WT/TPR/S/112 Trade Policy Review
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II. TRADE AND INVESTMENT POLICY FRAMEWORK
(1) INTRODUCTION
1. Canada's framework for trade and investment policy has not significantly changed since 2000.
This framework is based on shared federal-provincial competencies, and includes an agreement to
identify and reduce interprovincial barriers to trade and investment, as internal barriers distort
resource allocation.  Reflecting the importance of trade and foreign direct investment in the economy(see Chapter I), Canada's stated policy is to maintain open markets and grant foreign companies
national treatment, whilst securing access to foreign markets for Canadian firms.
2. Canada maintains a multi-track approach to trade and investment policy.  Canada holds the
WTO as the cornerstone of its trade policy and the foundation for its relations with trading partners,
and considers that multilateral, regional, and bilatera l initiatives are mutually reinforcing.  Within this
framework, Canada gives paramount importance to managing its relationship with the United States.
3. Since its last Review, Canada has been fully engaged in the current round of WTO
negotiations, with a view to strengthening existing rules and widening the scope of WTO disciplines.
At the same time, Canada has undertaken to negotiate preferential trade agreements with a number of
regional partners.  Canada's bilateral and regional initiatives have helped to establish an essentiallyoutward-oriented trade strategy (see Chapter III);  nonetheless, these efforts have also created an
elaborate system of preferential tariffs and rules of origin.   A multifaceted interaction between
Canada's federal system, regional integration, and multilateral liberalization greatly influence its
external relations in sectors considered sensitive, such as supply-managed farm products and cultural
activities (see Chapter IV).
(2) I
NSTITUTIONAL AND POLICY FRAMEWORK
4. Since its last Review, there have been no major changes to Canada's trade and investment
regime, which is one of the world's most transparent.  Transparency and accountability in policy-
making are enhanced by evaluation requirements for all federal and most sub-federal government
programmes.  In particular, all federal government programmes are evaluated for their cost, rationale,
and efficiency by the Office of the Auditor General.1  Provinces also have independent auditors.
5. The Department of Foreign Affairs and International Trade (DFAIT) is the leading federal
agency for international trade and investment policy formulation.  It coordinates with the Department
of Finance and with Industry Canada for international investment policy issues.2  DFAIT regularly
consults provinces and territories, as a number of matters covered by WTO provisions (e.g. subsidies,
procurement, technical regulations, services regulations) are subject to provincial legislation.
6. International agreements are not self-executing under Canadian law.  Implementing
legislation is necessary when Canada's treaty obligations are at variance with domestic law, including
under the WTO.  For the implementation of international agreements, the division of legislative
powers between the Federal Parliament and provincial legislatures is the same as for the adoption
of ordinary legislation.  Under the Constitution, only the Federal Parliament is authorized to
legislate on the regulation of international and interprovincial trade.  The Federal Government isfree in law to enter into international agreements without prior consultations with the provinces.  The
latter, however, have legislative jurisdiction over property and all local and private matters.  This
                                                     
1 For more information see Office of the Auditor General [Online].  Available at:  http://www.oag-
bvg.gc.ca/domino/oag-bvg.nsf/html/menue.html.
2 Industry Canada online information.  Available at:  http://www.ic.gc.ca.Canada WT/TPR/S/112
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gives them considerable leeway to enact legislation and conduct policies that affect trade or
investment.  Furthermore, certain areas have been recognized as being under shared jurisdiction,
either expressly in the Constitution, e.g. agriculture (subject to supremacy of federal legislation) or
through court rulings, e.g. the environment.  As a result, cooperation by the provinces is often
indispensable to implement international agreements.
7. As noted in Canada's previous Reviews, available information suggests significant differences
in trade and investment policies and practices between the federal and provincial governments, as well
as across provinces.  In order to mitigate the effect of these policy differences on internal trade, the
Agreement on Internal Trade (AIT), which came into  effect in 1995, aims to "reduce and eliminate, to
the extent possible, barriers to the free movement of persons, goods, services and investment within
Canada, and to establish an open, efficient and stable domestic market".3  The AIT's Secretariat
provides administrative and operational support to the functioning of the Agreement.
8. As part of the AIT, provincial governments agreed to focus on 11 sectors or policy
instruments that offer the greatest potential for the reduction of barriers.4  The authorities indicated
that provincial and territorial governments have made substantial progress in key areas
of procurement, investment incentives, labour mobility, consumer-related standards, transportation,and environmental protection.  In late 2002, discussions were continuing to extend the AIT's
procurement disciplines to provincial crown corp orations (i.e. companies owned by government)
(Chapter III(4) (v)).  Although the Chapter on Natural Resource Processing has been
completed, restrictions still limit the processing of certain raw resources to local operators (see
Chapter III (4)(iii)).  An energy chapter remains to be completed, so as to facilitate the transmission of
electricity across provinces.
9. The AIT contains a formal dispute settlement mechanism accessible to governments and
private parties.  There have been 165 disputes to date;  most cases related to government procurement
and most were resolved through consultations.  The first panel report regarding a person-to-
government dispute was released in December 2001:  in this case, the General Accountants
Association of Manitoba claimed that Ontario's licensing regime for public accountants excluded
members of their association and was thus in breach of the AIT's provisions on labour mobility.  ThePanel found in favour of the Manitoba Certified General Accountants.
10. The private sector is central in Canada's trade policy formulation process, so as to maximize
the effectiveness of government support to trade and investment.  Team Canada Inc is a network of
more than 20 federal departments and agencies working with the provinces, territories, and other
partners to provide services to exporters, with a view to enhancing export capability and preparednessin international market development.
5   Team Canada trade missions bring together business and
government representatives in visits to various priority countries to ensure that companies take full
advantage of international opportunities.6  The Government also consults regularly with the public to
                                                     
3 Internal Trade Secretariat online information is available at:  http://www.intrasec.mb.ca.
4 These are:  government procurement;  environmen tal protection;  consumer-related measures and
standards;  labour mobility;  investment;  agricultural and food products;  alcoholic beverages;  communications;
transport;  natural resource processing;  and energy.
