RESTRICTED
WORLD TRADE WT/TPR/G/22
15October 1996
ORGANIZATION(96-4274)
Original: English/French
TRADE POLICY REVIEW
CANADA
Report bytheGovernment
Pursuant totheAgreement Establishing theTrade Policy Review Mechanism (Annex 3ofthe
Marrakesh Agreement Establishing theWorld Trade Organization), theCanadian Government 'spolicy
statement isattached.
Note:Thisreport issubject torestricted circulation andpress embargo untiltheendofthemeeting
oftheTrade Policy Review Body onCanada.Canada WT/TPR/G/22
Page iii
TABLE OFCONTENTS
Page
I. EXECUTIVE SUMMARY 1
II. THE TRADE AND ECONOMIC POLICY ENVIRONMENT 1
III. TRADE POLICY DEVELOPMENTS 1994-96 2
IV. FUTURE POLICY DIRECTIONS 2
(i) GATT/World Trade Organization 3
(ii) NAFTA 4
(iii) Canada-USA Trade Relations 4
(iv) Other Trading Arrangements 4
(v) Other Administrative Actions 5
(vi) TheEmerging Issues 5Canada WT/TPR/G/22
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September 1996
TRADE POLICY REVIEW MECHANISM
POLICY STATEMENT BYTHE GOVERNMENT OFCANADA -1996
I. EXECUTIVE SUMMARY
1. Thepasttwoyears haveseentheCanadian economy, already oneofthemostopenintheworld,
become evenmore performance dependent onitsinternational economic activities. Exports havebeen
themostdynamic component oftheeconomy, leading theCanadian economy toanimpressive pattern
ofsustained growth, albeit notspectacular, overthepasttwoyears. Underlying productivity increases,
especially inthemore-easily-measured manufacturing sector, have beendramatic inrecent years,
reflecting theadjustment oftheCanadian economy toglobal developments, international trade
arrangements, andtotechnological change. Progressively Canadian products havebecome increasingly
more competitive inworld markets. Foreign exchange ratefluctuations havenotbeenamajor factor
impacting competition.
2. Canada 'sparticipation inbothmultilateral, regional andbilateral trading arrangements over
thepasttenyears hasbeenanimportant element inthisgenerally successful adaptation oftheCanadian
economy. Vigorous involvement ininternational trade andintheconduct andadvancement ofthe
international tradeagenda willcontinue toinfluence Canada 'sapproach, strategies, andobjectives with
respect toCanada 'strade policy initiatives inthecoming months andbeyond.
3. Canadacontinuestopursuetradeliberalizationobjectivesatthemultilateral,regionalandbilateral
levels. Inaddition tothisthefundamental andgenerally successful overall orientation oftheCanadian
economy tomeetthenewinternational context andchallenges, Canada hasbeenfullyandeffectively
implementing andtaking advantage ofitsinternational trade commitments toliberalize. Canada 's
approach totrade policy management overthepasttwoyears hasbeen: managing alarge number
oftrade disputes bothintheWTO andNAFTA context andworking toexpand market access
opportunities byreducing orremoving barriers totrade incertain instances internally orwithrespect
tocertain trading partners.
4. Inparticular, Canada hasbeenactively engaged indiscussions toextend theNAFTA beyond
itsthree original members, including undertaking negotiations withChile overthepastninemonths
toestablish afree-trade agreement, aswellasindiscussions toachieve afreetrade agreement inthe
hemisphere by2005 andtoestablish freetrade andinvestment intheAPEC region by2010/2020.
Further,inpreparationfortheSingaporeMinisterialConferenceinDecember1996,Canadahasinitiated
orparticipated indiscussions withmany ofourtrading partners indifferent foraonadvancing thetrade
agenda toreflect globalization pressures, thechanging international economic circumstances andto
maintainthecredibility,dynamismandeffectivenessoftheinternationaltradingsystem.Canadaremains
committed topursuing anactive tradepolicy agenda. Thegoalofthiscommitment istohelpstrengthen
theframework ofanopen, rules-based global andregionally-consistent trade regime.
II. THE TRADE AND ECONOMIC POLICY ENVIRONMENT
5. TheCanadian economy overthepasttwoyears hascontinued therecovery thatbegan in1991.
Exports havebeentheprimary component ofgrowth; theshare ofexports asapercentage ofCanadian
GNPhassteadily increased (from 24percentin1991to37percentin1995), indicating thecontinuedWT/TPR/G/22 Trade Policy Review
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openingoftheeconomyandreflectingitsincreasinglysuccessfulspecializationwithintheNorthAmerican
andglobal economic order. Thisstrong export performance hasbeenhelped byimproved productivity,
thecontinued economic expansion ofCanada 'sprincipal trading partner (theUSA), rising terms-of-trade
forCanada 'smajor export products, Canada 'scontinued lowinflation rateandarelatively undervalued
currency. Further, reduced public debtandimproved competitiveness haveresulted inCanada 'scurrent
account moving intoasurplus position forthefirsttimesince 1984.
