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BEFORE 1300 HRS GMT 19NOVEMBER 1996
PRESS/TPRB/48
11November 1996
CANADA 'SDOMESTIC AND EXTERNAL REFORMS HELP CREATE
STRONGER BASE FOR ECONOMIC EXPANSION
Canada'seffortstowardstradeliberalizationattheregionalandmultilaterallevels,complemented
byaprocess ofderegulation, commercialization andreduced government spending arehelping toease
distortions intheincentive system andcreate astronger basisforlong-term economic expansion. The
combined effects ofdomestic andexternal reforms have, intherecent years, touched virtually allsectors
oftheeconomy (with theexceptions ofafewsensitive areas suchascultural industries andsupply-
managed agriculture), andawiderange ofpolicy areas (tariffs, subsidies, investment).
According toanewWTO Secretariat report onCanada 'stradepolicies andpractices, Canada 's
economy inthelasttwoyears hasessentially beendriven byexports, which benefited from strong
demand intheUnited States, currency depreciation andliberalization bothunder theNAFTA andthe
WTO. Thereport notes thateconomic integration withtheUnited States hasdeepened during thelast
twoyears andthattheUnited States 'share inCanada 'strade hascontinued torise(tofour-fifths of
itsmerchandise exports andtwothirds ofitsimports).
Bilateral tariffreductions under NAFTA haveintensified North American market integration;
Canada 'stariffs onU.S.-made manufactures currently average onlyabout 1percent(asagainst 6.6
percentofm.f.n. imports), and58percentofalltariff linescarry zerorates. Fullbilateral tariff
elimination, except forcertain farmitems, isscheduled for1998. These reductions must beseenin
thelightofanongoing general reduction ofCanadian tariffs, including m.f.n. tariffs, inlinewithWTO
obligations, andimprovement intheGeneral Preferential Tariff.
Theprocess ofgradual economic andtradeliberalization isalsoreflected inavariety ofpolicy
initiatives aimed atrevitalizing theeconomy andimproving Canada 'sattraction forinvestment and
production, including thereduction ofsubsidies andinvestment controls andthederegulation ofservices
sectors. Theopening offactor andgoods markets tointerprovincial competition hasalsoproceeded
under theAgreement onInternal Trade.
Inthiscontext, public assistance totheeconomy hasbeenreduced. Under WTO Agreements
andstrong internal budgetary constraints, expenditure onagriculture hasbeenreduced by20percent
since 1994, mainly because oftheelimination ofgrain transport subsidies. Theimpact ofsuchcuts
hasbeenoffset bystrong export growth. Themore market-oriented environment forgrain andmajor
livestock industries contrasts, however, withtheretention ofsupply management regimes
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fordairy, poultry andeggspoultry products, which continue tobesheltered byhighimport barriers,
nowintheform ofrestrictive tariff quotas ranging upto300percentforout-of quota rates for
butter.
Conditions forforeign investors arealsogradually improving, inparticular through the
multilateralization under theGeneral Agreement onTrade inServices (GATS) ofliberalization measures
granted under NAFTA (such aslower investment review thresholds, andremoval ofownership
restrictions forsome financial institutions). While themanufacturing sector isgenerally freefrom
restrictions, investment monitoring andrestrictions remain insomeservices sectors, considered sensitive
forstrategic, economic orcultural reasons.
Recourse totrade defense mechanisms, inparticular anti-dumping, hasdeclined inthewake
ofcurrency depreciation andbooming exports. There isnoevidence ofCanada 'simports being subject
toany"voluntary" restraints. However, Canada undertook toimpose anexport charge above certain
thresholds onshipments ofsoftwood lumber totheUnited States. Thearrangement isintended to
safeguard Canadian exporters fromtherisksofhighlegalcostsoftraderemedy complaints intheUnited
States. Asasignatory tothePlurilateral Agreement onGovernment Procurement (GPA), Canada is
committed totheprinciple ofopening procurement markets among signatories, butitsundertaking
toinclude sub-federal procurement under theAgreements islinked toeconomically equivalent moves
bytheUnited States.
Deregulation hastouched some ofthelargest, andpreviously mostprotected, services sectors
oftheCanadian economy. Competition hasbeenintroduced intolargesegments ofthefinancial services,
telecommunication andairtransport industry, andtransport infrastructures arebeing commercialized
(ports, airports). While competitive pressures from deregulated U.S.services industries provided a
stimulus tothereform, Canada 'sproceeded inamore gradual manner. Asreform have been
accompanied bynewinternational commitments, firstunder theNAFTA, thenunder theGATS, foreign
suppliers havebenefited.