5 Online export information is available at:  http://www.exportsource.gc.ca.
6 Further online information on the priorities and the results of Team Canada visits is available at:
http://www.tcm-mec.gc.ca.WT/TPR/S/112 Trade Policy Review
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muster support for trade policy.  Interested parties are invited to submit their views regarding specific
WTO trade and investment-related issues thanks to a "Consultations with Canadians" website.7
11. The Office of Consumer Affairs at Industry Canada8, together with the Competition Bureau,
analyse the impact of trade and investment policy changes on consumers.  The Bureau aims to prevent
excessive market concentration, monopolistic pricing and other anti-competitive conduct that could
cause a reduction in consumer welfare.
(3) FOREIGN INVESTMENT REGIME
12. Canada's share of foreign direct investment (FDI ) stocks in GDP is one of the world's highest
(see also Chapter I(5)).  Recent estimates indicate that about 50% of manufacturing production is
carried out by foreign companies.9  This has been concomitant with  a government policy to promote
Canada as a location for investment.  No single agency is responsible for formulating or implementinginvestment regulations in Canada.  The three principal departments with direct responsibility for
investment are Finance;  Foreign Affairs and International Trade;  and Industry Canada.
13. To promote investment inflows, Investment Partnerships Canada (IPC) works with federal
investment partners, provincial/territorial department s and agencies, and the private sector to develop
and implement specific initiatives related to investment policy, branding, and investment attraction inpriority markets and sectors.  IPC researches and analyses investment climate issues to facilitate the
resolution of real or perceived investment impediments (such as border, immigration, regulatory, and
foreign ownership issues).
10
14. Foreign direct investment in Canada takes place within the framework provided by the
Investment Canada Act (ICA) of 1985, which is administered by Industry Canada and Canadian
Heritage (for matters relating to Canada's cultural industries).11  The purpose of the Act is to
encourage investment that contributes to economic growth and employment, and to provide for thereview of significant investments by non-Canadians to ensure such benefits.  Investments are judged
by criteria such as their impact on competiti on, productivity, compatibility with national and
provincial policies, and the participation of Canadians.
15. For the year 2002, foreign acquisitions by WTO-Member investors exceeding a threshold of
Can$218 million are reviewable (the threshold is adjusted annually, and is considerably lower forinvestors from non-WTO countries);  foreign acquisitions exceeding a Can$5 million threshold in
transport, financial services, and cultural sectors are also reviewable (Table II.1).  After approval,
reviewable investments are monitored by Industry Canada to ensure compliance with the firm's
commitments.  Non-Canadian investors must notify when they commence a new business or acquire
control of an existing Canadian business unless the investment is reviewable.
12  For 2001, the
authorities indicated that there were 649 notific ations under the ICA and only 44 reviews;  none
of these resulted in denials.  The ICA has been grandfathered under each of Canada's free-trade
agreements; their investors are therefore also subject to ICA review provisions.
                                                     
7 Further details on these consultations is provided in the DFAIT online information.  Available at:
http://www.dfait-maeci.gc.ca/tna-nac/wto_opinion-e.asp.
8 Office of Consumer Affairs online information.  Available at: http://strategis.ic.gc.ca/sc_consu/
consaffairs/engdoc/oca.html.
9 OECD (2002b)
10 See also the Invest in Canada online informatio n.  Available at:  http://www.investincanada.gc.ca.
11 The text of the ICA is available online at:  http://laws.justice.gc.ca/en/I-21.8/75574.html.
12 Information is available online at:  http://icnet.ic.gc.ca/investcan/main.htm .Canada WT/TPR/S/112
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Table II.1
Selected investment restrictions and controls by sector, 2002
Sector Level of government (legal base) Limitation
Notification and review provisions
All sectors Federal (Investment Canada Act (ICA)) All acquisitions of control of Canadian businesses
by non-Canadians must be notified; those exceedingCan$218 million (for 2002) are reviewed.
Uranium production Federal (ICA)
Transport services
Financial servicesReview thresholds:  Can$5 million for direct
acquisitions and Can$50 million for indirect
acquisitions or Can$5 million if the assets inCanada are 50% or more of the assets of thetargeted company.
Cultural industries (publishing, film,video, music, and broadcasting)Review thresholds:  Can$5 million for direct
acquisitions and Can$50 million for indirect
acquisitions or Can$5 million if the assets inCanada are 50% or more of the assets of the
targeted company. All other investments in the
cultural industries must be notified and may besubject to review (with the exception ofbroadcasting)
Ownership limitations
Fishing Federal (Fisheries Act) Only Canadians or Canadian-controlled corporations
are permitted to obtain fishing licences.  Canadian
fish-processing companies that have more than 49%
foreign ownership are not permitted to holdcommercial fishing licences.
Air transport Federal (Canada Transportation Act) Foreign ownership of an airline is limited to 25%.
Book publishing and distribution Federal (ICA and supplementary policy
guidelines)Foreign investment in new businesses is limited to
Canadian-controlled joint ventures.Foreign acquisition of existing Canadian-controlled
businesses is allowed only if:
(a) the business is in clear financial distress;  and(b) Canadians have had full and fair opportunity to
purchase.
Indirect acquisitions are permissible subject to a netbenefit test.
Periodical publishing Federal (ICA and supplementary policy
guidelines)Foreign acquisitions of Canadian-owned and
Canadian-controlled periodical publishing
businesses are not permitted. Foreign investments inthe periodical publishing sector, including
investments to establish or, directly or indirectly,
acquire foreign businesses to produce and sellperiodicals in Canada and to access the Canadian
advertising services market are allowed if a
commitment to the production of majority Canadianeditorial content is taken. Foreign investments with
respect to the publication, distribution and sale of
periodicals are subject to review for net benefit toCanada.
Broadcasting Federal (Broadcasting Act, Direction to
the CRTC (Ineligibility of Non-Canadians) SOR/97-192)Foreign ownership of a broadcasting programming
and distribution undertaking is limited to 20% of
voting shares (maximum 33.3% in the case of a
parent corporation).
Film distribution Federal (ICA) Foreign acquisition of a Canadian-controlled
distributor is not allowed.  Foreign investment innew distribution businesses is permissible only for
importation and distribution of proprietary products,
(the importer owns world rights or is a majorinvestor).  Direct or indirect acquisition of foreign
distribution businesses in Canada by foreign-owned
companies is permissible only if the investorundertakes to reinvest a portion of its Canadian
earnings "in accordance with national and cultural
policies".
Table II.1 (cont'd)WT/TPR/S/112 Trade Policy Review
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Sector Level of government (legal base) Limitation
Financial services Federal (Bank Act) Individual ownership of a large bank or insurance
company is limited to 20% of voting shares,
regardless of nationality.
