WORLD TRADE WT/TPR/M/22
21January 1997
ORGANIZATION(97-0222)
Trade Policy Review Body
18-19 November 1996
TRADE POLICY REVIEW
CANADA
MINUTES OFMEETING
Chairperson: H.E. Mrs. Anne Anderson (Ireland)
Page
I. INTRODUCTORY REMARKS BYTHE CHAIRPERSON 2
II. OPENING STATEMENT BYTHE REPRESENTATIVE OFCANADA 3
III. STATEMENT BYTHE FIRST DISCUSSANT 6
IV. STATEMENT BYTHE SECOND DISCUSSANT 8
V. STATEMENTS BYMEMBERS OFTHE TRADE POLICY REVIEW BODY 10
VI. REPLIES BYTHE REPRESENTATIVE OFCANADA 16
AND ADDITIONAL COMMENTS
VII. CONCLUDING REMARKS BYTHE CHAIRPERSON 30
______________________________________
Additional answers byCanada 35WT/TPR/M/22
Page 2Trade Policy Review
I. INTRODUCTORY REMARKS BYTHE CHAIRPERSON
1. TheTrade Policy Review ofCanada tookplaceon18and19November 1996. TheChairperson
welcomed thedelegation ofCanada, ledbyMr.JohnGero, Director General oftheTrade Policy Bureau
(Canadian Department ofForeign Affairs andInternational Trade) andAmbassador JohnWeekes, and
thediscussants, Ambassador Terje Johannessen (Norway) andMr.JuanFrancisco Misle (Venezuela).
2. TheChairperson recalled thepurpose oftheTrade Policy Reviews andthemain elements of
theprocedures forthemeeting. Thereport bytheGovernment ofCanada wascontained in
WT/TPR/G/22andthatoftheWTOSecretariatinWT/TPR/S/22.Copiesofwrittenquestionssubmitted
byAustralia, Brazil, theEuropean Communities, Hong Kong, Japan, NewZealand, Switzerland and
theUnited States hadbeentransmitted tothedelegation ofCanada.
3. Itwasdecided thattheTrade Policy Review Body would invite theFAO, EFTA, IMF, OECD,
UNCTAD andtheWorld Bank, which hadrequested observer status, toitsnextmeeting.Canada WT/TPR/M/22
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II. OPENING STATEMENT BYTHE REPRESENTATIVE OFCANADA
4. Therepresentative ofCanada noted thattheSecretariat Report provided abalanced assessment
ofCanadian trade policy. TheReport wastheproduct ofextensive meetings inOttawa between the
WTO Secretariat andallrelevant federal government departments.
5. Globalization wasafactoflifearound theworld andaprominent force intrade policy. In
thelastfourdecades, world tradehadincreased 15-fold, reaching overUS$6,000 billion, while global
production hadincreased only6fold. Investment alsohadbecome apowerful integration force. In
thelastdecade, annual global investment flows hadincreased from approximately US$60 billion to
US$300 billion. Production ofgoods andservices byforeign affiliates ofmultinational corporations
nowexceeded thetotalvalue ofworld trade ofgoods andservices. Investment hadoutpaced trade
indelivering products across borders toconsumers. Trade figures forCanada reflected anequally
dramatic integration intotheglobal trading system, withexports accounting foralmost 40percent
ofCanada 'sgross domestic product (GDP). Inward investment hadcontinued togrow andaccounted
for18percentofGDP.
6. Although Canada 'stradeandeconomic partnership withtheUnited States wasunique, Canada
haddealtwiththeglobal challenges andtaken advantage oftheopportunities theyprovided. Canadian
producers hadmaintained theirshare oftheU.S. market eveninthefaceofsignificantly increased
international competition, while Canada 'sexports tocountries other thantheUnited States hadalmost
doubled overthelasttenyears, growing from Can$27 billion in1985 toCan$52 billion in1995.
7. Since Canada 'slastTPR, theattention ofprovincial andterritorial governments hadfocused
oninternal trade issues, withthesupport oftheFederal Government. InJuly1995, theAgreement
onInternal Trade (AIT) hadcome intoeffect, withtheobjective ofbuilding anopen, efficient and
stable domestic market byreducing and/or eliminating barriers tothefreemovement ofpersons, goods,
services andinvestment inCanada; theAgreement would bebroadened anddeepened overtime.
8. While Canada wasstillamong theworld 'slargest exporters ofminerals andmetals, theshare
ofprimary products inCanadian exports hadfallen from 25percentin1985 to18percentin1995,
duetotheelimination oftariffs andtheensuing expansion ofinter- andintra-industry trade. Driven
inlarge measure byglobalization andrapid changes ininformation andtransportation technologies,
Canada 'seconomy wasshifting from resource-based toknowledge-based activities. Tosustain this
shift, Canada continued tofavour competitive markets inallocating resources. Theobjectives ofthe
three-year comprehensive review ofCanada 'stariffrégime, launched in1994, weretomake therégime
more responsive tothecompetitive pressures facing Canadian industry andincrease transparency and
predictability.
9. Theriskofdependency wasareality foracountry sharing thecontinent withtheworld 'slargest
economic power; 80percentofCanadian exports went totheUnited States. TheCanadian share
oftheU.S.import market hadincreased to19.1percentfrom 16.9percentin1987. Exposure to
competition through theCanada-U.S. FreeTrade Agreement and,since 1994, theNorth American
FreeTrade Agreement (NAFTA) hadresulted inamore diversified andcompetitive economy. Secure
access totheU.S. market wasanessential component ofCanada 'strade policy. Strengthening the
multilateral rules-based system embodied intheWTO wasnotonlyagoalworth pursuing initsown
right, butthebedrock ofthetrade relationship withtheUnited States.
10. Regional tradeinitiatives offered market-opening opportunities andcould support further trade
liberalization andrule-making atthemultilateral level. Inthepasttwoyears, Canada hadfocusedWT/TPR/M/22
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onimplementing andconsolidating theUruguay Round andNAFTA results; effective implementation
wasessentialforfurtherliberalization.CanadahadusedboththeWTODisputeSettlementUnderstanding
andtheNAFTAdisputesettlementprocedures,bringingeightdisputestotheWTOsince1January1995.
Mutually agreed settlements hadbeenreached before thecompletion ofproceedings intwocases, and
inonecasethepanel'sdecision hadbeenupheld bytheAppellate Body. Canada 'sbusiness community
hadrealized thattheWTO dispute settlement system offered apractical andtimely means ofaddressing
realworld problems, andalitmus testofgovernment 'sabidance byimpartial rulings. TheWTO 's
credibility waslinked directly totheimplementation oftheUruguay Round results, todispute settlement
andtothesuccess oftheon-going work programme andnegotiations. Forthatreason, Canada had
participated actively inthenegotiations onservices andrulesoforigin. Improving WTO transparency
wascritical andaccess toinformation atthenational andinternational levels.
11. Canadahadsupportedregionaltradeinitiatives,includingtheAsia-PacificEconomicCooperation
(APEC) forum andtheFreeTrade Agreement oftheAmericas (FTAA) andhadconcluded bilateral
free-trade agreements withChile andIsrael. Allregional initiatives hadastheirobjective tosubstantially
liberalize trade andwere outward-oriented; inorder toensure thatthese initiatives fitintheWTO
framework, Canada hadpressed forthecreation oftheWTO Committee onRegional Trade Agreements.
Canada alsohadused theopportunities provided byregional groupings todevelop support for
strengthening theWTO. APEC hadagreed topursue thegoaloffreetrade by2020 andtheFTAA
hadagreed tonegotiate afree-trade areaby2005. More generally, work inAPEC andtheFTAA,
onsubjects ranging from investment andstandards tocompetition, helped todevelop acollective
understanding ofthestructure needed tosupport acomprehensive rules-based system. Canada 's
experiencewithregionalinitiativessince1994hadincreasedsupportbothdomesticallyandinternationally
fortheWTO, andenhanced thedialogue between North andSouth byidentifying common interests
andobjectives which were inlinewithglobal realities.
12. Developing countries hadplayed apivotal roleintheUruguay Round andinthecreation of
theWTO. They alsohadbeencoreparticipants inregional initiatives inwhich Canada hadbeen
involved. Recognizing thatthebenefits oftheUruguay Round wereuneven, Canada hadlowered its
Generalized Preferential Tariff (GPT) ratesandextended product coverage. Italsocontinued tobe
involved inthereform ofUNCTAD asaninstrument toimprove developing countries 'understanding
ofemerging trade issues. Canada wascommitted toimproving trade-related technical assistance,
including through ameeting oftrade andaidagencies withrecipients inearly 1997.
13. Canada 'sfuture tradepolicy agenda included further liberalization, whether through agreements
toeliminate tariffs intheinformation technology sector ornegotiations onbasic telecommunications
andfinancialservices.CanadawascommittedtothedeadlinesintheWTO'sbuilt-inagenda,recognizing
thatitsfuture layingreater integration intotheglobal economy andthattheWTO wastheprimary
vehicle forcreating multilateral traderules. Given theambitions ofregional tradeinitiatives, itwould
belogical fortheWTO tostatetheultimate goalofaworld inwhich tradeflowed freely between nations,
pursuant toacomprehensive setofrules, administered byanorganization withuniversal membership.
14. Canada supported theWTO 'swork ontradeandenvironment, aiming toensure thattradeand
environment measures weremutually consistent andsupportive ofsustainable development. TheWTO
should alsobegin work oninvestment andcompetition policy. Unlike theGATT, theWTO wasmore
thanaforum forthenegotiation ofrules; itshould provide afocalpoint fordiscussion ofissues related
totheoperation andevolution ofthetrading system. Adynamic institution, withtherespect ofits
Members andthecredibility ofthepublic, would assist governments indealing withthechallenges
ofglobalization. Thealternative wasnotthatnational governments would settherules, butthatthe
market would impose itsrules ongovernments.Canada WT/TPR/M/22
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15. Canada hadmade "aleapoffaith" when negotiating afree-trade agreement with the
United States. Aided bysound policy decisions andabusiness sector willing toseize opportunities,
thishadbeenrewarded overthepasttwoyears. ItwasinCanada 'sinterest tocontinue theprocess
oftrade liberalization, begin theexamination ofnewissues andconsider options forrule-making in
other areas.WT/TPR/M/22
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III. STATEMENT BYTHE FIRST DISCUSSANT
16. Thefirstdiscussant,AmbassadorTerjeJohannessen,describedCanadaasamodelWTOMember.
Heavy reliance onforeign trade, andinparticular ononetrading partner, hadcreated theneedfor
areliable, predictable andtransparent global trading system. Thus, strong support fortheWTO had
beenandwould continue tobeacornerstone ofCanadian trade policy.
17. Canada 'seconomic performance in1994 and1995 hadbeenremarkable, withgrowth well
above theaverage forindustrialized countries. Exports ofgoods andservices hadbeengrowing at
14.7percentand12percentduring thepasttwoyears, nearly double theaverage oftheindustrial
countries. Similarly, imports hadwitnessed highgrowth rates. However, 1996 hadbrought some
levelling-off ineconomic activity. Unemployment washigh, although onadeclining trend, with
considerable regional differences. Given thecontrast between theemployment andthegeneral economic
situation, heenquired about improvements inthelabour market andwhether anyprotectionist pressure
could beexpected withunemployment at10percent.
18. Positive economic developments hadapparently resulted fromaconservative fiscal policy aimed
atbalancing thefederal budget overthemedium term, notably through thegradual reduction ofdomestic
subsidy programmes. Heasked whether highinterest rateswould restrain investment andconsumption,
sought additional information onplans toreduce subsidies andwondered about thecauses oftherecent
downgrading ofCanada 'sfiscal debtbyMoody 'srating agency.
19. Inthetwoyears to1995, theexport toGDPratiohadrisenfrom31to37percent. According
toOECD figures, exports hadcontributed almost 5percentage points torealGDP growth in1994.
Between 1989and1995, theU.S.share ofCanadian exports hadrisenby6percentage points to80per
cent,withtheresult thatalmost onethirdofCanada 'sGDP wasexported toasingle trading partner.
Although thisindicated agrowing levelofintegration, hefeltthatdependence wasanengine forgrowth
ingood times, butaneffective brake inbadtimes. Heasked whether thiswasamatter ofconcern
totheCanadian authorities andwhether recent policy initiatives atthebilateral andregional levels were
aresponse tothissituation.
20. Canadian-U.S.integrationhadbeenstrongestintextilesandautomobiles.ImportsofU.S.-made
manufactures were scheduled tobedutyfreein1998, compared tocurrent m.f.n. tariffs averaging
6.6percent. Hewondered whether thiswascompatible withCanada 'spolicy intheindustrial sector
topromote tariff reductions onimports from anysource.
21. Canada 'sfavourable competitive position andregional integration under theNAFTA hadhelped
toattract investors, especially inmotor vehicle assembly operations. While beneficial toemployment
andproduction, theSecretariat Report noted that"theexpansion ofassembly operations, withrelatively
shallow domestic supply links, hadresulted inanincreasing gapbetween theindustry 'scontribution
totrade(23percentofbothimports andexports), anditsrelatively modest 2.2percentshare inGDP.
Important stages ofR&D, design andengineering tendtobeconducted outside Canada". Wasthere
alinkbetween therelatively poortechnological content ofthese operations andwhat theCanadian
Government andcertain international organizations described asa"technology gap"? What might be
theimplications andremedial policy actions?