6. Continued steady growth intheUSAmarket, andimproved prospects inbothJapan andmost
oftheEUmember states, aswellasincertain other markets where Canadian-based firms areactive,
aswellashigher investment athome andimproved consumer confidence should underpin Canadian
economic growth prospects intheperiod ahead.
III. TRADE POLICY DEVELOPMENTS 1994-96
7. Canada'stradepolicyactivitiesoverthepasttwoyearshavefocusedparticularlyonimplementing
theUruguayRoundandtheNorthAmericanFreeTradeAgreement,advancingWTO-consistentbilateral
andregional trade arrangements involving Israel, Chile, theproposed FreeTrade Agreement inthe
Americas (FTAA) andAPEC, andmanaging alargenumber oftradedisputes, primarily withtheUSA.
Aswell,anumber ofpositive policy initiatives havebeentaken bytheCanadian Government, including
tariff simplification.
These initiatives include developments inthefollowing areas:
(i) Uruguay Round
(ii) TheNorth American FreeTrade Agreement (NAFTA)
(iii) TheCanada-USA FreeTrade Agreement (FTA)
(iv) Canada-Israel FreeTrade Agreement
(v) FTAA
(vi) APEC
(vii) Government Procurement
(viii) Tariff Simplification
(ix) Rules-of-Origin
(x) Anti-dumping andCountervail
(xi) Safeguards
(xii) TheInternal Trade Agreement
IV. FUTURE POLICY DIRECTIONS
8. Canadian trade policy hasbeenlargely successful overthepastfifteen years inbuilding on
anincreasingly internationally-competitive economy toestablish, withourtrading partners, aglobal
andregional framework forimproved market access andastronger rules-based system. Forthefuture,
thefundamental underlying economic philosophy offreer andmore open markets rooted in
internationally-agreed rulesandpractices willremain thebasis ofCanadian trade policy. Asaresult
ofahighly-publicized series oftradenegotiations since1986, recent export successes andmedia interest,
itiscleartomostCanadian stakeholders intheeconomy thattradeisvitaltoCanada 'seconomic well-
being. Canada 'seconomic growth, jobcreation, andmaintaining itsstandard ofliving depend onits
ability andsuccess inattracting newinvestment andtechnology, topursue important policies which
donotplace Canadian-based producers orservices providers atacompetitive disadvantage intheglobal
marketplace, andtomaintain andexpand access toexport markets forbothgoods andservices.Canada WT/TPR/G/22
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Canadian trade policy overthenextseveral years will:
continue tobepartof,andgiveeffect to,theCanadian government 'smicro-economic growth
andjobcreation;
remain acentral, andever-more important, component ofourforeign policy inthepost-Cold
Warera.Trade policy isanimportant aspect ofCanada 'sbilateral relations which itwillwish
tocontinue touseinbuilding amore stable multilateral system toensure international stability
andeconomic growth; and
willcontinue toreflect theprofound transformation taking place inCanada andintheworld
economy bothgeographically andinterms ofsectors andissues.
Inparticular, indeveloping andconducting trade policy theGovernment ofCanada will:
Ensure thatCanada andCanadian companies capitalize onthebusiness opportunities presented
byanincreasingly global market. Thisinvolves generating greater interest among companies
inopportunities ininternational markets andattracting investment toCanada;
Advance theliberalization oftradeandthedevelopment ofarules-based trading system through
theWorld Trade Organization, theNAFTA, andother regionally aswell asbilateral
arrangements; and
Manage theCanada-USA traderelationship topreserve thebenefits thatCanada derives from
itsmost important export market byfar.
9. Toachieve itsoverall economic andtrade objectives, theCanadian Government intends to
continue topursue trade policies aimed atfurther market liberalization, reducing barriers totrade,
strengthening therules-based multilateral trading system, andtightening international disciplines on
theuseofdirect andindirect subsidies. Inaddition, Canada intends tocontinue toexercise leadership
inaddressing newtrade issues which arenowemerging ontheinternational scene.