Provincial laws Foreign ownership is limited to 10% individually
and 25% collectively of provincially regulated trust
and loan companies and securities firms in several
provinces.
Insurance agents Prince Edward Island Only residents or corporations established in the
province may obtain licences.
Insurance services and other servicesauxiliary to insuranceQuebec (Loi sur les assurances) Non-residents may not acquire more than 30% of the
voting shares of a Quebec chartered insurance
company without ministerial approval.
British Columbia (Financial Institutions
Act)Incorporation, share acquisition or application for
business authorization, where any person controls or
will control 10% or more of the votes of the
company, is subject to ministerial approval.
Quebec, Saskatchewan, British Columbia Mandatory motor vehicle insurance is provided by
public monopoly.
Telecommunications Federal (Telecommunications Act) Foreign ownership of Canadian common carriers is
limited to 20% direct, and 331/3 % indirect (46.7%
combined direct and indirect).  There are norestrictions on foreign ownership of non-voting
shares.
Source: WTO Secretariat, based on information provided by the Government of Canada.
16. A variety of laws limit foreign ownership in sectors deemed sensitive, such as certain
broadcasting, film, financial, transport, and telecommunications sectors (Table II.1).  Variousinvestment restrictions maintained at provincial level also affect foreign participation in, for example,
large-scale projects, privatizations, petroleum and gas projects, electric power systems, chicken
production, liquor licences, and mining leases.  Several provinces regulate the sale and ownership of
land with respect to foreign owners, largely in the agricultural and recreational sectors.
17. Under the Canada Business Corporations Act, constraints may be placed on the issue, transfer
and ownership of shares in federally incorporated corporations so as to permit corporations to meet
Canadian ownership requirements, in sectors where Canadian ownership is required as a condition to
operate or to receive licences, permits, grants, payments or other benefits. Similar statutes exist at the
provincial level.  For example, all corporations in corporated outside Manitoba must be registered in
Manitoba prior to carrying on business in Manitoba, and a Manitoba-incorporated corporation whichhas distributed its shares to the public may restrict the transfer of its shares to non-Canadian residents.
Canada has made a number of reservations concerning tax and subsidy measures at the provincial
level in its Schedule of GATS commitments.
18. In October 2002, Canada notified under the WTO Agreement on Trade-Related Investment
Measures the websites containing publications produced by the federal and provincial governments"in which TRIMs may be found".
13
(4) PARTICIPATION IN THE WTO
19. Canada considers the multilateral trading system as the cornerstone of its trade policy, and is
an original Member of the World Trade Organization.  The WTO Agreement was incorporated in
Canadian domestic law through the WTO Implementation Act, which amended various statutes tobring them into conformity with Canada's WTO obligations.  Canada grants at least MFN treatment to
                                                     
13 WTO document G/TRIMS/N/2/Rev.9/Add.10, 11 October 2002.Canada WT/TPR/S/112
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all its trading partners except the Democratic People's Republic of Korea and Libya.  The Government
is a central participant in nearly all WTO activities, and has met most of its notification obligations
over the period since December 2000.  Exceptions include notifications on domestic support to
agriculture, on subsidies, and on import licensing (Table II.2).  Provinces have not notified any
measures to the WTO since 1998.14
(i) Trade policy priorities
20. Canada's priority objective for the Doha Development Agenda is to increase economic growth
and social prosperity for the benefit of all Members by reducing impediments to trade and by
enhancing predictability in the multilateral trading system. Central to this is fundamental
agricultural reform.
(a) Agri-food trade
21. Trade in agriculture is Canada's top priority in the current WTO negotiations, and the
authorities consider that the WTO is the best forum to address trade in agriculture.  Canada's positions
in the negotiations on agriculture have not changed since its last Review and are contained in several
proposals, either individually or as part of the Ca irns Group.  As part of  the Cairns Group, Canada
seeks the complete elimination of all forms of agricultural export subsidies15;  and has called for
tighter disciplines on export restrictions and taxes, which would help to assure Members about theirability to access food and feedstuffs in world markets.
16
22. Individually, Canada's market access proposal seeks "real and substantial market access
improvements for all agricultural and food products".17  The authorities consider that this proposal
constitutes a comprehensive and ambitious approach that encompasses tariffs, tariff quotas and their
administration. Canada has also made an individual proposal to reduce or eliminate production and
trade distorting domestic support.18
23. Canada is a relatively intensive producer of foods derived from biotechnology (i.e. containing
genetically modified organisms - GMOs).  Among recent developments, the Canadian Biotechnology
Advisory Committee issued a report to the Government in August 2002 on the regulation of GM
foods, which recommended, inter alia , the adoption of a voluntary system for labelling GM foods for
reasons other than health or safety, and the development of an accepted international standard.19
Canada has reiterated its concerns in the WTO over the lack of agricultural biotechnology approvals
by a number of European Union members, which has adversely affected Canadian exports.20  Canada
also expressed concerns about the mandatory nature and effectiveness of regulations proposed by
certain Members on GMO labelling and traceability.21
                                                     
14 WTO document S/C/N/89, 14 December 1998.
15 WTO document G/AG/NG/W/11, 16 June 2000.
16 WTO document G/AG/NG/W/93, 21 December 2000.
17 WTO document G/AG/NG/W/12, 19 June 2000.  See also Agriculture and Agri-Food Canada
(AAFC) online information.  Available at:  www.agr.gc.ca/itpd-dpci/english/current/proposals.htm.
18 WTO documents G/AG/NG/W/92, 21 Decembe r 2000, and G/AG/NG/W/112, 13 February 2001.
See also AAFC online information.
19 Improving the Regulation of Genetically Modified Foods and Other Novel Foods in Canada
[Online].  Available at:  http://www.cbac-cccb.ca/documents/en/cbac.report.pdf.