22. Canada sought tocombine regional andmultilateral integration bypromoting WTO-compatible
rulesattheregional levelwhile binding itsNAFTA services commitments under theGATS. Heasked
forcomments onhowinternal pressures inafederal system could bebalanced withregional integration
andmultilateral liberalization. Reflecting Canada 'sfederal constitution, anumber ofdecisions andCanada WT/TPR/M/22
Page 7
competencies weresplitbetween Ottawa andtheProvinces. TheFederal Government hadthemandate
tonegotiate international agreements, while implementation waslefttoprovincial governments inareas
fallingundertheirmandate.Wasthissituationimpedingordelayingtheimplementationofinternationally
negotiated commitments and,ifso,whatwastheGovernment 'sresponse? While extending itslist
offederal entities andopening anumber ofservices sectors toforeign competition under theGovernment
Procurement Agreement, Canada hadnotoffered theinclusion ofsub-federal government entities in
itsGPA schedule. Heinvited theCanadian delegation tocomment onthereservations concerning
taxandsubsidy measures attheprovincial levelinitsSchedule ofGATS commitments.
23. Thesimultaneous entry intoforce in1995 oftheNAFTA, theWTO andtheAgreement on
Internal Trade wascertainly more thanamere coincidence. Towhatextent would theAITfacilitate
theimplementation ofinternational agreements atalllevels ofgovernment? TheAgreement wasstill
incomplete inareas suchasgovernment procurement, subsidies andenergy, andleftaconsiderable
leeway totheprovinces. This, inturn, reduced thetransparency oftheCanadian market forforeign
firms.
24. Thehighcorrelation between external liberalization anddomestic reform wasprobably the
rootoftherecent success oftheCanadian economy. External reforms hadbeencomplemented by
aprocess ofinternal deregulation andgovernment retrenchment. Inagriculture, WTO disciplines and
budgetary constraints hadhelped toeliminate transport subsidies forgrain. Commending improvements
inaccesstotheCanadianservicesmarkets,reflectingbothdomesticderegulationandexternalnegotiations
under theNAFTA andtheWTO, heasked which areas hadbeenearmarked forfurther deregulation
orinternal liberalization.WT/TPR/M/22
Page 8Trade Policy Review
IV. STATEMENT BYTHE SECOND DISCUSSANT
25. Thesecond discussant, Mr.JuanFrancisco Misle, saidthatthemaincharacteristics ofCanada 's
economy were: aconstant search foraneconomic andpolitical balance between theprovinces and
theFederal Government; reliance oninternational andregional economic integration; anda
determination topursue structural reform oftheeconomic andtrading systems. Canada hadshown
acontinued commitment toliberalize trade, aswitnessed byitsUruguay Round andNAFTA
commitments. Nevertheless, several important challenges remained, including non-tariff barriers to
trade, obstacles tointerprovincial factor mobility andtheresistance toopenupcertain monopolies to
competition.
26. Theimplementation oftheAgreement onInternal Trade testified toCanada 'sefforts toliberalize
internal andregional trade. However, theAgreement didnotdealwithseveral important barriers in
theagricultural andtransport sectors, while energy wasexcluded from itscoverage. Heasked how
Canada viewed theeffects after18months ofimplementation, andwhytheenergy sector hadbeen
excluded.
27. Tariff reductions inmanufactures, fromanaverage of9to6.6percentbetween 1994and1996,
confirmed thechange intrade policy orientation initiated during the1980s. Nonetheless, thefactthat
above-average duties applied tocertain developing-country exports wascause forconcern. Considerable
externalcompetitionfacedbymanufacturingindustriescontrastedwithaveragetariffsofover25percent
inagriculture, complemented byfederal andprovincial subsidies andasupply management system.
Tariff quotas negotiated intheUruguay Round hadnotoffered anyopportunities fornewsuppliers
asaccess wasmostly reserved fortraditional importers, notably from theNAFTA.
28. Hequestioned thecompatibility oftherecent export taxonwood totheUnited States with
theprovisions oftheWTO Agreement onSafeguards, which explicitly prohibited managed trade and
voluntary export restraints. Quantitative restrictions onimports oftextiles andclothing, andthe
monitoring ofcarbon andspecialty steelimports seemed tocontradict thespirit oftrade liberalization
described bytheCanadian authorities, andretarded theprocess ofstructural adjustment. Heasked
howimport monitoring waseffectively being carried outandwhether anyimport licences hadbeen
refused.
29. There hadbeenanimportant decrease inthenumber ofanti-dumping casesinitiated since1994.
Thiscould beattributed totheCanadian dollar 'sdepreciation aswellastostructural factors, suchas
increasedcompetitivenessinducedbytradeliberalization.Heaskedwhetherthisdecreasewasconsidered
tobecyclical orwhether itreflected lasting changes inthedegree ofcompetition. More specifically,
heenquired about thebasis forchoosing aninstitutional forum incaseofadispute among NAFTA
partners. Whyhadthere beenfewer countervailing thananti-dumping dutycases? How could the
local-content requirements maintained byseveral provinces beconsidered compatible withGATT
Articles IIIandXIandtheTRIMs Agreement?
30. Thediscussant thenasked fordetails onCanada 'sInternational Business Strategy. Howhad
the23sectors beenselected? What wasthecompetence ofthe"national teams", andwhatwastheir
rôleindefining trade policy? Heregretted theabsence ofinformation onexport subsidies financed
attheprovincial levelandwondered whether suchsubsidies were inplace.
31. Changes inCanada 'sinvestment policy hadimproved market access andtreatment offoreign
suppliers.However,thereremainedsome"sensitive"sectors,includingtheenergy,transportandcultural
industries. Restrictions alsoexisted attheprovincial level onpurchases ofnon-urban landand,inCanada WT/TPR/M/22
Page 9
theoilandgassectors, investment authorizations could bemade conditional onlocalemployment or
onpurchases oflocalgoods andservices. Heasked whether anychanges wereenvisaged forforeign
investment inthese sectors.
32. Agricultural marketing boards continued tomaintain operations withapotentially distortive
impact ontrade. Intheenergy sector, activities relating tooilandgasproduction wereinprivate hands
andPetro-Canada would shortly beprivatized; while electricity production andtrade continued to
becontrolled byprovincial monopolies. Textiles andclothing constituted themajor exception tothe
generally lowleveloftariffs inmanufacturing. While Canada-U.S. trade would bedutyfreebythe
year2000, bound m.f.n. rateswould stillaverage 12.7percent. Such adisparity could accentuate
trade diversion tothedetriment ofdeveloping countries. Heasked iftheCanadian Government
considered plans toreact.
33. Twothirds ofCanadian GDP consisted ofservices, whose importance wasincreasing with
thedevelopment ofcommunications andinformation industries. Thisexpansion waslinked tothe
redefinition oftherôleoftheState inthatsector, increased private investment andbroader market
access inthecontext oftheNAFTA. These factors hadreduced thepublic deficit, while improving
productivity andcompetitiveness. Asmostactivities intheareasofcommunications, financial services,
andmaritime andairtransport hadbeenbrought under federal jurisdiction, thismight havefacilitated
theintegration ofregional services markets.
34. Under theGATS, Canada hadforgone reciprocity requirements inallowing market access for
branches offoreign banks andhadremoved limits ontheirassets. Thetelecommunications sector had
been liberalized recently, although segments stilloperated under public monopolies andcross
subsidization persisted between localandlongdistance calls. Heasked whether Canada intended to
make animproved offerinthetelecommunications negotiations in1997. Airtransport andshipping
hadalsoundergone deregulation, transfer tofederal regulation andopening toforeign direct investment.
35. Cultural services benefited fromconsiderable Statesupport across allactivities. Itconsisted
ofdirect grants, other fiscal incentives andrestrictions onforeign ownership ofmasscommunications
aswellaslocal- andnational-content requirements. Under theGATS, Canada hadnotmade market
access ornational treatment commitments fortheaudiovisual sector andhadincluded alistofm.f.n.
exemptions forcinema, television andother cultural activities. Heasked whether Canada envisaged
making commitments inthese areas.WT/TPR/M/22
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V. STATEMENTS BYMEMBERS OFTHE TRADE POLICY REVIEW BODY
36. Therepresentative ofAustralia commended Canada forrecent tradeliberalization. Government
support forthegrains sector, aswellasassistance todairy andother agricultural products hadbeen
substantiallyreduced.Hehopedthatthesedevelopmentsinagricultureandcertainindustrialandservices
sectors would continue andbeextended tothedairy, poultry andeggssectors, which hadremained
behind protective tariffquotas. Australia encouraged Canada togradually reform thesesupply-managed
sectors andlessen thecosts toconsumers andtrading partners; thereform should beundertaken
regardless ofthecurrent NAFTA panel. Amore transparent quota administration system would also
beappropriate. Canada hadshown withtheabolition ofgrain transport subsidies thatreforms oflong
entrenched policies could deliver considerable economic benefit.
37. Canada hadgradually reduced tariffs onsome industrial products andcontinued toreform and
liberalize itsservice sector. Efforts hadbeenmade toincrease competition especially intransport,
financial, postal andtelecommunications services. Heencouraged Canada tofurther liberalize access
toitstelecommunications markets.
38. Heappreciated improvements inAustralia 'sbilateral traderelationship withCanada following
theresolution ofaccess problems forbeef. Negotiation oftheCanada-Australia Trade andEconomic
Cooperation Agreement might further enhance economic relations. Canada hadpursued anambitious
andbalanced agenda inmultilateral andregional fora,focusing onissues beyond theUruguay Round
implementation andtheSingapore Ministerial Conference. Canada hadremained aconstructive
participant intheCairns Group andwould bepivotal inadvancing APEC 'strade andliberalization
agenda. However, theincreased regional focus ofCanada 'strade policy could fragment itsoverall
traderelationsanddisadvantageothertradingpartners.Forexample,theAustraliancannedfruitindustry
hadsuffered fromtheNAFTA implementation. Hecalled forareaffirmation ofCanada 'scommitment
tooutward-looking regional integration thatwould besupportive ofthemultilateral system, andenquired
howtheprocess ofeconomic integration intheAmericas would unfold inthenextdecade.
39. TherepresentativeofSwitzerlandsoughtfurtherclarificationontheincreaseinCanadianexports
oftextiles andclothing totheUnited States, referring tostricter rulesoforigin andtothepossibility
under theNAFTA toexport additional quantities ofnon-originating products under azero-tariff quota.
Wasthedecrease inCanadian andU.S. anti-dumping cases inbilateral trade alsotheresult ofthe
NAFTA? Hequestioned theWTO-compatibility oftherecently imposed export taxonlumber and
asked whyithadnotbeennotified totheWTO. TheCanadian Business Council haddescribed this
measure asa"dangerous precedent, demonstrating anincreased tendency forprivate party actions to
force governments toact,andashifttowards managed trade".
40. Canadian cheese imports hadlongbeensubject toquantitative restrictions, which hadbeen
converted intotariff quotas following theUruguay Round. On1January 1996, thequota reserved
fornon-EC suppliers, suchasSwitzerland, hadbeenreduced asSweden, Finland andAustria hadjoined
theEC.Furthermore, thequotas hadnever beenincreased, despite asubstantial expansion ofCanadian
cheese consumption. Herequested more information onCanada 'scheese import régime andbilateral
talksonthismatter.
41. Recent trade-related initiatives byCanadian producers ofgeneric drugs wereofconcern; he
asked formore details onplans forlegalamendments, suchastheabolition ofthe"linkage regulation"
andtheintroduction ofan"export amendment" andhoped thatthese would beinconformity withthe
TRIPS Agreement. Asthesixthlargest foreign investor inCanada, Switzerland welcomed therecent
extension ofNAFTA preferences ergaomnes andappreciated theabolition ofrestrictions onforeignCanada WT/TPR/M/22
Page 11
ownership infederally chartered insurance, trust, loans andinvestment companies. However, henoted
thatcertain restrictions could stillbeapplied toforeign investment andasked when theGovernment
intended tolifttheministerial approval forbanks fromnon-NAFTA countries wishing toopenmore
thanonebranch.
42. Incertain provinces, exploitation andmarketing ofnatural resources wasconditional onlocal
processing criteria. InOntario, local grapes hadtobepurchased inorder toimport wine. These
measures might notbeWTO-compatible. Moreover, Canada hadnotsubmitted alistofsub-federal
entities forinclusion intheAgreement onGovernment Procurement (GPA), buthadintroduced new
conditions forsubmission afterthesigning oftheAgreement. Heexpected thattheCanadian authorities
would notify theprovinces subject totheAgreement 'sprovisions, inconformity withitsobligations.
43. Therepresentative ofHong Kong saidthatCanada 'seconomy hadimproved since the1994
TPRduetoderegulation andrational policy choices. Athree-year tariff review included reductions
ofm.f.n. tariffs onabout 1,500 items covering abroad range ofmanufacturing inputs, aswellasa
proposal forasimpler andtransparent tariff. Hewelcomed thisproposal butcalled forlower tariffs
inhigh-tariff areas liketextiles andclothing. Hehoped thatthereview ofCanada 'sSpecial Import
Measures Actwould result inanimproved anti-dumping legislation.