(i) GATT/World Trade Organization
10. Throughout thepost-war period, theGATT hasrepresented thecornerstone ofCanadian trade
policy. With theUruguay Round negotiations andimplementation oftheresults oftheRound inthe
process ofbeing implemented, theeffective operation oftheWorld Trade Organization isamong the
Canadian Government 'stoptradepolicy priorities. Thisinvolves participating intheon-going effective
operation oftheWTO, including itscouncils, committees, working parties, adispute settlement body
andappeal tribunal, andtheTrade Policy Review Mechanism, allofwhich willbereviewed byMinisters
attheupcoming Singapore Ministerial Conference inDecember ofthisyear. Canada alsocontinues
tobeactively involved inthealmost thirty accessions totheWTO andinon-going negotiations in
financial andtelecommunications services. Canada proposes tocontinue tousetheforum ofthe
GATT/WTO andother appropriate institutional forafordiscussions ontheemerging or"new" trade
issues,includingwithrespecttotradeandtheenvironment,andtradeandinvestment.Aswell,improved
coordination andcooperation within processes such astheG-7, theQUAD andwithother key
international organizations, suchastheIMF, theIBRD andtheOECD, remain akeypriority forCanada
inensuring thattheglobal trade andeconomic system runseffectively andopenly.WT/TPR/G/22 Trade Policy Review
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(ii) NAFTA
11. NAFTA institution building continued atministerial levelthrough meetings oftheFreeTrade
Commission. Officials fromthethreecountries working through thevarious committees andworking
groups called forbytheAgreement proceeded tofurther develop theNAFTA. Theworking groups
andcommittees alsoprovide aforum tosettle tradeirritants before theybecome disruptive. Inaddition
totheformal NAFTA committees andworking groups under NAFTA, eachcountry hasdesignated
asub-ministerial coordinator forNAFTA whoconsult regularly witheachother onimplementation
matters. Sub-national units havenowcompleted theprocess ofregistering reservations asprovided
under theAgreement. TheEnvironmental andLabour secretariats created bythetwoNorth American
Cooperation agreements, often referred toastheNAFTA sideagreements, carried onwithwork
programs developed under theauthority oftheministers from thethree countries.
12. InJune1995, negotiations onChile'saccession totheAgreement wereinitiated. These were
latersuspended when theUnited States administration failed toobtain unfettered negotiating authority
from Congress.
(iii) Canada-USA Trade Relations
13. Inthecontext oftheNAFTA andWTO rulesandcommitments, Canada willcontinue topursue
atrade policy approach thatsecures andenhances Canadian access totheU.S. market anddefends
Canadian trade interests.
Careful management ofbilateral trade disputes withtheUnited States continues tobeakey
strategic priority. Thiscurrently includes managing thesoftwood lumber fileandHelms-Burton
Cuba tradeembargo andthedefence oftheU.S.NAFTA challenge ofCanada 'ssupply managed
sector. Canada isalsoresisting U.S.challenges toCanadian cultural industry trade interests.
Through bilateral Ministerial contact, NAFTA Commission meetings andworking groups and
other occasions when Ministers meet, Canadian andCanada-U.S. trade policy interests will
bereinforced.
(iv) Other Trading Arrangements
14. Canada signed afreetrade agreement withIsrael on31July1996. Thisagreement covers
removal oftariffs from industrial products, provide dutyfreeaccess orlowduties toavariety of
agricultural andfishery products andestablishes adispute settlement process.
15. Since theUSAdministration wasnotinaposition toeffectively pursue accession negotiations
withChile without aproper mandate, Canada hasundertaken tonegotiate afreetrade initiative with
Chile. Thisisaimed atproducing abilateral interim tradeaccord agreement based onNAFTA principles
anddisciplines tofacilitate Chile'seventual accession totheNAFTA andtoenhance trade. Thisbilateral
agreement willencompass trade ingoods andservices, investment anddispute settlement.
16. CanadaisparticipatingintheFTAAworkinggroupscreatedtopreparetheupcominghemispheric
negotiations.Consultationshaveconcentratedsofarintheexchangeofinformationandtheidentification
ofspecific areas fornegotiation.
17. InMay1996, Canada presented itsAPEC Individual Action Planalong withtheother member
countries asafirststeptowards further trade liberalization inthearea.Canada WT/TPR/G/22
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(v) Other Administrative Actions
Review oftheSpecial Import Measures Act
18. Theestablishment oftheSpecial Import Measures Act(SIMA) in1984 represented the
consolidation andmodernisation ofCanada ’strade remedy lawsbyincorporating theresults ofthe
Tokyo Round aswellasParliamentary recommendations concerning thedesign oftheCanadian system.
Asapartofnormal government practice toreview legislation fromtimetotime, aParliamentary Sub-
Committee wasestablished inthespring of1996toreview theSIMA anddetermine whether itcontinues
toadequately reflect thecompetitive needs ofallsegments oftheCanadian business community. The
Sub-Committee isscheduled toholdpublic hearings andmake recommendations onanyimprovements
tothelawbytheendof1996.