20 See, for example, WTO document WT/TPR/M/102/Add.1, 23 September 2002.
21 See, for example, WTO document G/TBT/M/27, 31 July 2002.WT/TPR/S/112 Trade Policy Review
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Table II.2
Canada's notifications under WTO Agreements, September 1998-August 2002
Legal basis, instrument WTO documents Comment
Agreement on Agriculture
Article 16.2 G/AG/N/CAN/42 – 12.03.01 Measures concerning possible negative effects of the reform Programme
Article 18.2 G/AG/N/CAN/45 – 30.07.01 Table MA:1 - Tariff and other quota commitments
Article 18.2 G/AG/N/CAN/31 – 07.12.99 Table MA:2 - Tariff and other quota commitments
Articles 5.7 and 18.2 G/AG/N/CAN/47 – 11.12.01 Table MA:5 – Special safeguards
Article 18.2 G/AG/N/CAN/43/Corr.1 – 19.10.01 Table DS:1 – Domestic support
Article 18.3 G/AG/N/CAN/44 – 11.06.01 Table DS:1 – Domestic support
Article 10 and 18.2 G/AG/N/CAN/41 – 06.03.01 Table Es:1 to ES:3 – Export subsidies
Agreement on Implementation of Article VI of the GATT 1994, Antidumping
Article 16.4 G/ADP/N/92/CAN – 23.07.02 Semi-annual reports
Article 16.4 G/ADP/N/94 – 25.07.02 Ad-hoc reports
Article 16.5 G/ADP/N/Add.2 – 28.11.00 Competent authorities
Article 18.5 G/ADP/N/Add.1 – 13.09.00 Notification of laws and regulations
Agreement on Implementation of Article VII of the GATT 1994, Custom Valuation
Article 22.2 G/VAL/N/1/CAN/2 – 11.11.97 Changes to legislation, regulations and their administration
GATT concessions under the Harmonized Commodity description and Coding System
Article 16 Harmonized
System ConventionG/SECRET/HS02/CAN/1/Rev.1 01.08.02 To revise the Harmonized System nomenclature
General Agreement on Tariffs and Trade (GATT) 1994
Article XXIV:7(a) WT/REG38/N/1 – 30.07.97 Notification of Free Trade Agreements (Canada – Chile)
Article XXVIII:5 G/SECRET/10/Add.1 – 15.12.98 Reservation of right to modify schedule
General Agreement on Trade in Services (GATS)
Article III:3 S/C/N/90 – 16.12.98 Notification of laws and regulations
Article III:4 and IV:2 S/ENQ/78 – 23.03.01 Notification of enquiry points
Agreement on Government Procurement
WTO Document GPA GPA/W/168/Add.2 – 14.01.02 National threshold
GPA/W/101/Add.1 – 14.01.02 National threshold
Agreement on Import Licensing Procedures
Article 7.3 G/LIC/N/3/CAN/4/Corr.1 – 21.03.02 Replies to questionnaire on procedures (no notification for 1998, 2000, and
2001)
Agreement on Rules of Origin
Annex 5.1 G/RO/N/01 - 13.03.01 No-preferential rules
Agreement on the Application on Sanitary and Phytosanitary Measures
Article 7, Annex B Several in series G/SPS/N/CAN (most
recent 09.09.02)Transparency of regulations
Understanding of the Interpretation of Article XVII of the GATT 1994, State Trading
Article XVII (4)(a) G/STR/N/4/CAN – 05.11.02 Annual state-trading activities
Agreement on Subsidies and Countervailing Measures
Article 25.1 G/SCM/N/60/CAN – 10.06.02 Annual report on subsidies
Article 25.11 G/SCM/N/87/CAN – 29.07.02 Report on countervailing actions:  semi-annual
Article 25.11 G/SCM/N/79 – 06.11.01 Report on countervailing actions:  ad hoc
Article 25.12 G/SCM/N/18/Add.12 – 17.04.01 Competent authorities
Article 32.6 G/SCM/N/CAN/3/Add.1 – 02.10.00 Incorporation of the Agreement in national legislation
Agreement on Technical Barriers to Trade
Annex 3C G/TBT//CS/N/110 – 05.10.99 Code of good practice
Article 10.7 G/TBT/10.7/N/31 – 28.05.01 Bilateral and multilateral agreement
Article 2.9 Several in series G/TBT/NOTIF.99, 00, 01 & 02 Proposed and adopted technical regulations
Agreement on Textiles and Clothing
Article 2.1 Several in series G/TMB/N/62 (most recent
24.07.02)Notification of restrictions in force
Article 2.7 G/TMB/N/2/Corr.4 – 25.06.01 Integration programmes
Article 2.11 Several in series G/TMB/N/214 (most recent
25.06.01)List of products included in te integration process
Article 2.15 G/TMB/N/402/Add.1 – 10.07.01 Ad hoc  elimination of quotas
Article 2.17 G/TMB/N/440/Add.1 – 14.06.02 Administrative arrangements
Article 3.1 G/TMB/N/62/Add.3 – 16.01.02 Quantitative restrictions
Article 8.11 G/TMB/N/410 – 01.08.01 Ad hoc implementation of the ATC
Agreement on Trade-Related Investment Measures
Article 6.2 G/TRIMS/N/2/Rev.9/Add.10 – 11.10.02 Government websites that may contain TRIMs
Agreement on Trade-Related Aspects of Intellectual Property Rights
Article 63.2 Several in series IP/N/1/CAN/ Provisional
entry (most recent 24.06.02)Notification of laws and regulations
Source: WTO documents and Central Registry of Notifications.Canada WT/TPR/S/112
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(b) Trade in services
24. Canada has made several negotiating proposals for liberalization of services trade in the
context of the current WTO negotiations (Table II.3).  Canada seeks both  improved market access
and strengthened multilateral, legally enforceable rule s covering international trade in services.  At the
same time the Government has repeatedly stressed the need to safeguard its right to regulate services
in pursuit of its national policy objectives.  In particular, Canada stated in its previous review that itspublic health and public education systems would not be jeopardized in these negotiations.