44. TherepresentativeoftheEuropeanCommunitiesnotedthatEC-Canadatradehadbeenrelatively
stagnant forseveral years, withsome growth in1995-96. TheECremained Canada 'ssecond most
important tradepartner andsecond largest foreign investor. Hecommended Canada 'srôleintheWTO,
inparticular inpromoting thecompatibility between regional arrangements andmultilateral rulesand
advancing work onthe"new issues". While theFederal Government hadthepower tonegotiate,
conclude andratify international agreements under theterms ofArticle XXIV:12, implementation of
certain areaslaywithin provincial jurisdiction. TheGovernment Procurement Agreement would allow
Canadatofulfilitscommitmentsvis-à-visotherpartners,irrespectiveofthepositionoftheUnitedStates.
45. Canada andtheECwereclose tocompleting negotiations onamutual recognition agreement
onconformity assessment andcertification, which would come intoeffect in1997andshould facilitate
trade flows forarange ofproducts. Atprovincial level, locally imposed standards andlabelling
regulations, local inspection procedures andcomplex packaging rules hadcreated substantial trade
barriers. Hehoped thatimprovements would result from theAgreement onInternal Trade.
46. Canada continued tobethethirdlargest userofanti-dumping measures among WTO Members.
Recent reviews oncertain steelproducts hadbeenlaunched attheinitiative ofRevenue Canada, without
acomplaint onthepartofCanadian industry. Theuseofcomplex questionnaires inthereview process
raised thecostofcompliance considerably, andpunitive duties hadbeenimposed onnon-co-operating
exporters onthebasis ofbestinformation available. Alesser dutyruleshould beapplied soasto
eliminate injury rather thanpenalize exporters. Withregard tocustoms valuation, hecomplained about
recent interpretive legislation, which wasrestrictive andnotjustified under theCustoms Valuation
Agreement.
47. Under Article 23.2oftheTRIPS Agreement, geographical indications ofwines andspirits
could beprotected against abusive useeveniftheproduct 'sorigin wasindicated, oraccompanied by
expressions suchas"type" or"style". Theabsence ofsuchaprovision inCanadian legislation created
aproblem ofconformity. Under Article 11.18(3) oftheWT0 Implementation Act,Canada hadlisted
generic winenames asbenefiting fromtheexceptions toprotection foreseen inArticle 24.6oftheTRIPS
Agreement. Certain appellations aswellascertain brand names hadbenefited fromprotection priorWT/TPR/M/22
Page 12Trade Policy Review
totheWTO Implementation Act; heconsidered thatCanada 'suseofthese appellations asgeneric
wasincontradiction withtheTRIPS Agreement.
48. TheECwelcomed thereduction ofsome agricultural subsidies andtheconversion ofCanada 's
import quotas intoasystem oftariffquotas. However, thereallocation ofbovine meatquotas tospecific
countries wasquestionable, andCanada hadcounted preferential NAFTA imports ofwheat-containing
products against itsglobal quotas. Exports bytheCanadian Wheat Board lacked transparency, making
itimpossible toverify whether Canada wasrespecting itsreduction commitments.
49. Theamendment totheCoastal Fisheries Protection Actin1994 wasinprinciple applicable
toallforeign fishing vessels, notjuststateless orflag-of-convenience vessels. Thisintroduced anelement
ofextraterritoriality andwascontrary tointernational law. Heregretted thecontinued prohibition of
direct branching byforeign banks, despite twoCanadian reports supporting immediate change, aswell
assingle ownerships limits of"Schedule I"banks. Theinstruments designed toprotect Canada 'scultural
identity wereblunt anddisproportionate inrelation totheirobjectives. Investments innewcompanies
involved infilmproduction anddistribution were onlyallowed forthedistribution ofproprietary
products, andiftheinvestment wereofneteconomic benefit toCanada. Thisobstacle fornewinvestors
wasunlikely tomeettheunderlying policy objectives; itmight alsodiscriminate defacto infavour
ofU.S.investors established inCanada andgrandfathered byCanadian legislation.
50. Therepresentative ofNew Zealand joined others inlinking theimprovement inCanada 's
macro-economic indicators toeconomic policy reforms, including steps toreduce trade distortions,
liberalize interprovincial trade andimprove industrial efficiency. Canada wasNewZealand 's11th
largest export market, withimports about athird larger thanexports. Although Canada enjoyed
substantially freeaccess toNewZealand, ithadsubmitted NewZealand 'smost important exports,
dairy products, totariff-quota restrictions. Thereform process, which hadtaken place inCanadian
agriculture overthelasttwoyears hadbeenuneven; tariffpeaks onabove-quota imports inareassubject
tosupply management, ranged toover300percentforbutter, compared witha6.6percenttariff
average onmanufactures. Supply management policies inthedairy andpoultry sectors hadnotbeen
significantly reformed todate. Arecent publication bytheCanadian Department ofForeign Affairs
andInternational Trade hadnoted thatthecurrent supply management system regulated farmincome
forover35,000 Canadian farmers, andgrocery prices formillions ofconsumers byexcluding imports.
While Canada favoured further liberalization offarmtrade"inthelonger term", therewasnomention
ofatimeframe intheGovernment 'sTPRReport. Canada 'scommitment toliberalizing trade inthe
WTO, APEC andtheCairns Group allprovided sufficient inducement toaccelerate theprocess of
agricultural liberalization.
51. Therepresentative ofJapan complimented Canada foritssupport foranopenmultilateral trading
system. Regarding NAFTA, heexpressed concern about complex rules oforigin intheautomotive
sector thatmight restrain trade fornon-members. Japan hadsubmitted anumber ofwritten questions
ontheexport prohibition maintained byBritish Columbia ontimber andwood chips, andthecriteria
usedtodetermine sufficient supplies fornational use. Further questions concerned anti-dumping
regulations, including thepublic interest clause, thecross-cumulation ofdumping andsubsidy charges,
andtheuseofprices intheexporting country asnormal values. Wastherecently concluded agreement
onsoftwood lumber withtheUnited States subject toArticle 11.1oftheSafeguards Agreement? He
questioned thecompatibility oflocal-content measures fortimber, oresandminerals, wine, and
audio-visual products withtheprovisions oftheTRIMs Agreement.
52. Heasked whether theCanadian Export Development Corporation provided export subsidies,
andwhether regional assistance andsupport forresearch anddevelopment werecompatible with, andCanada WT/TPR/M/22
Page 13
hadbeennotified under, theSubsidies Agreement. Caution wasrequired before applying theTBT
Agreementtoeco-labellingprogrammes.HesharedtheconcernsexpressedaboutCanada'sprocurement
regulations atthesub-federal level, including those specified intheAgreement onInternal Trade, and
about thenon-submission ofCanada 'ssub-federal entities under theAgreement onGovernment
Procurement. Heasked whether thephasing outoftheFederal Dairy Stabilization subsidy by2001-02
wastantamount totheelimination ofdirect payments totheproducers ofindustrial milk. Ifso,would
there beanycompensatory measures? Noting thatthetariff onautomobile partshadbeeneliminated
inJanuary 1996, hesaidthat,while Auto-Pact companies wereallowed toimport assembled carsduty
freefrom theUnited States orother countries, duties of8percentwere levied onimports from
non-Auto-Pact companies. Thisconstituted discriminatory treatment. While Canada 'scommitment
toeaserestrictions onforeign ownership inbanking waswelcome, heenquired whether provincial
trustandloanbanks stillapplied the10/25 rule. Ifso,would thisconstitute alimitation offoreign
capital covered byArticle 16.2(f) oftheServices Agreement? Would Canada abolish thelimitation
onforeign participation infacilities-based telecommunications carriers, currently 20percentfordirect
holdings and33.3percentforvoting shares inholding companies?
53. Therepresentative oftheUnited States congratulated Canada onitsrecent economic progress
anditsleadership inimplementing theUruguay Round andtheNAFTA. Canada 'seconomic future
wasinextricably linked tothatoftheUnited States. Hewelcomed theloosening ofCanada 'sinvestment
restrictions, butexpressed concern thatforeign banks could enter onlyasseparately organized and
capitalized subsidiaries rather thanthrough direct branching. Canada should endthescreening offoreign
investment proposals beyond Can$168 million under theInvestment Canada Act. TheUnited States
hadalsosubmitted questions regarding limitations onforeign investment inthetelecommunications
sector. Discriminatory measures continued toaffect magazine publishing, cable television, copyrights,
direct broadcast satellite services andfilmdistribution. Since thelastreview, Canada hadimplemented
thediscriminatory recommendations ofataskforce onthemagazine industry; aWTO panel was
currently reviewing these andother policies attherequest oftheUnited States.
54. Canada hadintroduced legislation tomodernize itscopyright law,including byextending
neighbouring rights toauthors, performers andproducers ofsound recordings. Under thenewsystem,
royalty payments generated fromthepublic performance ofsound recordings would notbedistributed
onthebasis ofnational treatment, butallocated tosignatories oftheRome Convention towhich the
United States wasnotaparty. Astheprincipal producer ofsound recordings broadcast inCanada,
theUnited States wasconcerned about thestatus ofU.S.rights owners under theproposed legislation.
Thenewlawwould alsoimpose alevyonblank audio cassettes andequipment, andtheUnited States
wasconcerned thatU.S.rights holders would notberemunerated onanational treatment basis.
55. Heshared concerns about thenon-inclusion under theAgreement onGovernment Procurement
(GPA) ofCanada 'sprovinces, which hadalonghistory ofdiscriminatory procurement practices. With
respecttoagriculture,herepudiatedtheinterpretationthatover-quotaimportsofsupply-managedproducts
were exempt from dutyelimination under theNAFTA. TheCanadian Government hadrevised its
currentsystemformarketinggrains,andtheUnitedStateshadrequestedfurtherinformationonproposals
andrecommendations inthiscontext. While some dairy export assistance programmes hadbeen
abolished,newprogrammeshadbeenestablished,includingtheOptionalExportProgramandtheSpecial
MilkClass Permit System. Canada didnotpermit interprovincial movement, orimports intoCanada,
ofcertain fruits andvegetables inbulkcontainers, except under ministerial exemption. Heurged Canada
tochange thispolicy, which inhibited thefreemovement ofgoods ingeneral anddiscriminated against
imports ofU.S.potatoes andapples.WT/TPR/M/22
Page 14Trade Policy Review
56. Therepresentative ofNorway complimented Canada onitsconstructive andactive participation
intheWTO. Norway shared Canada 'sposition ontrade andcompetition policy andoninvestment
policies, anditsconstructive position ontradeandlabour standards. Noting thattheCanadian authorities
hadcalled forefforts to"re-energize theeconomic relationship withEurope", sheasked fordetails
ontheongoing Trans-Atlantic Dialogue. Although theAgreement onInternal Trade wasasignificant
steptoreduce domestic barriers andcreate asingle Canadian market, itdidnotcontain clear
commitments toabolish barriers. How would thecurrently excluded sectors beintegrated?
57. Shesought further information onthepresent review ofCanadian anti-dumping legislation
andtheauthorities 'viewontheeffectiveness ofanti-dumping measures. Norway shared theconcerns
about Canada 'sprocurement policy. What wastheshare ofinternational standards implemented as
national standards inCanada, asrequired under Article 2.4oftheTBTAgreement? Sheagreed with
previous speakers thatCanada 'scheese import régime should beadjusted. Why hadCanada not
completed itsWTO notification obligations insome areasofagriculture andsubsidies, andwhen would
these bemade? Regarding textiles andclothing, whathadbeentheCanadian experience withimport
liberalization, andwerethereplans toimplement special tradepreferences forLDCs? HowdidCanada
enforce itsimport prohibitions forgoods manufactured withprison labour?
58. Therepresentative ofSlovakia, while considering Canada asamodel fortrade liberalization,
noted thatfederal policies contrasted withamore restrictive provincial approach incertain agricultural
andservices sectors andinprocurement. Healsomentioned theprohibitive tariff-quota régime for
dairy, poultry andeggs, theuseofanti-dumping measures, andhighprotection oftextiles andclothing.
59. Therepresentative oftheRepublic ofKorea noted thateight Korean products werecurrently
subject toCanadian anti-dumping measures. Sixitems, including photo album sheets, oilandgaswell
casings, hadbeencovered sincethe1970s or1980s despite anegligible volume oftrade. Hewondered
whether thiswasinaccordance withArticle 11.1oftheWTO Agreement onAnti-Dumping, andwhether
theCanadian Government would adhere tothedeminimis ruleofArticle 5.8.Heasked forclarification
ofthe1996tariff re-classification forsnow-board boots, previously classified asdown-hill skiboots,
whereby tariffs hadbeenraised to21.5percent. Under theNAFTA, localcontent ofautopartswas
tobeincreased from50percentto62.5percentbytheyear2002, tothedetriment offoreign investors.
60. Therepresentative ofIndia noted thatCanada wasnotonlyoneoftherichest nations inthe
world, butalsooneofthemostopeneconomies. Over thelasttwoyears, animpressive pattern of
sustained growth hadbeenunderpinned bylowinflation, improved productivity, andincreased exports.
Progress hadbeenmade inreducing structural budget deficits above theimprovements associated with
economic recovery. Intheareaoftextiles, Canada continued tofollow thetraditional, restrictive
approach; theshare oftextiles andclothing products imported fromdeveloping countries wasdeclining.
Noting thatCanada hadintegrated onlyonerestrained product (work gloves) from seven sources in
thefirststageofintegration under theAgreement onTextiles andClothing, hehoped thatCanada would
implement theAgreement inletter andspirit. Hefullysupported Canada 'sapproach that"rules of
themultilateral trading system arecomplementary to,andnotcontrary totheattainment ofbroader
social objectives".
