded negotiationson a FIPA and are expected to sign in 2008.Once the agreement is signed, investmentshould increase. Areas of potential for Canadiancompanies include life sciences, infrastructure,natural resources, and information andcommunications technologies. Foreignownership restrictions in India are stillprevalent, especially in the financial sector;however, there is an emerging trend towardgreater liberalization in Indias investmentregime. Some sectors, such as infrastructure,are experiencing faster liberalization as Indiarealizes the need for more rapid growth inthese sectors.

Indias share of foreign direct investment inCanada is very small but increasing: 2007 sawan increase of Indian direct investment intoCanada directed toward software developmentcentres, educational technology firms and thetelecommunications industry.6

Canada remains committed to increasing itsaccess to the Indian market through a varietyof initiatives and strategies. For example, theGovernment of Canada continues to engage









Canadian Services imports $331 million (2005)

CDIA $207 million -58.9

FDI $446 million 100.9

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4 Hong Kong Baptist University Survey, 2007.

5 McKinsey Global Institute, The Bird of Gold: The Rise of Indias Consumer Market, May 2007.

6 www.asiapacific.ca/news/chrono_search.cfm.

http://www.asiapacific.ca/news/chrono_search.cfm

India through annual trade policy consultations,as well as regular technical discussions onmarket access issues. In February 2008, anAtlantic Gateway mission was launched thataimed to promote the ports of Nova Scotiaand existing infrastructure in Atlantic Canadaas the fastest route for goods travellingbetween India and Canada. As well, the GlobalCommerce Strategy will allow for an expansionof the Trade Commissioner Service in India tobetter serve its existing clients and attract newCanadian clients to Indias vibrant market.

Japan

Japans industrial strength, wealth, politicalstability and geographic location position it asa global and regional trading hub. Home to 67 Fortune 500 corporations, and the worldslargest exporter to China, Japan offers notonly a large and lucrative market in itself, but also provides a gateway to the boomingNorth Asian marketplace. Japan has beencharacterized as the worlds most innovativecountry. As a global leader in a range ofadvanced technologies, Japan ranks second in total research and development (R&D)expenditures, spending $130 billion7 comparedwith Canadas $26 billion.

Canada faces both threats and challenges inrealizing its fullest commercial potential inJapan. In recent years, the overall commercialrelationship has underperformed, over-shadowed by dynamic growth in bilateralrelations with other economic partners. The continuation of such trends, especially inlight of Japans aggressive program of bilateralnegotiations for preferential access withcountries such as Mexico and Chile, threatensCanadas market share.

Challenges for Canadian businesses includethe complexity of the Japanese market andlack of awareness of the immense marketopportunities present in Japan and its Asianneighbo

Documents

Access Report – 2008 - Organization of American States · Global Commerce Strategy ... our businesses and investors tap into global ... increasing by 3.2% to reach $502.5