Table II.3
Canada's WTO negotiating proposals for trade in services
Date Document symbol Title/Subject
14.03.2001 S/CSS/W/46 Canadian Initial GATS Sectoral/Modal/Horizontal Negotiating Proposals
23.03.2001 S/CSS/W/46/Corr.1 Initial Canadian Negotiating Proposal – Corrigendum
14.03.2001 S/CSS/W/47 Initial Negotiating Proposal Transparency and Predictability
14.03.2001 S/CSS/W/48 Initial Negotiating Proposal on Temporary Movement of Natural Persons Supplying Services
under the GATS (Mode 4)
14.03.2001 S/CSS/W/49 Initial Negotiating Proposal on Small and Medium-Sized Enterprises
14.03.2001 S/CSS/W/50 Initial Negotiating Proposal on Financial Services
14.03.2001 S/CSS/W/51 Initial Negotiating Proposal on Environmental Services
14.03.2001 S/CSS/W/52 Initial Negotiating Proposal on Professional Services
14.03.2001 S/CSS/W/53 Initial Negotiating Proposal on Telecommunication Services
14.03.2001 S/CSS/W/54 Initial Negotiating Proposal on Tourism and Travel-Related Services
04.05.2001 S/CSS/W/54/Rev.1 Initial Negotiating Proposal on Tourism and Travel-Related Services - Revision
14.03.2001 S/CSS/W/55 Initial Negotiating Proposal on Business Services (Other than Professional Services and
Computer and Related Services)
14.03.2001 S/CSS/W/56 Initial Negotiating Proposal on Computer and Related Services
14.03.2001 S/CSS/W/57 Initial Negotiating Proposal on Distribution Services
14.03.2001 S/CSS/W/58 Initial Negotiating Proposal on Oil and Gas
Source: WTO Secretariat.
25. Canada remains opposed to trade liberalization in certain services areas.  For example in air
transport, Canada is opposed to the inclusion of traffic rights into the sectoral coverage of the GATS
(Chapter IV(7)).22  The authorities have also stated that "Canada will not make any commitment that
restricts our ability to achieve our cultural policy objectives until a new international instrument can
be established designed specifically to safeguard the right of countries to promote and preserve their
cultural identity."23  In the WTO Working Party on GATS Rules, Canada has described as "difficult"
the notification of relevant subsidies in services, and considered that fundamental questions remained,
such as how to define a subsidy;  moreover, the authorities have questioned whether governmental
assistance to service sectors was trade-distortive.24
(c) Other issues
26. As a medium-sized economy, Canada considers that an effective trade-dispute settlement
system that furthers the security and predictabili ty of the multilateral rules-based trading system is
critical to economic success.  In the WTO, Canada supports negotiations on rules governing the use of
trade remedies and subsidies, as well as on improvements to the dispute settlement system.
                                                     
22 See, for example, WTO document S/C/M/57, 13 February 2002.
23 WTO document S/CSS/M/10, 21 September 2001.
24 See, for example, WTO document S/WPGR/M/38, 2002.WT/TPR/S/112 Trade Policy Review
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27. The coherence agenda, particularly on trade, finance and development, and the needs of
developing countries in the negotiations are also integral to Canada's objectives in the Doha
Development Agenda.  Other Canadian objectives include concluding negotiations for a voluntary,
facilitative, simple and low-cost registration system for wines and spirits.  Canada also supports
negotiations in the four Singapore issues (investment, competition policy, transparency in government
procurement, and trade facilitation).  Canada is also committed to all elements of work mandated inthe Doha Declaration, including the work programmes  (e.g. electronic commerce).  Furthermore, the
authorities have stated that Canada will continue to pursue openness and transparency at the WTO.
28. In the area of trade and the environment, Canada seeks to strengthen the mutually supportive
relationship between WTO rules and multilateral environmental agreements.  Canada ratified the
Kyoto Protocol to the United Nations Framew ork Convention on Climate Change on 17 December
2002.
(ii) International investment policy
29. Canada actively participates in the WTO Working Group on the Relationship between Trade
and Investment.  The authorities have stressed the importance of transparency, non-discriminatory
treatment, flexibility for developmental purposes and governments’ right to regulate in the public
interest.  Canada also supports the undertaking of both pre- and post-establishment obligations based
on a “negative list” approach rather than a GATS-type, positive list approach.  With respect to dispute
settlement, Canada supports the application of the WTO dispute settlement understanding to the
prospective Multilateral Framework on Investment (MFI) and considers that an alternative dispute
settlement mechanism, such as an investor-state dispute settlement option, would be inappropriate
insofar as it may be incompatible with the existing WTO architecture.
(iii) Trade and development
30. Canada considers that meaningful progress in both agricultural and non-agricultural market
access is required, together with rules on trade facilitation and investment for the current trade
negotiations to contribute effectively to development goals.
25  In agriculture, the Canadian
Government has intensified its partnerships with developing countries in such areas as food security,
risk management, and trade policy capability.  Canada's WTO objectives in the negotiations onagriculture (see above) are also part of its trade and development agenda, so that trade can help all
Members address their growth and development needs.  Canada considers that provisions for "special
and differential treatment" may enable developing countries to adjust to more open markets.
31. Canada has been one of the proponents of a Development Round that takes into account the
needs of developing countries, and particularly the least developed countries, in furthering theirdevelopment.  Canada has supported enhanced participation by developing countries in the
negotiations, as well as in WTO programmes and activities, such as the Integrated Framework for
Trade-Related Technical Assistance for Least-Developed Countries.  Canada also seeks to reinforce
the links between trade and poverty reduction strategies in national development plans.
                                                     
25 "Canada's Objectives for the Fourth WTO Minister ial Conference", tabled by the Honourable Pierre
Pettigrew, Minister for International Trade, to the House of Commons Standing Committee on Foreign Affairsand International Trade, October 24, 2001 [Online].  Available at:  http://www.dfait-maeci.gc.ca/tna-nac/WTO-obj-e.asp#V.Canada WT/TPR/S/112
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(iv) WTO dispute settlement
32. The Canadian Government has continued to participate intensively dispute settlement
available under the WTO Dispute Settlement U nderstanding (DSU), based on the conviction that
Canada benefits from a system based on rules, norms, and procedures rather than on the unilateral
exercise of economic leverage.  Canada has participated in about one quarter of all WTO dispute
settlement cases (consultations, mutually agreed solutions, and panels) since the WTO's inception.26
33. Implementation of recommendations contained in WTO Panels has resulted in legislative or
regulatory changes in a number of areas, including:  pricing and export policy on dairy products
(Chapter IV(2));  export subsidies in favour of ci vilian aircraft (Chapter III(3)(ii));  patent law
(Chapter III(4)(vi));  and tariffs on motor vehicles.  Since December 2000, the only new panel case
involving Canadian trade measures concerned subsidies to the aircraft industry (see also Table AII.1).
34. Canada has been involved as a complainant in nine cases since December 2000;  seven were
against the United States, confirming the importance of the WTO for the Canada-United States
bilateral relationship.  Anti-dumping and countervailing duty legislation was the main cause of
dispute.  Canada has also joined consultations and participated as a third party in several cases
(Table AII.1).