61. Therepresentative ofHungary questioned howarobust andcompetitive economy needed import
protection viaquantitative restrictions ontextile imports andenquired whether thereview oftheSpecial
Import Measures Actwould address thisproblem. Strict sanitary ruleslimited market access forsalami
andsimilar products. Wasthebanonnon-heat treated processed meatproducts based oninternational
standards, guidelines orrecommendations? DidCanada recognize sanitary andphytosanitary measuresCanada WT/TPR/M/22
Page 15
ofother Members ifitwasdemonstrated thatthese metanappropriate levelofprotection, asrequired
inArticle 4.1oftheSPSAgreement?
62. Therepresentative ofPakistan stated thatCanada 'sfirstintegration stage oftextiles products
intoGATT 1994 hadbeenadisappointment asitincluded onlyoneMFA-restrained item. Heurged
theauthorities toenhance market access opportunities fortextiles-exporting countries.WT/TPR/M/22
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VI. REPLIES BYTHEREPRESENTATIVE OFCANADA AND ADDITIONAL COMMENTS
1. General Economic Situation
63. Therepresentative ofCanada stressed thatthegrowth ofproduction andtrade inCanada was
asencouraging asachievements intheareaoffiscal policy, where arestrained approach hadfurthered
thebalancing ofthebudget. Continuing highunemployment remained aproblem andjobcreation
wasoneoftheGovernment 'schiefeconomic priorities. However, noincreased protectionist pressures
hadresulted from theunemployment situation. Canada 'sopen economy wasgreatly dependent on
international trade andinvestment flows; maximizing economic growth implied further trade
liberalization andcomplementary internal deregulation. Canada 'sfederal system ofgovernment brought
itsownchallenges tothemanagement oftradepolicy. Theapproach ofconstant andcloseco-operation
through regular federal-provincial consultations ontheentire tradepolicy agenda hadbeenbeneficial.
Trade barriers continued toexistatthefederal andprovincial levels, butwere being addressed in
co-operation withprovincial governments. TheAgreement onInternal Trade wasasteptowards a
more openandefficient Canadian market.
64. Canada considered thatitsconstitutional structure didnotobstruct thefulfilment ofitsWTO
obligations.Theprovinceshadbeenfullyconsultedindevelopingtheobjectivesandnegotiatingpositions
fortheUruguay Round, andnocommitments hadbeenmade inareas requiring changes toprovincial
legislation without theirapproval. Theprovinces haddemonstrated theirsupport fortheCanada-U.S.
FTA, theNAFTA andtheUruguay Round, andhadundergone aninternal liberalization process. The
AITincluded specific obligations intensectors, thereduction ofexisting barriers, thederegulation
oftrucking, andcommitments tonegotiate further trade liberalization.
65. TheAITprovisions onconsumer-related measures andstandards wereaimed atstreamlining
andharmonizing regulations designed forconsumer protection. There hadbeenprogress inremoving
impediments foragricultural andfoodproducts; tradebarriers intransport services would bereduced,
particularly fortrucking; andgovernments would reconcile avariety ofmeasures toprovide amore
uniform system. Theobjective ofthechapter onlabour mobility wastoenable anyworker qualified
foranoccupation inonepartofCanada tohaveemployment across thecountry. Occupational regulatory
bodies hadbeenasked tocomply voluntarily withtheprovisions within areasonable period oftime.
66. Negotiations were ongoing toextend thecoverage oftheprocurement chapter oftheAITto
municipalities, publicly funded academic institutions, social services agencies andhospitals. Inaddition,
attempts were being made toreduce thenumber ofcurrently excluded services andentities (Crown
corporations) andconclude anenergy chapter. While most energy flowed freely across provincial
borders, electricity wasanexception. Issues regarding thecross-territorial transmission ofelectricity
werecurrently thefocus ofdiscussions. Although therewasnoclause intheAgreement thatspecifically
discriminated against foreign suppliers orproducts, theprocurement provisions permitted parties to
accord apreference ofupto10percentforCanadian value-added where thiswaspermissible under
international agreements. However, there wasnoobligation todoso.Itwastooearly toanalyse the
impact oftheAITonrecent growth andstructural change.
67. Thesecond discussant asked whether theAITcontained provisions regarding WTO-compliance.
Therepresentative ofCanada responded thatinternational rules applied; although theFederal
Government hadconstitutional power ontradeissues, theprovinces hadalways implemented theresults
ofGATT andWTO panels when thesehadfound provincial practices tobeinviolation ofinternational
obligations.Canada WT/TPR/M/22
Page 17
2. Regional andMultilateral Trade Relations
68. CanadaplacedemphasisondevelopingtheWTOnotonlyasaforumforimplementation,review
andnegotiation, butfortheexamination ofemerging issues suchasinvestment andcompetition policy.
Where some sawvulnerability anddependence intherelationship withtheUnited States, Canada saw
opportunity. Through theNAFTA, bilateral trade arrangements andregional initiatives suchasthe
FTAA andAPEC, Canada continued towork forthecomplementarity ofregional andmultilateral
rules. Ifmanaged correctly, suchrules-based systems were mutually reinforcing andledtotrade
creation, notdiversion. Managing theinterplay oftheWTO andregional arrangements wasakey
element ofCanada 'strade policy.
69. Canada didnotbelieve thatthesoftwood lumber agreement withtheUSAwould bechallenged
byitstrading partners asbeing WTO-inconsistent.
70. TheCanada-Chile FreeTrade Agreement would cover substantially alltradebetween thetwo
countries. Inaddition tobarrier-free access forgoods, theagreement contained national treatment
andmost-favoured-nation clauses ensuring non-discriminatory treatment forinvestors, guarantees for
services, anexemption fromanti-dumping duties aswellassideagreements onenvironment andlabour.
Itrepresented another market-opening opportunity andabridge toChile‘saccession totheNAFTA.
Canada 'sefforts overtheinterim period would focus onnegotiations currently under wayintheFTAA
andonimplementing andconsolidating theexpanded NAFTA andfuture FTAA.
71. Thesecond discussant asked which factors ledCanada tobring adispute toaWTO rather than
aNAFTA panel. Therepresentative ofCanada responded thattheWTO Dispute Settlement Mechanism
wasusedwhen lawsofNAFTA parties wereconsidered tobeWTO-inconsistent. Recourse toNAFTA
dispute settlement provisions wasmade toexamine theconsistency ofaParty'sadministrative provisions
withitsownlegislation.
3. Trade andInvestment Policies
72. In1995, thetrade-weighted average applied tariff onallimports (dutiable andnon-dutiable)
wasonly1.6percent. Asforthegapbetween m.f.n. andpreferential rates, Canada remained ready
tosupport newinitiatives tofurther liberalize tariffs. Although Canada remained amajor useroftrade
remedies, recourse tothemwasdeclining duetostructural changes andamore competitive economy.
Canada would continue tomaintain mechanisms foraddressing unfair tradepractices. However, there
wasnoneedforanti-dumping rules inafree-trade environment, andCanada continued topushfor
theirelimination inNAFTA asintheFTAwithChile.
(i) Tariffs andcustoms valuation
73. Thechanges foreseen forCanada 'stariff régime would lessen theregulatory burden on,and
theassociated costs to,thebusiness community andtheGovernment. Thetariff system would be
simplified, andmade more transparent andpredictable. In1995, Canada hadreduced 1,500 m.f.n.
tariff linescovering production inputs. AnewCustoms Tariff would beintroduced inJanuary 1998.
74. Canada wasreducing tariff ratesontextile andclothing products. Prior tothecompletion of
theUruguay Round, ithadtaken unilateral action tocuttextile tariffs. These reductions hadbeen
incorporated inCanada 'sUruguay Round tariff commitments withtheresult thattherelevant tariffs
werebeing reduced earlier thanrequired bytheWTO Agreement. Inaddition, Canada hadcommitted
itself totariff reductions forapparel. Canadian tariffs fortextiles andapparel products originatingWT/TPR/M/22
Page 18Trade Policy Review
within theNAFTA werelower thanthose onnon-originating products, reflecting NAFTA 'sstatus as
afree-trade areaunder GATT Article XXIV. Thetariff gapwould narrow when theUruguay Round
results hadbeenimplemented.
75. Thepurpose oflegislative amendments totheCustoms Actwastoclarify Canada 'sexisting
administrative practice. Since Canada 'simplementation oftheGATT Agreement onCustoms Valuation
in1985, ithadbeentheGovernment 'spolicy thatthepurchaser inasaleforexport toCanada belocated
inCanada. Thiswasconsistent withCanada 'sobligations under theGATT andtheWTO Agreement
onCustoms Valuation, which didnotcontain adirect reference totheresidence oftheimporter and
purchaser.
76. Thefirstdiscussant agreed thatanti-dumping regulations were notneeded inafree-trade
environment. Thesecond discussant asked howthesubject ofunfair competition would beaddressed
insuchacase. Inreply, therepresentative ofCanada stated that,intheabsence ofexternal trade
barriers, unfair practices became adomestic-policy issue andhadtobedealtwithunder competition
law.
77. Therepresentative ofThailand, speaking onbehalf oftheASEAN countries, considered that
possible introduction ofregulations on"good manufacturing practices" would constitute anunfair trade
barrier, asthefocus onprocesses rather thanfinished products would favour domestic processors.
Therepresentative ofJapan asked forCanada 'sviewonwhether thesoftwood lumber agreement was
compatible withtheAgreement onSafeguards.
(ii) Government procurement
78. Therepresentative ofCanada stated thatinApril 1994, Canada hadundertaken toprovide a
finallistunder theAgreement onGovernment Procurement ofcovered provincial entities onthebasis
ofcommitments obtained from alltenprovincial governments. Discussions withtheprovinces and
various industry associations were carried out,andadetailed assessment ofother Members 'offers
wasundertaken. InOctober 1995, Canada stated that,given access limitations ofother Members,
primarily theUnited States, andgiven theimportance ofthismarket toCanadian companies, the
provinces would beprepared toproceed withoffers "only ifMembers wereprepared (i)toinclude
sectors ofpriority interest toCanadian suppliers, forexample, inthesteelandtransportation areas;
and(ii)toagree tocircumscribe theuseofsmall business andother set-asides inamanner that,while
notprecluding theiruse,would provide anacceptable security ofaccess". TheCanadian position
continued tobebased onthisstatement.
79. Canada hadrepeatedly indicated thatprovincial offers would onlybemade withthefull
concurrence oftheprovinces. Inthatevent, Canada would ensure thatprocurement procedures of
entities subject totheAgreement were consistent withitsprovisions. Amendments would bemade
toregulations, policy orlegislation ifrequired. TheCanadian statement made atthemeeting in
October 1995 oftheCommittee onGovernment Procurement provided asummary ofthedetailed
assessment undertaken bytheprovincial governments.
80. Thecriteria Canada usedtoassess other Members 'offers focused notonlyonthesub-central
component, butincluded: export interests; sectoral coverage; security ofmarket access; exceptions;
exclusions, e.g.under theBuyAmerican Act;andpervasiveness ofhorizontal exceptions, suchas
set-aside programmes. While issues related tocentral government procurement hadlargely beensettled
inthenegotiations, anumber ofquestions, including sub-central coverage, remained open. Negotiations
hadbeenheldfromJanuary 1994untiltheMarrakesh Ministerial Meeting inApril 1994. Inthatperiod,Canada WT/TPR/M/22
Page 19
theUnited States andtheEC,thetwomostimportant procurement markets forCanada, hadcontinued
tonegotiate abilateral agreement withsub-central coverage; Canada hadnotbeen partofthese
negotiations. TheUnited States andtheEChadreached abilateral agreement justpriortotheMarrakesh
meeting. Theearlyreview oftheAgreement onGovernment Procurement would allow theoutstanding
issue ofdiscriminatory procurement practices tobeaddressed. Thevalue ofCanada 'sinclusion of
sub-federal entities would depend oncommitments tobereceived from theprovinces.
81. Anindustrial andregional benefits policy might apply forlarger contracts notsubject to
international agreements. Under thispolicy, allprocurement overavalue ofCan$2 million might
bereviewed byaninterdepartmental committee toassess theopportunities forachieving socio-economic
benefits inCanada. However, thispolicy wasrarely applied tocontracts under Can$100 million;
itwasnotlinked toanyinvestment review mechanism.
82. Theset-asideprogrammeforaboriginalpeoplewastightlycircumscribed.Similarly,anexception
forset-aside programmes forsmall andminority businesses wasstrictly limited andcircumscribed.
Fulltransparency would beensured inimplementing anysuchprogrammes.
83. Thereciprocal nature oftheAgreement onGovernment Procurement effectively permitted
Members toexclude other Members fromaccess tospecific procurement markets. While theCanadian
position, asstated intheCommittee inOctober 1995, usedtheUnited States asanexample toillustrate
thispossibility, ithadexplicitly stated thatoffers ofother Members would alsobeexamined. The
ECwasaware thatCanada hadexperienced considerable problems inobtaining effective market access.
Inproviding increased andsecure market access toitstrading partners, itwasnotunreasonable for
Canada toexpect thesame degree ofreciprocal access.