19. In1994, thegovernment ofCanada announced athree-year review ofthetariff system in
recognition ofthefactthatithasbecome increasingly complex overtheyears. Theobjectives ofthe
review areessentially two-fold: tomake thetariffregime more responsive tothecompetitive pressures
facing Canadian industry asaresult offreer trade; andtosimplify thesystem andmake itmore
transparent andpredictable. Aspartofthisreview, MFN ratereductions onawide range of
manufacturinginputswereimplementedinJune1995;thesewillbenefitnotonlyCanadianmanufacturers
butalsoforeign suppliers ofthese goods.
20. After overtwoyears ofstudy andconsultations, aproposed newsimplified Customs Tariff
wasissuedforpubliccommentinMarch1996.ThenewTariffwouldprovideforfurtherratereductions,
asignificant reduction inthenumber oftariff provisions andasimpler ratestructure. Under thenew
Tariff mostgoods would beclassified inoneSchedule where theirdutiable status would bedetermined,
rather thaninseveral Schedules andawide range ofregulations asiscurrently thecase. Other
improvements would include streamlined legislative provisions, theelimination ofthe"notmade in
Canada" conditions under certain duty-free tariffprovisions andoftherelated administrative procedures,
andthereplacement oftheMachinery Remission Program withduty-free anddutiable provisions for
unavailableandavailablemachineryrespectively.ThenewTariffwouldbesimplerandmoretransparent
andpredictable, thuslessening theregulatory burden andrelated costsassociated withimporting. Once
theconsultations launched lastMarch arecompleted, implementing legislation willbeprepared. The
newTariff isintended forimplementation in1998.
21. Amongotherinternationaltradeliberalizationinitiatives,Canadaextended,in1994,forafurther
tenyearperiod, theGeneral Preferential Tariff (GPT) aimed athelping lessdeveloped countries (LDCs)
increase theirexport opportunities andearnings. Ithasalsoimplemented, effective 1January 1996,
GPTratereductions andexpanded itsproduct coverage.
(vi) TheEmerging Issues
22. Anumber oftrade-related issues havemade theirwayontothetrade policy agenda overthe
pastseveral years. Theglobalization oftheworld economy andtheresulting impact onnational policies
willrequire thedevelopment ofnewormore precise rules tohandle these emerging issues.
23. Several principles maybefollowed indefining these"new issues" astheyrelate totrade. First,
Canadadoesnotsupportasageneralpracticetheuseoftradesanctionstoimposeonecountry'sstandards
ofconduct onother countries; solutions mustbefound through aprocess ofinternational consultation
andrulemaking. Second, wemustguard against thepossibility thatnewrulescanbecome avehicleWT/TPR/G/22 Trade Policy Review
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forprotectionism. Third, thefundamental premise ofCanada 'sapproach willbethattherulesofthe
multilateral trading system arecomplementary to,andnotcontrary to,theattainment ofbroader societal
objectives.
24. CanadaviewstheWTOastheultimatefocalpointformostofthisactivityastheseissuesbecome
more clearly understood andwhen orifthenecessity oftheirbeing negotiated isagreed tofollowing
discussion andconsultation. Itisimportant thattheWTO demonstrates thatitcanmanage itsimmediate
tasksofoverseeing thefullimplementation ofallUruguay Round obligations, seeing thatthenewdispute
settlement mechanism isusedregularly andfully, andguiding negotiations bothonunfinished Uruguay
Round business andtheaccession ofnewmembers toanearly andsuccessful conclusion.
25. TheWTO mustalsoensure, however, thatitcanrespond effectively andinatimely manner
totheneeds oftheworld trading system asitevolves. Inparticular, theWTO willneedtoensure
thattheappropriate preparatory workisundertaken toenable boththereview and/or further negotiations
called forunder thebuilt-in agenda areeffectively undertaken andthatthenecessary work inareas
suchasinvestment andcompetition policy isconducted and/or coordinated toensure thatanup-to-date,
credible andopen rules-based system ismaintained andstrengthened asweprepare toenter anew
century.
26. Once theappropriate analytical work isdoneinvarious appropriate fora, Canada, working
withitsprivate sector andtheprovinces, willwanttheWTO toproceed onthese matters inamanner
consistent withitscompetence andmandate.
27. TheSingapore Ministerial Conference willbeespecially important inthiscontext. There is
alarge agenda ahead thatmustbemanaged carefully andeffectively toensure thattheworld trading
system and,beyond that,theworld 'sinternational economic system, evolve inthebroadest interests
ofusall.