(5) PREFERENTIAL TRADE AND INVESTMENT RELATIONS
35. Canada has entered into a number of preferential relations with bilateral and regional partners
(Table II.4), partly to promote diversification but also to intensify political cooperation. Canada sees
such relations as complementing the multilateral trad e system.  Most of Canada's preferential partners
are in the Americas;  other trade generally takes place on an MFN basis or under unilateral tariff
preferences.  Canada provides unilateral tariff preferences to developing countries under the
Generalized Preferential Tariff (GPT), the Least Developed Country Tariff27, and under the
CARIBCAN Chapter III(2)(iii)).  Trade with develo ping countries (WTO definition) accounts for
16% of Canada's imports and 5% of exports.
36. Most of Canada's trade with the United States takes place under the NAFTA.  Since Canada's
last Review, a new free-trade agreement (FTA) has entered into force, with Costa Rica, and
negotiations have begun or continued with countries in Central America, with EFTA countries, andwith Singapore.  Exploratory discussions towards the possible negotiation of free trade agreements
have begun with CARICOM, the countries of the Andean Community, and with the Dominican
Republic.
37. Canada's FTAs and unilateral preferential schemes exclude out-of-quota tariffs on supply
managed products (dairy, poultry and eggs – see Chapter IV(2)) and certain services sectors(Chapter IV), and are otherwise of varying scope in their coverage.  The most complete, such as the
NAFTA and the FTA with Chile, not only provide for near complete tariff elimination and rules
regarding investment and services, but also for agreements on technical issues such as SPS
inspections.  In addition, Canada believes that the use of anti-dumping and countervailing measures
between integrated markets is inappropriate and has sought their elimination under free-tradeagreements with NAFTA and with Chile (see below).
                                                     
26 WTO document WT/DSB/26/Add.1, 12 October 2001.
27 Countries eligible for least developed country benefits in Canada are the least developed countries as
defined by the United Nations excluding Myanmar (Burma).WT/TPR/S/112 Trade Policy Review
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Table II.4
Canada's preferential trade and investment agreements and arrangements, December 2002
Agreement (entry into force)/Coverage Partners Developments since 2000
CARIBCAN (1986)
Duty-free treatment extended unilaterally to goods thatoriginate in Caribbean countries covered by an economic
and trade development assistance programme for theCommonwealth Caribbean countries and territories.
Excluded are textiles and clothing and agri-food products
subject to out-of-quota tariff quotas.Anguilla, Antigua and Barbuda,
Bahamas, Barbados, Belize, Bermuda,
British Virgin Islands, Cayman Islands,
Dominica, Grenada, Guyana, Jamaica,Montserrat, Saint Christopher and
Nevis, Saint Lucia, Saint Vincent and
the Grenadines, Suriname, Trinidad andTobago, Turks and Cayman Islands.Ongoing discussions toward
a possible FTA with
CARICOM partners.
Generalized Preferential Tariff and Least Developed
Country Tariff
Preferential treatment on most products except certain
agricultural products, textiles and clothing, footwear, andsteel products.  All imports from least developed countries
except agri-food products subject to out-of-quota tariff
quotas enter duty free.163 developing countries and countries
in transition.The Government announced
in June 2002 that Canada
would extend duty-free and
quota-free access to importsfrom LDCs on 1 January
2003.
NAFTA (1994)
Duty-free trade in originating goods.  National treatment in
services trade, except public social services, basictelecommunications, financial services, and most maritime
and air transport services.  Rules on investment, competition
policy, monopolies and state enterprises, IPRs, standards,SPS measures, government procurement, environmental
cooperation, labour standards, and dispute settlement,
including specifically in AD and CVD matters.  Sectoralagreements (automotive, textiles and clothing, energy, and
agri-food).Mexico, United States Accelerated tariff reductions
with Mexico in January
2002;  Clarification ofChapter 11 provisions
Canada-Israel Free Trade Agreement (January 1997)
Duty-free trade in industrial products and in agri-foodproducts amounting to approximately 80% of agri-food and
fish trade. No provisions on trade in services.  The text ofCIFTA is contained in WTO document WT/REG31/2,
23 January 1997.Israel As provided by the
Agreement, Canada and
Israel began negotiations in
1999 to further liberalizetrade in agriculture and food
products.  Negotiations are
ongoing.
Joint Canadian Palestinian Framework on EconomicCooperation and Trade
a
Signed in 1999.  Same coverage as the CIFTA.Palestinian Authority
Canada - Chile Free Trade Agreement (July 1997)
Duty-free treatment by 2003 on most goods, including a
mutual exemption from the use of AD measures bilaterally,
and a committee on subsidy disciplines and CVD measures.
Provisions on services and on  investment modelled onNAFTA. MFN and national treatment for investment.  Also
includes a labour cooperation agreement. WTO document
WT/REG38/2, 28 January 1998.Chile Accelerated tariff reductions
in October 2001.Clarification of Chapter 11
provisions in October 2002.
Canada - Costa Rica Free Trade Agreement (April 2001)
Duty-free treatment by 2014 on most goods.  Also includes
labour and environment cooperation agreements.  Not yetnotified to the WTO.Costa Rica Entered into force on
1 November 2002.
a DFAIT online information.  Available at:  http://www.dfait-maeci-gc.ca/tna-nac/framework-e.asp.
Source: WTO Secretariat, based on information provided by the Canadian authorities.
(i) Relations with the United States and Mexico
38. Canada and the United States maintain the world's largest two-way trade and investment
flows, and the relationship with the United States constitutes one of Canada's key policy priorities.After the 11 September 2001 attacks in the United States, border measures have been introduced to
tighten security while not disrupting bilateral trade (see Chapter III(2)(1)).Canada WT/TPR/S/112
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39. Most of the relationship with the United States and Mexico takes place under the NAFTA,
which provides for duty-free trade in all goods with the exception of the supply-managed dairy and
poultry products, and rules on trade in services and investment.28  Very few tariffs remain on items
imported from Mexico;  those remaining are scheduled for elimination on a ten-year staging period
(to be completed by 2003).  With respect to other agreements the authorities have stated that
Article 103 of the NAFTA covers agreements in effect as of 1 January 1994 and therefore does notcover Canada's WTO obligations.
29
40. In general, bilateral trade and investment flows between Canada and the United States have
remained to a large extent problem-free, with the exception of anti-dumping and countervailing
measures.  NAFTA parties retain the discretion to settle matters under both NAFTA and WTO rules.