(iii) Technical barriers totrade
84. Canada 'sposition oneco-labelling wasbased onthereality thatlife-cycle approaches might
ormight notresult incriteria thatwerebased onnon-product-related production andprocess methods
(PPMs). Canada believed thatWTO Members could consider theuseofnon-product-related PPMs
inthecontext ofvoluntary eco-labelling programmes without establishing aprecedent inthegeneral
context ofstandards. Consequently, Canada hadnotified itseco-labelling programme under theTBT
Agreement andwould notobject toabroader discussion ofstandards based onnon-product-related
PPMs. Voluntary eco-labelling programmes should bedeveloped inamanner consistent withthe
international guidelines currently under consideration.
(iv) Trade remedies
85. CanadahadlongstateditsintentiontocontinuereformingtraderemedylawsbothintheNAFTA
andother forasuchastheWTO andFTAA. Therecently concluded bilateral agreement withChile
wasjustanother stepinthatdirection.
86. Canada ’santi-dumping andcountervailing dutylaw,theSpecial Import Measures Act(SIMA),
wasadministered bytheDepartment ofNational Revenue (Revenue Canada) andtheCanadian
International Trade Tribunal (CITT). Revenue Canada wasresponsible forreviewing complaints,
initiating investigations, making thepreliminary determinations ofdumping/subsidy andinjury and
making thefinaldetermination ofdumping/subsidy. TheCITT made theinjury determination.
87. When adomestic industry believed thatdumped orsubsidized goods werecausing orthreatening
tocause injury, itcould submit acomplaint toRevenue Canada. Canada ’sstandards fortheinitiationWT/TPR/M/22
Page 20Trade Policy Review
ofaninvestigation were consistent withitsWTO obligations; theGovernment hadnocontrol over
thenumber ofanti-dumping andcountervailing complaints itreceived. Thefrequency withwhich these
werefiledreflected theeconomic situation inagiven sector atagiven time. Thecrucial element was
whether domestic industries could show thattheywere being injured orthreatened withinjury.
88. Theindependent study comparing Canadian andU.S.anti-dumping legislation, referred toin
theSecretariat Report, addressed differences intheadministration oflawsandconcluded thateach
country hadsome practices thatweremore restrictive thanthose oftheother. Thedifferences between
thetwosystems, reduced following theWTO Agreement onAnti-Dumping, weremostimportant in
theareaofongoing enforcement. TheU.S.retrospective dutyenforcement system created uncertainty
andimposed heavy compliance burdens whereas theCanadian prospective enforcement system was
lessburdensome andmore predictable, butequally effective.
89. Adumping investigation might involve arange ofproducts which werenotlikeproducts in
relation toeachother (e.g., steelplate ofdifferent gauges/uses), butinrespect ofwhich there was
Canadian domestic production ofeach“likegood”.Insuchcases, product groupings oflikegoods
were intended toensure “apples-to-apples ”comparisons inaccordance withtherequirements ofthe
WTO Agreement onAnti-Dumping. Theestablishment ofappropriate product groupings wasaquestion
offactineach caseandinvolved consideration ofsuch factors asproduct size, specifications,
composition, etc.Inaccordance withArticle 2.4.2 oftheAgreement onAnti-Dumping, “acomparison
ofaweighted average normal value withaweighted average oftheprices ofallcomparable export
transactions... ”wasmade. Therefore, negative margins ofdumping offset positive margins when the
comparison wasmade between weighted average normal values andexport prices forlikegoods (i.e.
comparable export transactions), ascontemplated bytheAgreement. When separate groupings oflike
goods wereanalysed together todetermine anoverall margin ofdumping foranexporter, theproduct
groupings withanegative margin wereassigned adumping margin ofzero. Thisprevented products
withnegative margins fromoffsetting positive margins ofdumping ofgoods thatwereconsidered to
benon-like.
90. Canada operated aprospective dutyenforcement system where goods priced atorabove their
normal values didnotincur anti-dumping duties. Canada would notapply anti-dumping duties to
products withnegative margins ofdumping, i.e.,where theexport price wasequal toorgreater than
thenormal value. Where normal values and/or export prices could notbedetermined because ofa
lackofsufficient information, theywerebased onaMinisterial Specification using thefactsavailable,
consistent withtherequirements ofArticle 6.8andAnnex IIoftheWTO Agreement onAnti-Dumping.
Where sufficient information hadnotbeenfurnished ortheverification oftheinformation hadnotbeen
permitted, thevalues established mustnotprovide amore beneficial result fortheparties thantheresult
obtained hadtheyco-operated. Forexample, theMinisterial Specifications might bebased onthehighest
margin ofdumping found intheinvestigation forthegoods inquestion. Where sufficient information
wasnotavailable, Ministerial Specifications werealsoused. Suchcases, however, wererarebecause
ithadtobeshown thattherequired information was,infact,notavailable.
91. TheSIMAcontainednospecificlistingoffactorstobeconsideredwhendeterminingtheexistence
ofpublic interest. Relevant factors were determined onacase-by-case basis bytheCITT. Factors
usedhadincluded theimpact ofhighprices onconsumers andindustrial users; themagnitude ofthe
margins ofdumping; thecapacity ofexporters tocontinue toexport; theeffects ofintra-industry
competition; thelikelihood ofimports fromothersources; andtheoffsetting buying power ofCanadian
domestic purchasers. Consumer interests hadbeenconsidered inallpublic interest analyses.Canada WT/TPR/M/22
Page 21
92. Regardingthere-investigationofthedumpingordersonsteel,RevenueCanada'sstandardpractice
wastoapply tonon-co-operating exporters dumping dutyratesthatwerebased onthefactsavailable;
thiswasinaccordance withtheWTO Agreement onAnti-Dumping. Theexporters could stillprovide
Revenue Canada withtheappropriate information, normal values would thenbedetermined onthe
basis ofactual data.
93. Changes intheinformation required byRevenue Canada were toensure thattherevised
requirements oftheWTO Agreement onAnti-Dumping werefullyreflected andthatfulldetails were
made available toinvestigating authorities. Theinvestigations, thathadledtotheimposition of
anti-dumping duties onimports fromKorea werequasi-judicial innature andincomplete conformity
withGATT/WTO disciplines. Canadian officials wereprepared toconsult under theauspices ofthe
WTO withKorean officials withrespect toanyspecific investigation orfinding. Regarding theextension
oftheanti-dumpingdutyordersonimportsofanumberofproductsfromKorea,allCITTdeterminations
wereconsistent withtherespective WTO/GATT obligations. Furthermore, thereference tonegligible
volumes intheAgreement wasareference to"actual orpotential volumes". When aninjury finding
wasinplace, itwasonlynatural thatimports would decline, particularly iftheycould notbeexported
atnormal prices.
94. On17May1996, theMinister ofFinance hadannounced thathewould beasking the
Parliamentary Standing Committees onFinance andInternational Trade tojointly review theSIMA.
Itwasnormal practice tosubmit legislation toperiodic Parliamentary review toensure thatitcontinued
tomeettheneeds ofthevarious interested parties within Canada. ThejointSub-Committee wasexpected
toreport itsfindings bytheendof1996. Should thereview recommend changes tothelaw,the
Government would review therecommendations andrespond accordingly.
(v) State trading, local-content requirements, investment andcultural policies
95. Canada 'snotifications pursuant toArticle XVII:4(a) ofGATT 1994 andParagraph 1ofthe
Understanding ontheInterpretation ofArticle XVII described theactivities oftheCanadian Wheat
Board, theCanadian Dairy Commission (CDC) andtheCanadian Freshwater Fish Marketing
Corporation. Afurther notification ontheCDC wasavailable fromtheSecretariat, aswasanotification
oftheProvincial Liquor Control Authorities.
96. Local-content requirements inthepublishing andaudio-visual industries concerned services
and,hence, werecovered bytheGATS rather thantheTRIMs Agreement. Theprovincial requirements
regarding timber, oreandminerals, andwine were notinconsistent withtheobligation ofnational
treatment anddidnotimpose quantitative restrictions onimports.
97. Noinvestment proposals hadbeenformally disallowed since thepassage oftheInvestment
Canada Actin1985. Tosafeguard thecommercial interests ofinternational investors, theActspecified
thatallinformation from aninvestor should bekeptconfidential andnotdisclosed. Hence, Canada
could notcomment onchanges required ininvestment proposals inorder tomeetthenetbenefit test.
However, thesixcriteria formeasuring netbenefit were setoutinthelegislation, aswere the
decision-making procedures, allofwhich weredesigned toensure afairandtransparent process for
investors.
98. InCanada, companies might incorporate atthefederal, provincial orterritorial levels orcould
register intheprovince ofoperation asforeign corporations. Companies incorporated under thefederal
andsixprovincial business corporate lawswererequired tohaveamajority ofresident Canadians on
theboard ofdirectors andeachcommittee thereof. Aspartofthereform oftheCanada BusinessWT/TPR/M/22
Page 22Trade Policy Review
Corporations Act,theGovernment hadwidely released inAugust 1995 adiscussion paper analysing
theresidence requirements andtheirimpact onCanadian andforeign businesses. Thepaper considered
awide range ofoptions, butmade norecommendations. In1996, theSenate Banking, Trade and
Commerce Committee hadheldhearings withsenior business executives onanumber ofreform issues;
adecision wasexpected inmidtolate1997.
99. Theissue offoreign ownership control andrestriction inthecontext ofprivatization was
approached onacase-by-case basis. Under theNAFTA, reservations hadbeenmade toensure the
continued validity ofrestrictions imposed inpastprivatizations andallow forsuchrestrictions inthe
future.Inprivatizationinitiativesenactedthroughlegislation,theGovernmentcouldestablishpermanent
limits onforeign ownership. However, inthecaseofdepartmental initiatives which might notrequire
legislative authority, thiswasmore difficult. Incertain transactions, there might beaneedtolimit
foreign participation, forexample innational flagships, centres oftechnological excellence, andentities
withnational security dimensions. Since themid-1980s, theFederal Government hadprivatized its
interests in25entities; enabling legislation hadfrequently included restrictions onnon-residents and
individual ownership andcontrol.
100. Foreachprivatization, thepolicy onforeign ownership would reflect theneeds andsituation
oftheentity involved. Generally, though notalways, limits onforeign ownership ofprivatized Crown
corporations hadbeenimposed either through existing industry-wide legislation orspecific privatization
legislation. Forexample, under theCanada Transportation Act,aircarriers must be75percent
Canadian-owned andcontrolled infactbyCanadians. Accordingly, non-resident ownership ofAir
Canada 'spublicly heldvoting shares wasrestricted to25percent. Non-residents were prohibited
fromowning morethan25percentofPetro-Canada 'spublicly heldvoting shares. However, noforeign
ownership restrictions hadbeenimposed inthesaleofCanadian National Railways. Also, AirCanada
andPetro-Canada hadbeenabletocreate newclasses ofnon-voting andvariable-voting shares, which
enabled non-residents topurchase additional shares, while respecting thelegislated foreign ownership
limitations. Theprivate sector company purchasing Transport Canada 'sAirNavigation System had
tobea"not-for-profit" corporation andthemajority ofitsboard members Canadians. There were
noforeign ownership restrictions intheprivatization oftheCanada Communication Group.
101. TheCanadianFilmandVideoPolicy'sobjectivewastomakeavailabletoallCanadiansattractive,
high-quality indigenous andvaried productions. Though economic considerations were important,
abasic cultural concern wastoensure thatallCanadians could share inafilmandvideo culture that
wasdistinctively Canadian. Non-Canadian distribution firms hadtraditionally reinvested almost none
oftheirsubstantial revenues fromtheCanadian market intoCanadian films. Domestically owned and
controlled distributors, whoplayed amajor rôleinfinancing andpromoting Canadian films, struggled
toconserve asmall share oftotaldomestic distribution revenues. The1988foreign investment policy
forfilmdistribution sought toredress thissituation; several foreign investments hadsubsequently been
reviewed. Theguidelines wereclearandhadbeenfairly applied toallforeign investments inthearea
ofdistribution, regardless ofnationality.
102. Canada 'scultural policy maintained anopenness toforeign content andservices, asreflected
inthebalance oftradeincultural products. Although exports hadincreased significantly, theCanadian
market remained dominated byforeign content. Canada remained oneoftheworld 'smostopenmarkets
forcultural products. Foreign television broadcasts accounted for60percentofthescreen time; 57per
centofthebooks and89percentofthesound recordings soldinCanada wereforeign aswere90per
centofthefilms.Canada WT/TPR/M/22
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103. TheInvestment Canada Actoutlined factors tobetaken intoaccount indetermining netbenefit.
Forcultural industries, thisincluded thecompatibility oftheinvestment withcultural policies, taking
intoconsideration industrial, economic andcultural policy objectives ofanyprovince likely tobe
significantly affected. On6August 1996, theGovernment hadannounced itsConvergence Policy
Framework which created theconditions needed forfairandsustainable competition inthebroadcasting
andtelecommunicationsmarkets,expandedconsumerchoice,andcontinuedsupportforCanadianculture.
104. Since 1984, Canadian cable television operators hadbeenallowed todistribute some U.S.
originating specialty services (non-licensed services), provided thesewerepartofapackage containing
Canadian services. When aCanadian service waslicensed inaformat competitive withthatofan
authorized non-Canadian satellite service, thelicence forthelatter'scable carriage ofnon-Canadian
services could beterminated.
(vi) Intellectual property
105. InFebruary 1993, BillC-91effected anumber ofsignificant amendments totheCanadian Patent
Actandstipulated arequirement fortheirparliamentary review inFebruary 1997. Inpreparing for
thisreview, Canada 'sinternational obligations intheareaoftradeandintellectual property rights would
betaken intoaccount.
106. TheTrade-marks Actprohibited theadoption oruseofaprotected geographical indication
inrespect ofawineorspirit notoriginating intheterritory covered bythatindication. InCanada 's
view, thiswould include usesinwhich thetrueorigin ofthegoods wasindicated andusesinwhich
other information suchas"type", "style" or"imitation" wasgiven. Thecriteria employed todetermine
whether aname, asreferred tointheTrade-marks Act,hadbeencustomary inthecommon language
werethecriteria setoutinTRIPS Article 24.6. Anumber ofmethods wereusedtoconfirm thestatus
ofeachname inaccordance withTRIPS criteria; these included consultations withindustry, checking
ofprovincial listings, andtheGovernment 'sunderstanding ofcurrent Canadian conversational usage.
107. Thepremise thatindications suchasChampagne, Madeira, PortandSherry hadbenefited from
protection inCanada immediately before entryintoforceoftheWTO Implementation Actwasincorrect.
TheCanada-France Trade Agreement of1933, under which "champagne" hadbeenprotected inCanada,
hadbeenterminated in1978. TheCanadian courts hadpermitted theuseof"champagne" byCanadian
producers. TheCanada-Portugal Trade Agreement of1954 hadprovided thatCanada undertook to
make available inrespect of"Port" and"Madeira" onlytheprotection granted byitsnational legislation
concerning false, misleading anddeceptive labelling andadvertising. IntheCanada-Spain Trade
Agreement of1954, Canada hadonlyundertaken thesame obligation withrespect toJerez, Xeres and
Sherry.TheinclusionofthesenamesandothersintheTrade-marksActwasconsistentwiththestandstill
provision ofTRIPS.
(vii) Export subsidies andpromotion
108. TheExport Development Corporation (EDC) didnotprovide grants orsubsidies. Itwasa
self-sustaining Crown corporation thatoperated oncommercial principles, generating itsoperating
revenues through fees,premiums, andinterest onloans. Profits werereinvested inthecorporation 's
capital basetosupport future export growth. TheWestern Grain Transportation Acthadbeenterminated
inJune1995, asreported inCanada 'snotification under Article 25oftheSubsidies Agreement. Canada
hadnotyetnotified anyprogrammes under Article 8.3.WT/TPR/M/22
Page 24Trade Policy Review
109. Canada 'sInternational Business Strategy (CIBS) wasapartnership between thefederal and
provincial governments andtheprivate sector toprovide effective andtargeted assistance topursue
internationalbusinessopportunities.Strategiesin29keyindustrysectorsdescribedCanadiancapabilities
andglobal opportunities. Eachsector strategy specified whatbothlevels ofgovernment andtheprivate
sector hadagreed todoinorder tomaximize international business success.
110. TheAgri-Food Trade Service (ATS) assisted theindustry inidentifying market opportunities
andachieving export growth: itco-ordinated available information, expertise andsupport through
mechanisms suchasAgri-Food Industry Market Strategies (AIMS) andtheCIBS. ItsAgri-Food Trade
Fund (AFT) 2000 reimbursed associations orcompanies forpartoftheir generic export market
developmentcosts,complementingotherfederalprogrammes.Also,agri-foodcompanieswereprovided
withinformation, advice andrelated support intheirexport efforts, including theplacement ofagri-food
specialists inkeyexport markets, theimplementation oftheAgri-Food Trade Network todisseminate
market intelligence, funding forin-country market studies, andsupport foragri-food promotion.
4. Sectoral Issues
(i) Agriculture
111. Canada fullysupported aprogramme ofanalysis andinformation exchange within theWTO
onagricultural trade policy matters, notlimited tomarket access questions, withaviewtopreparing
fortheeventual resumption ofnegotiations foreseen intheAgreement onAgriculture. Canada had
complied withallitsnotification requirements under theAgreement, andthefirstexport subsidy
notification would besubmitted bytheendofNovember 1996.
112. Canada 'sstrategy wastoassist theagri-food sector toreach Can$20 billion inexports bythe
year2000. Thisinvolved securing greater access toworld markets byexercising Canada 'srights under
existing trade agreements, continuing tonegotiate clearer international technical standards andnew
trade agreements. Nospecific timeframe hadbeen established fortheliberalization ofCanada 's
agriculture.
113. Duetouncertainty resulting fromtheUruguay Round andother changes affecting theagri-food
sector, Canada wasreluctant toimpose sweeping changes within thetariff-quota system. However,
more market-oriented procedures hadbeenintroduced toallocate quotas among chicken importers,
based ontheirmarket share asaprocessor, distributor orfoodservice provider. Theprevious allocation
forchicken hadbeenlargely onahistorical basis, rather thanonafirst-come, first-served basis. The
newallocation method wasbased onanimporter ’srôleandmarket share intheindustry, andinno
wayserved torestrict trade. Theprinciple ofquota transferability wasunanimously supported by
government andindustry anditsintroduction would allow forquota transfer through rentorsale.
114. TheAgreement onInternal Trade onlyencompassed technical barriers tointerprovincial trade,
anddidnotcover supply management policies inthedairy andpoultry sectors. Thelatter werebeing
examined aspartoftheongoing review ofagri-food policy, which covered thetransfer ofproduction
quotasbetweenprovinces.Effortswerebeingmadetoharmonizeprovincialregulationsfortheinspection
ofmilkandquality standards forfluidmilk.
115. Tariffs ondairy, introduced following theUruguay Round, werefullyconsistent withCanada 's
schedule. Thepolicy reforms necessary tobring thedairy, poultry andeggprogrammes intoconformity
withUruguay Round commitments hadalready beenimplemented. Tariff quotas forpoultry andegg
products werebound inCanada 'sUruguay Round Schedule, andtherewerenoplans tomodify UruguayCanada WT/TPR/M/22
Page 25
Round commitments. Themarket access accorded through theNAFTA wasgranted onanm.f.n. basis
and,thus, expanded access opportunities forthirdcountry suppliers.
116. Total expenditure byAgriculture andAgri-Food Canada were planned todecline from
Can$2.1 billion infiscal year1994-95 tojustbelow Can$1.6 billion in1998-99. These budgeted
reductionsreflectedtheeliminationofthefederaldairysubsidyby2001-2002,savingsfromtheproposed
creation ofasingle foodinspection agency, theprivatization ofselected government services, reductions
intheoverall federal contribution tofarmincome andstabilization, andsavings fromtherationalization
ofAgriculture andAgri-Food Canada 'sadministrative andpolicy functions.
117. Inaccordance withtheAgreement ontheApplication ofSanitary andPhytosanitary Measures,
international standards wereaccepted where theymetCanada ’slevelofprotection. Toexport meat
products,acountryhadtodemonstrateeitherfreedomfromspecificdiseasesortheexistenceofmeasures
toeliminate therelevant disease organism fromtheproduct. Thishadnotyetbeenproven forsalami
andsimilar products.
118. Canada hadestablished atariff quota of20,411.866 tonnes (product weight basis) forcheese,
which represented more than5percentofdomestic baseperiod consumption. There wasnointention
toincrease thein-quota quantity negotiated under theUruguay Round. Thetariffquota wasallocated
totraditional allocation holders, i.e.those thathadbeeninvolved incheese import trade atthetime
ofimplementation ofimport controls. These allocations, based onhistorical performance, hadbeen
largely unaltered sincetheimposition ofimport controls. Importers wereallocated shares forimports
fromtwodistinct groupings, ECornon-EC sources; within thisconstraint, theywerefreetosource
cheese from anycountry.
119. TheEChadincreased itsshare to66percentofCanada 'scheese tariffquota. Thiswasdone,
atthelevelofallocation holders, largely bytaking account ofcompanies 'actual imports fromAustria,
Sweden andFinland. Assmall importers werenotaffected bythischange, theremaining quantities
weretransferred onapro-rata basisfromother importers. Thetransfer of1,225 tonnes ofcheese from
non-EC toECcountries represented 6percentofCanada 'sglobal import quota ofcheese.
120. Todate, there hadbeennoexports ofdairy products under theOptional Export Program.
There werefivesub-classes within theSpecial MilkClass Permit System: (a)cheese ingredients for
further processing forthedomestic andexport markets; (b)other dairy products forfurther processing
forthedomestic andexport markets; (c)domestic andexport activities oftheconfectionery sector;
(d)specific negotiated exports including cheese under quota destined forU.S.andUnited Kingdom
markets, evaporated milk, whole milkpowder andniche markets; and(e)surplus removal. Utilization
from 1August 1995 to31July 1996 was: 1.4million hectolitres (a);2.1million hl(b);
0.8million hl(c);1.8million hl(d);5.4million hl(e).Dataonthevolume ofexports bycommodity,
country, volume andvalue under theSpecial MilkClasses werenotavailable. Thevolumes ofdairy
components accessed under thesystem weremonitored through permits issued bytheCanadian Dairy
Commission. Theindustrial milkwassoldtoprocessors bytheirrespective provincial milkboard
oragency. Eacheligible further processor orexporter wasprovided withapermit number which was
tobequoted when ordering dairy ingredients. Programme participants must provide theCDC with
regular reports ontheirdairy ingredient purchases anduse.Thespecial classpricing system would
neither stimulate nordepress exports relative totheprevious system.
121. Under thefederal programme supporting thetarget priceforindustrial milk, producers received
direct support payments formilkandcream shipments produced tomeetdomestic requirements. The
1995 federal budget reduced thedirect payments fromCan$228 million toabout Can$194 million inWT/TPR/M/22
Page 26Trade Policy Review
1995-96 andCan$160 million in1996-97, based ondomestic requirements of42million hectolitres.
Thebalance ofthedirect payments would bephased outbyfiscal year2001-2002.
122. Canadadidnotconsideritsnewexportsystemondairyproductsintroducedfrom1August1995
toinvolve export subsidies.
123. TheMinister forForeign Affairs wasresponsible fortheExport andImport Permits Act.
Canada 'ssystem oftariff quotas, administered under theAct,wasunder continual review. The
administration ofanyparticular quota wasannounced foroneyearatatime. Anyimporter could import
butter atanytime, subject totheapplicable duty. Thepermits toimport butter within thetariff quota
hadbeenallocated totheCDC forthe1996-97 dairy year. TheGovernment, inconsultation with
domestic stakeholders, hadallocated thetariff quota ofcertain dairy products toparticular end-uses
topromote value-added processing activities; thisshould encourage utilization ofthequota.
124. Inthedairysector, theproducer levy-rebate system hadbeenterminated formostdairyproducts
inAugust 1995. Canada would shortly benotifying itscompliance withexport subsidy commitments
totheWTO Committee onAgriculture asrequired, including thespecific amounts granted forskimmed
milkpowder andbutter for1995-96. Milksoldbyprovincial marketing boards under thespecial class
wascompetitively priced fortheend-use andmarket concerned. Asindicated intheSecretariat Report,
theprevious practice wastoprice allmilkatdomestic prices andprovide producer-financed subsidies
toexporters ofdairy products tobridge thegapbetween Canadian andworld prices. Thispractice
hadbeendiscontinued in1995 formost dairy products.
125. Theoverall governance oftheCanadian Wheat Board (CWB) would beplaced inthehands
ofaboard ofdirectors, withamajority being farmers. Theproducer-director majority would bereplaced
bydirectors elected byfarmers beginning in1998. Henceforth, theCWB would nolonger bea"Crown
corporation" within theestablished definitions offederal agencies. Enabling legislation would make
itpossible fortheCWB tomake cashpurchases ofwheat andbarley; manage adjustment payments
during anycropyearonanexpedited basis; terminate poolaccounts atanytimeandpayoutfarmers '
returns asrapidly aspossible thereafter; issue negotiable producer certificates; utilize fullymodern
riskmanagement toolsindealing withfarmers andcustomers; anddefray farmers 'grainstorage and/or
carrying costs. Thiswould allow theCWB todisburse money tofarmers more quickly. TheCWB
would beauthorized toestablish appropriate contingency funds within itsfinancial structure toserve
asacapital backstop.
126. Theproposed legislation would notaltertheCWB'sexisting marketing mandate. However,
more decision would beplaced inthehands offarmers themselves. Future changes would becontingent
upon formal advice oftheCWB board ofdirectors and,ifaquality control issue wasinvolved, the
formal approval bytheCanadian Grain Commission. Aproducer votewould berequired toimplement
anysignificantorfundamentalchange.Withrespecttobarleymarketing,theGovernmentwouldproceed
with avoteamong farmers inthefirstquarter of1997. TheWestern Grain Marketing Panel
recommended thatfeedbarley should beplaced under anopenmarket system, notprecluding theCWB,
forboththedomestic andexport markets.
127. TheFederal Government guaranteed initial CWB payments, adjustments tothese payments
during thecropyearandinterim payments following theendofthecropyear. TheCWB'scredit
grain salesprogramme anditsannual operational borrowing werealsoguaranteed. Inorder toallow
theCWB tooperate inamore business-like manner andtoadjust payments toproducers more quickly,
thecurrent system ofgovernment guarantees andapprovals would eventually beamended toapply
onlytotheinitial payment established atthestartofeachcropyear. TheCWB would havediscretionCanada WT/TPR/M/22
Page 27
tomake allsubsequent adjustments-related payments tofarmers, andwould beauthorized tobackcash
trading operations.