41. Chapter 19 of the NAFTA provides for bi-national panel review of anti-dumping and
countervailing duty final determinations and underlying legislation. In December 2002, three
Canadian determinations were being reviewed under Chapter 19;  at the same time, 21 such
determinations by the United States were under review, eight of which at the request of Canadian
producers or authorities.  The main recent issue of contention, because of its economic impact, was
the softwood lumber dispute, which was once again brought to both the GATT/WTO and NAFTA
Chapter 19 dispute settlement bodies.  Another issue of bilateral trade friction is the Canadian Wheat
Board and its trading privileges  (Chapter III(4)(iv)).30
42. Disputes relating to the investment provisions of Chapter 11 may also be referred to either of
two dispute settlement mechanisms under the agreement:  government-to-government dispute
settlement or investor-state arbitration.  In July 2001, pursuant to Canada's initiative, the NAFTA
parties issued binding Notes of Interpretation regarding the operation of proceedings under
Chapter 11.  The Notes reaffirm the NAFTA partners’ understanding that there is no generalobligation of confidentiality and that the parties may make available to the public virtually all
documents submitted to, or issued by, Chapter 11 tribunals, and therefore aim to enhance the
transparency of the Chapter's dispute resolution provisions.  In addition, the Notes clarify the
minimum standard of treatment required under Chapter 11 as being that required under the customary
international law for the treatment of aliens.
43. Information on Chapter 11-related disputes involving Canada since 1999 is available publicly
on the DFAIT website.
31 In November 2002, three arbitrations involving foreign private investors
against the Government of Canada were ongoing.
(ii) Other preferential trade agreements
(a) Chile
44. By January 2003, all tariff cuts will have been completed between Canada and Chile under
the 1997 Canada-Chile Free Trade Agreement (CCFTA), except out-of-quota tariffs on supply-
                                                     
28 The text of the agreement is available in the NAFTA Secretariat online information.  Available at:
http://www.nafta-sec-alena.org.
29 Article 103 of the NAFTA, relation to other agreements:  1. The Parties affirm their existing rights
and obligations with respect to each other under the General Agreement on Tariffs and Trade  and other
agreements to which such Parties are party.  2. In the event of any inconsistency between this Agreement and
such other agreements, this Agreement shall prevail to the extent of the inconsistency, except as otherwiseprovided in this Agreement.
30 Further information is available online at:  http://www.ustr.gov/releases/2002/02/02-22-finding.pdf.
31 See http://www.dfait-maeci.gc.ca/tna-nac/gov-e.asp.WT/TPR/S/112 Trade Policy Review
Page 24
managed dairy and poultry products, which remain at the MFN level.32  In addition to regular
ministerial meetings of the bilateral Free Trade Commission,  eight committees and working groups
are in place to ensure implementation, resolve problems, and devise ways of facilitating trade.  As of
late 2002, no dispute had arisen under the CCFTA.   The CCFTA is the only FTA entered into by
Canada that contains a bilateral exemption from the mutual use of AD measures;  it also provides for
a committee on subsidy disciplines and CVD measures.  Safeguard actions, however, may be taken.In December 2000, Canada joined others in WTO consultations regarding safeguard measures
imposed by Chile on powdered milk and liquid UHT milk.
33  Subsequently, Canada was excluded
from the application of these measures;  under the CCFTA, the parties must exclude imports of a good
from the other party from global emergency action measures, unless these imports account for a
substantial share of total imports and contribute strongly to the serious injury or threat thereof.
45. The agreement includes provisions on services and on investment, which are modelled on
those of the NAFTA.34  In late 2002, Canada and Chile signed notes of interpretation to clarify certain
provisions of the CCFTA investment chapter.  These notes are based on similar NAFTA notes
(see above).  To date, no cases have been brought against either Canada or Chile under the investment
chapter under the CCFTA.  Parallel agreements to the FTA provide for bilateral cooperation on labourand environment issues.
35
(b) Costa Rica
46. The Canada-Costa Rica Free Trade Agreement (CCRFTA) was signed on 23 April 2001,
together with cooperation agreements on labour and the environment.  The three agreements came
into force on 1 November 2002.  The CCRFTA  eliminates tariffs on bilateral trade by 2011 at the
latest on all products except, in the case of Canada, beef and supply-managed dairy and
poultry products.36  According to Canada, one of the main accomplishments of the CCRFTA is the
establishment of a framework for competition policy that could serve as a model for the region;
the CCRFTA establishes a concrete framework for cooperation and consultation to enhance the
effectiveness of enforcement activities by the competition authorities in both countries
(Chapter III(4)(i)).  Additionally, the CCRFTA includes a comprehensive chapter on trade facilitation
that aims for more efficient trade procedures and reduced formalities and business costs.  The parties,for example, commit to taking steps to coordinate all agencies involved in the import and export of
goods and harmonize their data requirements, with the objective of allowing importers and exporters
to present all data to only one border agency.
47. Upon implementation of the agreement, Canada is  to eliminate its quantitative restrictions on
imports of textiles and clothing from Costa Rica (Chapter III(2)(vi)).  The parties have retained theright to apply anti-dumping and countervailing duties and safeguards.  The agreement does not
contain any commitments in the area of services or investment, procurement or intellectual property
rights, but it notes the existence of the Agreement between the Government of Canada and the
Government of Costa Rica for the Promotion and Prot ection of Investments, which came into force in
1999.  The agreement also contains specific provisions on rules of origin and dispute settlement, and
establishes a Free Trade Commission comprising cabinet-level representatives, together with a
Secretariat.
                                                     
32 WTO document WT/REG38/2, 28 January 1998.
33 WTO document G/SG/24/Suppl.2, 13 October 2000.
34 WTO document WT/REG38/M/4, 11 June 2002.
35 For information on this agreement, see "Canada an d Chile:  Five Years as Free Trade Partners", and
other DFAIT online information.  Available at:  http://www.dfait-maeci.gc.ca/tna-nac/bilateral-e.asp#01.
36 Canada's Schedule of tariff elimination under the CCRFTA can be found in DFAIT online
information.  Available at:  http://www.dfa it-maeci.gc.ca/tna-nac/canada_schedule-e.pdf.Canada WT/TPR/S/112
Page 25
(c) Israel
48. The Canada-Israel Free Trade Agreement (CIFTA) entered into force in January 1997.  It
eliminated tariffs on industrial products and reduced or eliminated tariffs on certain agri-food
products.  The agreement also covers certain competition policy issues and government procurement.