128. TheWestern Grain Transportation Act(WGTA) which subsidized thecostofmoving western
Canadian grain toports, waseliminated effective 1August 1995. Since then, grain shippers hadbeen
paying thefullcostofmoving grain byrailtoport,andCanada hadnotprovided anyexport subsidy
tothegrains andoilseeds sector. Under theWestern Grain Transition Payments Program, apayment
ofCan$1.6 billion wasbeing made toowners ofprairie farmland inrecognition oftheimpact onland
values thatwasexpected toresult from thetermination ofthefreight subsidy. Thiswasaone-time
direct payment toproducers thatwasmarket neutral andcomplied withtherequirements ofparagraph 6
ofAnnex 2oftheWTO Agreement onAgriculture asdecoupled income support.
129. NAFTA suppliers ofwheat andproducts received atariffpreference afterthetariff quota was
filled.
130. Canada hadfurther relaxed itsregulatory requirements fordomestically produced andimported
fresh andprocessed fruits andvegetables. In1995, Canada deregulated itsmandatory inspection
provision forawidenumber ofregulated fresh fruits andvegetables. While Canada stillretained its
basic standards forpackaging, labelling andminimum grade (quality standards), therequirement that
these standards beconfirmed byinspection hadbeenderegulated forawidevariety ofcommodities.
“MeetsCanadianImportRequirements”inspectioncertificateswerenowonlyrequiredfortablepotatoes,
onions, apples, andfieldtomatoes.
131. Canadianrequirementspertainingtoprocessedproductsinover-sizedpackagesundertheCanada
Agricultural Products Acthadbeenmodified inDecember 1995. Importers mustmeettheCanadian
regulations andaffirm compliance ontheImport Declaration. Previously, regulations hadrequired
thattheinspection system oftheexporting country berecognized asequivalent totheCanadian system.
Therequirement forlabelling individual packages within ashipping container destined forthehotel,
restaurant, andinstitutional market hadalsobeenremoved.
132. Canada hadnotsought application ofthespecial "snapback" provisions forfruitandvegetables,
negotiatedundertheCanada-U.S.FreeTradeAgreement,whichallowedforatemporarydutyonimports
from theUnited States toprotect domestic production.
(ii) Textiles
133. Canada hadfully implemented itscommitments inthefirstphase ofintegration under the
Agreement onTextiles andClothing and,despite adifficult adjustment process, wastheonlyWTO
Member toinclude arestrained product. TheGovernment ofCanada hadbeen consulting with
stakeholders concerning notification ofproducts tobeintegrated inthesecond phase oftheATC, which
would benotified totheWTO bytheendof1996. TheGovernment wasalsoconsidering aproposal
foranewduty-remission programme fortailored collar shirts andshirting fabrics. Ifaccepted, this
could leadtotheremoval ofrestraints onthese products.
(iii) Transport services
134. There werenorestrictions onnational treatment forforeign companies providing trucking and
freight forwarding services, other thanthegeneral régime ofinvestment review runbyInvestment
Canada. Ports orairports ofnational importance would beoperated byanot-for-profit localauthority.
Itwastobemanaged byaboard ofdirectors whose composition reflected abroad cross-section ofWT/TPR/M/22
Page 28Trade Policy Review
individuals from thelocalcommunity andelsewhere. Ownership oftheFederal Government sland
assets would remain withtheCrown. Forportmanagement, localauthorities would beestablished
byfederal law.Local authorities would alsobegranted broad discretionary powers overtheoperation
ofairport facilities; theymight contract companies ofanynationality fortheprovision ofmanagement
andother services. Ports orairports notofnational importance werebeing offered forsaletointerested
parties without anyforeign ownership restrictions orlimitations onnational treatment forforeign
companies.
135. TheonlydirectrestrictionundertheCanadaTransportationActappliedinthecaseofairservices.
Thiswasstandard international practice, where bilateral airagreements were thenorm. Forsuch
agreements tofunction, itwasnecessary thateachnation hadrulestodetermine thenationality ofcarriers
operating initsairspace.
(iv) Financial services
136. Toprevent"ScheduleI"banksfrombeingdominatedbyanyoneshareholder,individualholdings
werelimited to10percent. There werenoplans torevise thisprovision. Foreign banks might establish
inCanada assubsidiaries. These subsidiaries, called "Schedule II"banks, could be100percentforeign
owned. Canada hadclearly declared thispolicy asalimitation maintained onmarket access inits
Schedule ofCommitments.
137. Under theBank Act,foreign bank subsidiaries operating inCanada hadfirsttoseekthe
permissionoftheMinisterofFinancebeforeopeningnewbranches.Thisrequirementhadbeeninstituted
forprudential reasons, andwasintended tohelpprotect thesoundness andintegrity oftheCanadian
financial system. Todate, theMinister ofFinance hadnotrefused anyapprovals fornewbranches.
138. Branching hadnotbeenincluded inthepolicy proposals released bytheGovernment inthe
discussion paper onthe1997 Review ofFinancial Sector Legislation. Theissue wasseenbythe
Government asabroader, structural matter andtherefore assomething thattheTaskForce ontheFuture
oftheCanadian Financial Services Sector would bewellplaced toconsider. Since therelease ofthe
discussion paper, twoparliamentary committees hadrecommended theinclusion ofdirect branching
byforeign banks intheproposals foramendments toCanada 'sfinancial sector legislation.
139. The25percentcollective limitation onforeign ownership of"Schedule I"banks andthe10per
centindividual and25percentcollective limitations onfederally regulated insurance companies and
trustandloancompanies hadbeeneliminated on15December 1994. Thishadbeeninthecontext
ofimplementing Canada 'scommitments under theUruguay Round withtheenactment oftheWTO
Implementation Act. Afewprovinces maintained a10percentindividual and25percentcollective
limitation ontheforeign ownership ofprovincially-regulated trustandloancompanies. These limits
were setoutinCanada 'sSchedule ofCommitments.
140. Theprovinces hadjurisdiction overtheregulation ofsecurities. There were noownership
requirements fortrustandloancompanies thathadincorporated atthefederal level. Companies
incorporated attheprovincial levelwould besubject totherules applicable inindividual provinces.
Aswiththecaseofsecurities, theprovinces thatmaintained ownership limitations didnotenvisage
changes.
141. Itwasarequirement ineachprovince thatautomobiles beregistered provincially, andthat
theybelicensed andinsured. British Columbia, Manitoba andQuebec provided public plans forauto
insurance asamatter ofpublic social policy. TheGovernment ofQuebec hada"nofault" systemCanada WT/TPR/M/22
Page 29
which required autoowners tobuyliability coverage from theGovernment, while collision and
comprehensive coverage could beobtained from anyprivate company. InBritish Columbia and
Manitoba, government plans provided abasiclevelofliability, comprehensive andcollision coverage;
additional levels might bepurchased from private companies.
(v) Telecommunications
142. IntheWTOnegotiationsonbasictelecommunicationsservices,Canadaofferedtobinditscurrent
policies regarding foreign investment andtraffic routing. Thenegotiations approach wasbeing reviewed
inorder tohelpachieve anacceptable multilateral agreement. Anyfurther improvements would be
considered inthelightofother offers.
(vi) Motor vehicles
143. NAFTA rules oforigin forautomotive goods required 50percentNorth American content,
rising to60percentand62.5percentbytheyear2002. These rulesoforigin applied onlyfortrade
between theNAFTA parties. Anyinvestor inCanada therefore hadtwooptions: meeting therules
oforigin toenjoy theNAFTA tariffpreferences, ortrading atthem.f.n. ratesthathadbeennegotiated
under theWTO. Canada hadunilaterally removed itsm.f.n. duties onautoparts in1996.
144. Committed totradeliberalization, in1994Canada hadreduced tariffs onawiderange oforiginal
equipment (OE) parts, including allmajor drivetrain components. Asfurther evidence ofitsliberal
trade policy, Canada hadunilaterally eliminated itstariffs onOEpartsasof1January 1996. Thus,
allautomobile assemblers inCanada, notjustAuto Pactmembers, could import OEparts andparts
ofOEpartsdutyfree.Finally, under itsUruguay Round commitments, Canada wastoreduce itsvehicle
tariffs from 9.2percentto6.1percentin1999. Attempts toachieve deeper cutshadnotbeenmet
byequivalent concessions bytrading partners.WT/TPR/M/22
Page 30Trade Policy Review
VII. CONCLUDING REMARKS BYTHE CHAIRPERSON
145. Over thepasttwodays, theTrade Policy Review Body hasconducted thefourth review -the
firstunder WTO provisions -ofCanada 'strade policies andpractices. These remarks, made onmy
ownresponsibility, areintended tosummarize thesalient points ofthediscussion; theydonotsubstitute
fortheBody'scollective evaluation andappreciation, which willbereflected intheminutes ofthe
meeting.
146. Thediscussion developed under fourmainthemes: (i)thegeneral economic situation andthe
process ofderegulation andliberalization; (ii)regional andmultilateral trade relations; (iii)trade and
investment policies; and(iv)sectoral issues.
147. Inaddition tothediscussion, participants raised alarge number ofquestions inwriting. The
representative ofCanada provided comprehensive written replies inthecontext ofthemeeting and
undertook toprovide further details asnecessary.
(1) General economic situation andtheprocess ofderegulation andliberalization
148. Members noted theimprovement inCanada 'smacroeconomic performance inthepasttwo
years. Economic growth hadessentially beendriven byexports, inflation waskeptlow,andfiscal
policy aimed atbringing thefederal budget intomedium-term balance. Unemployment remained high,
despite some recent improvement; Members asked whether thismight leadtoprotectionist pressures.
149. Members noted thatthestrength ofexports benefited both from strong demand inthe
United States andfromthestructural effects oftrade liberalization under theWTO andtheNAFTA.
Reflecting strong economic expansion intheUnited States, economic integration deepened, withthe
U.S.share ofCanada 'strade rising tofourfifths ofmerchandise exports andtwothirds ofimports.
WhileacknowledgingthatthisreflectedCanadianfirms'abilitytooperateinahighlycompetitivemarket,
several Members stressed thecyclical vulnerability inherent insuchdependence ononedestination.
SomeMembersaskedwhetherCanada'sparticipationinregionalandbilateraltradeinitiatives,comprising
theFTAA, APEC andfree-trade agreements withIsrael andChile, could beseenasaresponse tothis
trend.
150. MembersrecognizedthatCanada'seffortstowardstradeliberalization,complementedbydomestic
reforms, hadcreated astronger basisforlong-term economic expansion. Most sectors oftheeconomy
andawiderange ofpolicy areas hadbeenaffected.
151. Members noted acontinuing duality inCanada 'stradepolicy between thefederal competence
forthenegotiation ofinternational agreements andtheprovinces 'responsibility fortheimplementation
ofsuch agreements incertain areas. Inthisconnection, Members stressed theneed forcloser
co-ordination between theFederal Government andprovinces andexpressed concerns about remaining
provincial restrictions inareassuchasgovernment procurement, investment, local-content requirements
andsubsidies. Thesimultaneous entry intoforce oftheNAFTA, theWTO Agreements andthe
Agreement onInternal Trade (AIT) showed thepossibilities ofsynergy among thedifferent levels of
government action; Members thusencouraged Canada tocomplete andimplement theAITinorder
toaddress suchrestrictions.
152. Therepresentative ofCanada replied thathiscountry wasgreatly dependent oninternational
trade andinvestment flows; further trade liberalization andinternal deregulation, complemented byCanada WT/TPR/M/22
Page 31
prudent andbalanced fiscal policies, were seenasthepathtomaximizing economic growth. There
were nosigns ofprotectionist pressures resulting from theemployment situation.
153. ChallengesinherentinCanada'sfederalsystemwerebeingmetbyconstantandcloseco-operation
between federal andprovincial authorities. Under theAIT, work wasinprogress tostreamline and
harmonize regulations inmany areasofgoods, services andfactor movements; negotiations wereunder
waytoextend itsscope andcoverage, including inareas suchaslabour mobility, procurement and
energy. Hecited instances where provincial practices hadbeen brought intolinewithCanada 's
international obligations.
154. Therepresentative didnotbelieve thatthesoftwood lumber agreement withtheUnited States
would leadtochallenges bytrading partners intheWTO.
(2) Regional andmultilateral trade relations
155. Members recognized Canada 'sstrong support forthemultilateral trading system andits
contribution topreparations fortheWTO Ministerial Conference inSingapore. They noted Canada 's
progress inimplementing andconsolidating WTO Agreements, which hadcontributed toamore liberal
trade régime inseveral areas. While showing appreciation forCanada 'spropensity touseWTO
procedures tosolve bilateral disputes withtheUnited States, some Members sought clarification on
thebasis forchoosing between WTO andNAFTA procedures.
156. Members generally sawCanada 'sparticipation inregional initiatives through APEC, theFTAA
andthenewly concluded free-trade agreement withChile ascomplementing itsactions atthemultilateral
level. They alsoviewed Canada 'sparallel implementation oftheNAFTA andWTO Agreements as
complementary ingeneral. However, someMembers expressed concerns about possible tradediversion
stemmingfrombilateralorregionalpreferences;inthisconnection,theylinkedtheexpansionofbilateral
tradeintextiles andclothing andinmotor vehicles tothestrengthening ofNAFTA rulesoforigin and
thegrowing gapbetween NAFTA andm.f.n. tariffs.
157. Therepresentative ofCanada responded thattheGATT, andnowtheWTO, wasthe"bedrock"
ofhiscountry 'strade policy, andtheframework forCanada 'sother bilateral orregional initiatives.
Although Canada wasobliged toplace emphasis onmanaging itsrelationship withitslargest trade
partner, andimplement theNAFTA, itcontinued towork forthecomplementarity ofregional and
multilateral rules. Inthisconnection, heclarified thedistinctions between WTO andNAFTA dispute
settlement provisions, which haddiffering objectives andprocedures.
(3) Trade andinvestment policies
158. Members welcomed thecontinued reductions intariffs under theNAFTA andWTO Agreements
andthefurther autonomous cutsbeing made inm.f.n. andpreferential rates. Average m.f.n. tariffs
onmanufactures were low; however, there were stillsignificant peaks intextiles andclothing. By
contrast, out-of-quota tariffs inagriculture were often prohibitive. Some Members called attention
tothe"graduation" proposals forCanada 'sGPT.
159. Members recognized thatnewanti-dumping initiations byCanada haddeclined inthelasttwo
years, continuing atrend established inthemid-1980s, andsought information regarding thecurrent
review ofCanada 'sSpecial Import Measures Act. However, theynoted thathighduties hadbeen
imposed incertain cases andthatsome measures hadpersisted overlongperiods oftimeinareaswhere
fewimports hadoccurred.WT/TPR/M/22
Page 32Trade Policy Review
160. Several Members asked when Canada intended toinclude sub-federal entities initscoverage
undertheGovernmentProcurementAgreement.Questionswerealsoraisedaboutbuy-Canadaprovisions
atthesub-federal level, andonset-aside programmes.
161. Membersnotedthatconditionsforforeigninvestorsweresteadilyimprovingthroughtheremoval
ofownership restrictions infinancial services atthefederal level, andtheapplication oflower investment
review thresholds forWTO Members, inparallel tothose applied under NAFTA. While access for
investment inmanufacturing wasrecognized asgenerally free,concern wasexpressed about remaining
restrictions insome services sectors atthefederal andprovincial levels.
162. Some Members called forstricter application byCanada ofintellectual property rights,
particularly inthefields ofcopyright protection andgeographical indications forwines andspirits.
163. Several Members asked forclarification ofCanada 'sexport promotion initiatives, inparticular
theExport Development Corporation, Canada 'snewInternational Business Strategy, andprovincial
incentives.
164. Inreturn, therepresentative ofCanada stressed thatCanada 'sperformance inthetariff area
wasbetter thanindicated intheTPRReport; across allimports, thetrade-weighted applied tariff
averaged only1.6percent. Referring tothegapbetween m.f.n. andpreferential rates, henoted that
movement towards global freetradewould reduce suchgaps; Canada remained ready tosupport further
multilateral tariff liberalization. Theongoing three-year tariff review wasintended tomake thetariff
system simpler, more transparent andpredictable, andtoreduce regulatory costs. Consultations with
thebusiness sector wereunderway withaviewtointroducing anewcustoms tariffon1January 1998.
Canada wasalsoreducing itstariff ontextile andclothing items; unilateral cutsmade prior tothe
conclusion oftheUruguay Round werecovered bytheUruguay Round reduction commitments and
would narrow thegapvis-à-vis NAFTA rates. There werenoplans tointroduce a"graduation" element
intoCanada 'sGPTscheme.
165. Therecent decline inanti-dumping initiations wasattributable tomore favourable economic
conditions andstrengthened competitiveness. Canada 'sview wasthatinafree-trade environment
domesticcompetitionlawscouldreplaceanti-dumpingprovisions;anti-dumpingprocedureshadtherefore
beeneliminatedunderthebilateralagreementwithChile,andCanadacontinuedtopushfortheirabolition
intheNAFTA context. Therepresentative stressed thatunder Canada 'sprospective dutyenforcement
system, goods priced above theirnormal values didnotincur anti-dumping duties. Canada hadlong
hada"sunset" clause providing forregular reviews ofmeasures inforce.
166. Intheprocurement area, Canada hadundertaken in1994 toprovide afinallistofprovincial
entities tobeincluded intheWTO Agreement, onthebasisofcommitments obtained fromprovincial
governments. InOctober 1995, referring toaccess limitations toimportant markets, primarily the
United States, Canada hadmade thisinclusion subject toreciprocal offers onsectors ofpriority interest
aswellastotheintroduction oflimits ontheuseofsmall business andother set-asides soastoprovide
anacceptable security ofaccess. Should circumstances change, theCanadian provinces wereprepared
toproceed withoffers. Additional information would begiven inreply toquestions.
167. Therepresentative stressed theopenness oftheCanadian investment scheme. Companies might
incorporate atthefederal, provincial orterritorial levels ortheymight operate byregistering inthe
province ofoperation asforeign corporations. Thequestion of"sensitive" sectors needed further
multilateral consideration.Canada WT/TPR/M/22
Page 33
(4) Sectoral issues
168. Members recognized thatCanada hadtaken several initiatives aimed atrevitalizing theeconomy
byreducing State involvement. Public expenditure onagriculture hadbeenreduced by20percent,
dueessentially totheelimination ofgrain transport subsidies. However, supply management régimes
fordairy, poultry andeggproducts retained various restrictions onforeign access. Members expressed
concerns about highimport barriers onthese products nowintheformofrestrictive tariffquotas, and
questioned thesystem ofquota allocation, which relied ontraditional importers andleftlimited scope
forimprovement inmarket access. Concerns regarding specific products suchascheese orwheat were
raised. Members sought clarification fromCanada onfuture stepstowards liberalization inagriculture.
169. Members recognized therapid growth oftheenergy sector inrecent years, buthighlighted
thecontrast between theperformance ofthelargely deregulated oilandgasindustry andtheelectricity
sector which remained impeded bythepersistence ofinterprovincial barriers totrade.
170. Members recognized thattherecent strong performance ofmanufacturing exports hadbenefited
fromgreater economic integration withtheUnited States. Several Members questioned Canada 'shigh
m.f.n. tariffs intextiles andclothing; while recognizing thatCanada wasoneofthefewimporting
countries thathadintegrated under theWTO Agreement onTextiles andClothing (ATC) anyitems
previously subject toquantitative restrictions, theynoted thelimited impact ofsuchaninitiative. They
hoped thatmore items would beintegrated under thesecond andthirdphase oftheAgreement. Some
Members expressed concern about possible trade diversion inthissector resulting fromstricter rules
oforigin under theNAFTA andthewidening tariff gapvis-à-vis m.f.n. rates, despite certain
compensatory quotas fornon-originating products. Inthemotor vehicles industry, Members stressed
Canada 'sattractiveness asanassembly andpart-production location. Some Members appreciated the
elimination ofm.f.n. tariffs onautopartimports, butnoted significant differences between Auto-Pact
andnon-Auto-Pact Members fortariffs onassembled cars. They regretted thattheCanada-U.S.
Free-Trade Agreement didnotallow companies from non-member States tojointheAuto-Pact.
171. Members alsonoted that,duetotherapid expansion ofCanada 'smodern, technology-based
industries, thestructure ofproduction andtrade hadgradually shifted from resource-based to
"knowledge-based" industries. Withafewexceptions, advanced-technology activities wereconcentrated
inCanadian subsidiaries ofmultinational enterprises, surrounded byanetwork ofsmaller, innovative
domestic firms. However, some Members noted that,overall, research anddevelopment spending
inCanada remained lowbyOECD standards.
172. Finally, Members showed theirappreciation forrecent deregulation insome ofthelargest,
andpreviously mostprotected, services sectors oftheCanadian economy. Theynoted thatcompetition
hadbeenintroduced intolargesegments ofthefinancial services, telecommunications andairtransport
industry andthat,since reforms hadbeenaccompanied bynewinternational commitments, foreign
suppliers hadgenerally benefited. However, several Members pointed toremaining restrictions on
foreign investment inareassuchastelecommunications andtransport andencouraged Canada toremove
these inthecontext ofGATS negotiations. Some Members feltthatmarket access inbanking was
stillseverely restricted bytheimpossibility tobranch directly intoCanada from thehome country.
Other Members questioned "routing" obligations applying tointernational telecommunications services.
173. Therepresentative ofCanada responded thatCanada 'scurrent tariff-quota system reflected
itsUruguay Round concessions onagriculture. Withregard tofurther WTO discussions onagriculture,
hesaidthatCanada fullysupported aprogramme ofanalysis andinformation exchange within theWTOWT/TPR/M/22
Page 34Trade Policy Review
onagricultural trade-policy matters, notlimited tomarket-access questions, withaviewtopreparing
fortheeventual resumption ofnegotiations foreseen intheAgreement onAgriculture.
174. Therepresentative ofCanada recalled thatCanada hadlongpursued liberalization infinancial
services, transportation andtelecommunications services. Hementioned inparticular Canada 's
commitments toremove the10/25 investment limitinfederally incorporated financial institutions under
theGATS, except forSchedule Ibanks forwhich the10percentlimitremained. TheGovernment
ofCanada hadnoplans torevise thislatter provision. HesaidthattheGovernment wascarefully
considering theimplications oftworecent Parliamentary Committees 'recommendations toallow direct
branching fromabroad. Canada hadalsooffered tobinditscurrent policies regarding foreign investment
andtraffic routing intheongoing WTO negotiations, butwasreviewing itsapproach tosuchnegotiations
tohelpachieve anacceptable mutual agreement bythedeadline ofFebruary 1997.
***************
175. Members fullyacknowledged theexport-driven growth intheCanadian economy overthepast
twoyears, theliberalization incertain sectors andthevarious initiatives toreview andupdate trade
policy mechanisms. However, anumber ofconcerns thathadbeenexpressed atearlier reviews remain.
These include continuing highlevels ofprotection intheagricultural sector, thelarge number of
anti-dumping measures stillinforce, andtheproblems ofensuring thatpolicies shaped atfederal level
werefullycarried through atsub-federal level. Other issues thatreceived emphasis wereremaining
restrictions intheservices sector andthemanner ofimplementation oftheAgreement onTextiles and
Clothing.
176. Developments inrelation toNAFTA wereofparticular interest toMembers, bothinthewider
context ofinteraction between regional andmultilateral arrangements andalsointerms ofCanada 's
heavy dependence ontheU.S. market. Members thusencouraged Canada tomaintain itsstrong
commitment tomultilateralism andtocontinue togiveclose attention toensuring complementarity
between regional andmultilateral initiatives.Canada WT/TPR/M/22
Page 35
Additional answers byCanada
1. Venezuela
Could thedifference intariff treatment fortextiles between fullyimplemented NAFTA schedules
andMFN rates cause adiversion oftrade away from LDCs?
Response:
Since NAFTA wasfirstimplemented starting onJanuary 1,1994, textile imports from LDCs have
risen (from $8million in1994 to$14.4 million in1995). Based onthispastexperience, wedonot
expect thatthedifference between NAFTA andMFN ratesontextiles willcause tradediversion away
from LDCs inthefuture.
2. Korea
Could Canada explain thechange intariff treatment forsnowboard boots from Korea which
resulted inasignificant raise intariffs?
Thechange intarifftreatment ofsnowboard boots isaconsequence oftheclassification decision reached
bytheWorld Customs Organization in1993. Thisdecision resulted inthedefinition ofsports footwear
expanding toinclude snowboard boots, beginning in1996.
3. Norway
What istheimport tariff foroil?
Free(there aresome limited exceptions, suchaslubricating oilswithMFN tariffratesofbetween 6%
and7%in1997).
5. Brazil
Willthere beareform oftheGPT?
InMarch of1994, theCanadian Government began consultations withCanadian industry andGPT
beneficiary countries withaviewtoreducing GPTratesandexpanding GPTcoverage where possible.
Theresults ofthisreview tookeffect starting onJanuary 1,1996. Insummary:
- Most GPTratesarebeing phased down tolevels atleasttwo-thirds ofapplied MFN ratesby
1999, andwhere possible, even further. Imports under theGPT preference amounted to
$3.8billion in1995.
- GPTproduct coverage hasbeenexpanded bysome 218tariff lines. In1995 thetotalvalue
ofimports fromGPTeligible countries entering under thesetarifflinesamounted to$1.5billion.
- Theadministrative burden onGPT exporters hasbeenreduced through theremoval ofthe
requirement forGPTgoods tobecertified byanauthority (the"Certifying Authority") within
theoriginating country asmeeting GPTorigin regulations.WT/TPR/M/22
Page 36Trade Policy Review
6. NewZealand
Why areprocessing restrictions necessary forcertain agricultural goods?
TheCanadian government, inconsultation withdomestic stakeholder, allocated theTQtoprocessors
andfurther-processorsforcertainagriculturalproductsforparticularend-usesandtopromotevalue-added
processing activities; thisinturnshould encourage utilization oftheTQ.
Why hastheCanadian Dairy Commission [Council] theright toimport inbulk?
ATQforbutter hasbeenallocated forthe1996-97 dairyyeartotheCanadian Dairy Commission(CDC),
tobedirected toprocessors andfurther processors whousebutter formanufacturing. Anyimporter,
including theCDC, mayimport butter inanyform andatanytime, subject totheapplicable duty.