Over 1996-01, bilateral merchandise trade nearly doubled.37  As of late 2002, negotiations were
ongoing to expand the list of agricultural and food products under the agreement.
49. Although, in practice, the CIFTA covers the territory where Israel’s customs laws apply
(this includes the West Bank and Gaza following the signing of the Paris Protocols in 1995), in
February 1999, Canada and the Palestine Liberation Organization on behalf of the Palestinian
Authority signed the Joint Canadian-Palestin ian Framework on Economic Cooperation and Trade,
designed to improve market access and customs procedures on a reciprocal basis.  The Frameworkexactly mirrors the CIFTA.
(6) O
THER TRADE AND INVESTMENT RELATIONS
(a) The Americas
50. Caribbean countries benefit from preferential tariff treatment under CARIBCAN (Table II.4).
However, no tariff preferences are granted on out-of-quota imports of supply-managed agri-foodproducts, or on textiles and clothing products.  A recent report to the WTO on trade under
CARIBCAN suggests a strong increase in Canadian imports from the region, in particular from
Jamaica and from Trinidad and Tobago.
38  Some 96% of imports from these countries entered Canada
duty free in 2001.  Of this however, only 14% took  place under CARIBCAN dut y free provisions;  the
remainder were duty free unde r MFN or GPT provisions.
51. In January 2001, Canada and CARICOM members agreed to explore enhancing of their trade
relationship, including through a free-trade agreement.
52. In April 2001, at the Summit of the Americas in Quebec, leaders endorsed the decision to
conclude negotiations by January 2005 on the Free Trade Area of the Americas (FTAA) among all the
countries of the Western Hemisphere except Cuba.39  Leaders also agreed that the FTAA would enter
into force no later than December 2005.  The third phase of negotiations was launched in November
2002 in Ecuador.
53. In November 2001, free-trade negotiations were launched with El Salvador, Guatemala,
Honduras, and Nicaragua (CA4).  Through such a fr ee-trade agreement, Canada's stated aim is to
inject further momentum into FTAA and WTO negotiations by serving as a model for cooperation
between developed and developing countries.40 
54. In March 2002, the President of the Dominican Republic and the Canadian Prime Minister
agreed to consider bilateral free-trade negotiations.  In August 2002, Canada announced that it would
begin preliminary talks towards a possible free-trade agreement with the countries of the Andean
Community (Bolivia, Colombia, Ecuador, Peru, and Venezuela).
                                                     
37 See also DFAIT (2002), p. 108.
38 WTO document WT/L/483, 4 October 2002.  The CARIBCAN programme benefits from a waiver
from WTO rules until 31 December 2006.
39 FTAA online information.  Available at:  http://www.ftaa-alca.org.
40 See DFAIT online information.  Available at:  http://webapps.dfait-maeci.gc.ca/minpub/
Publication.asp?FileSpec=/Min_Pub_Docs/104688.htm.WT/TPR/S/112 Trade Policy Review
Page 26
(b) The Asia-Pacific region
55. Trade and investment relations with Asia are largely MFN, although in October 2001 the
launch of negotiations was announced on a free-trade agreement with Singapore.  These negotiations
cover several areas including market access, trade in services, financial services, investment,
government procurement, dispute settlement, and competition.41  Canada is also a founding member
of the Asia-Pacific Economic Co-operation (APEC), a forum for trade relations in the Asia-Pacific
region.
56. Japan and China are Canada's two largest economic partners in Asia. Canada's  relations with
Japan take place under the 1976 Framework for Economic Cooperation.  Canada's current priorities
regarding trade and investment relations with Japan are to advance regulatory cooperation betweenthe two governments with a view to facilitating trade in regulated products.
(c) Europe
57. Relations with the European Union, Canada's second-largest trading and investment partner,
also take place on an MFN basis, although the Canadian Government has as a current priority to"engage the EU to explore the advantages and the disadvantages of a Canada-EU FTA".
42
Meanwhile, a recent study concluded that tariff elimination on all merchandise trade under such anFTA would increase Canadian exports to the EU by  15.6%, or Can$3.4 billion annually.
43
58. Canada-EU relations are also framed by a number of instruments:  the 1976 Framework
Agreement for Commercial and Economic Cooperation established the Joint Cooperation Committee,which meets annually at the senior officials level.  The 1996 Joint Political Declaration on Canada-EU
Relations and the Canada-EU Action Plan set goals for broadening Canada-EU relations in the trade
and economic areas, and on a range of foreign and domestic policy issues.
44  The EU-Canada Trade
Initiative (ECTI), launched in December 1998, established a subset of objectives for market access
and economic cooperation drawn from the action plan, which were considered achievable within areasonable time frame.
45  A report on progress made under ECTI is submitted to trade ministers at
each twice-yearly Canada-EU Summit.  Canada-EU trade questions are also dealt with by officials
through a Joint Cooperation Committee and a Trade and Investment Sub-Committee.  In October
2001, the Government tabled its response to the 25 recommendations found in a report by the
Standing Committee on Foreign Affairs and International Trade entitled, “Crossing the Atlantic:Expanding the Economic Relationship between Canada and Europe."
46
59. Efforts have been ongoing since 1998 to negotiate a Canada-EFTA Free Trade Agreement,
which would be the first "free-trade bridge" with Europe.  The negotiations have covered tariffelimination for non-agricultural products, trade facilitation, and competition policy;  no discussions
have taken place on new obligations in areas such as services, investment, intellectual property or
government procurement.  Negotiations have been held up over a number of issues, including the
elimination of tariffs and subsidies to the shipbuilding sector.
                                                     
41 See DFAIT online information.  Available at:  http://www.dfait-maeci.gc.ca/tna-nac/singapore-
e.asp#negotiations.
42 DFAIT (2002).
43 Cameron and Loukine (2001).
44 See DFAIT online information.  Available at:  www.dfait-maeci.gc.ca/english/geo/europe/eu/action-
e.htm.
45 See DFAIT online information.  Available at:  www.dfait-maeci.gc.ca/english/geo/europe/EU/ECTI-
Dec-2000- E.html.
46 The report is available in DFAIT online information.  Available at:  http://www.dfait-maeci.gc.ca/
tna-nac/fifth-report-english.pdf.