Overall, theregulatory environment governing growth andstructural adjustment inCanada
haschangedsignificantlysince1994astheNAFTA,WTOAgreementsandtheInternalTradeAgreement
allremoved barriers toeconomic integration bothinternally andexternally. Theeconomic implications
oftheseagreements differ widely between sectors. While theWTO appears tohavehadastrong impact
onagriculture, manufacturing seems atthistimetohavebeenmoreaffected byNAFTA through reduced
tariffs andstrengthened rules oforigin. U.S.-based companies currently account for90percentof
allcarsand60percentofallcomputers produced inCanada. Large foreign-owned plants are
complemented byanetwork ofsmall andmedium-size Canadian firms thathaveoften beenableto
develop competitive market niches. While capitalizing oncertain size-related advantages, suchas
flexibility, SMEs inCanada generally operate from alimited economic andfinancial baseandmay
experience difficulties inmaintaining adequate international supply andmarketing channels.
Initsconclusion, thereport notes thatafterdecades ofNorth American market integration,
starting withtheAuto Pactin1965, most sectors arenowexposed to,andperform wellin,full
competition withtheirU.S. counterparts. Concerns persist, however, about Canada 'shighreliance
ononelarge trading partner, andtheauthorities recognize theneedfordiversification. Newtrade
linksarebeing forged, forexample through APEC (Asian-Pacific Economic Cooperation) andtheFree
Trade AreaoftheAmericas, andafreetrade agreement withChile, which seeks tocomplement and
extend NAFTA. These initiatives havenot,however, compromised Canada 'sactions atthemultilateral
level; Canada hassought todevelop synergies between regional andmultilateral integration, and
Canada'stradepoliciesremainfirmlyanchoredintheWTO.Thereportnotes,finally,thattradepatterns
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in"sensitive" industries highlight thecontinuing importance forCanada tobalance internal pressures
inafederal system against itsaimsforbroader regional integration andmultilateral liberalization.
*
TheWTO Secretariat report andapolicy paper byCanada willbethesubject oftwodaysof
discussion atameeting attheWTO 'sTrade policy Review Body on18and19November 1996.
Notes toEditors:
TheWTO Secretariat 'sreport, together withareport prepared byCanada willbediscussed
bytheWTO Trade Policy Review Body (TPRB) on18and19November 1996.
TheWTO 'sTPRB conducts acollective evaluation ofthefullrange oftradepolicies practices
ofeachWTO member atregular periodic intervals andmonitors significant trends anddevelopments
which mayhaveanimpact ontheglobal trading system.
Thetworeports,togetherwithareportoftheTPRB'sdiscussionandoftheChairman'ssumming
up,willbepublished induecourse asthecomplete Trade Policy Review ofCanada andwillbeavailable
from theWTO Secretariat, Centre William Rappard, 154ruedeLausanne, 1211 Geneva 21.
Thereports cover thedevelopment ofallaspects ofCanada 'stradepolicies, including domestic
lawsandregulations, theinstitutional framework, trade policies bymeasure andbysector. Since the
WTO cameintoforce, the"new areas" ofservices tradeandtrade-related aspects ofintellectual property
rights arealsocovered. Attached arethesummary observations fromtheSecretariat andgovernment
reports. Fullreports willbeavailable forjournalists from theWTO Secretariat onrequest.
Since December 1989, thefollowing reports havebeencompleted: Argentina (1992), Australia
(1989 &1994), Austria (1992), Bangladesh (1992), Bolivia (1993), Brazil (1992), Cameroon (1995),
Canada (1990, 1992&1994), Chile (1991), Colombia (1990 &1996), Costa Rica(1995), Côted'Ivoire
(1995), Czech Republic (1996), Dominican Republic (1996), Egypt (1992), theEuropean Communities
(1991, 1993 &1995), Finland (1992), Ghana (1992), Hong Kong (1990 &1994), Hungary (1991),
Iceland (1994), India (1993), Indonesia (1991 and1994), Israel (1994), Japan (1990, 1992and1995),
Kenya(1993),Korea,Rep.of(1992&1996),Macau(1994),Malaysia(1993),Mauritius(1995),Mexico
(1993), Morocco (1989 &1996), NewZealand (1990 &1996), Nigeria (1991), Norway (1991 &1996),
Pakistan (1995), Peru(1994), thePhilippines (1993), Poland (1993), Romania (1992), Senegal (1994),
Singapore (1992 &1996), Slovak Republic (1995), South Africa (1993), SriLanka (1995), Sweden
(1990 &1994), Switzerland (1991 &1996), Thailand (1991 &1995), Tunisia (1994), Turkey (1994),
theUnited States (1989, 1992 &1994), Uganda (1995), Uruguay (1992), Venezuela (1996), Zambia
(1996) andZimbabwe (1994).
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TRADE POLICY REVIEW BODY
CANADA
Report bytheSecretariat -Summary Observations
Recent Economic Trends
Exports andinvestment (principally inexport oriented industries) havebeenthemainelements
inthestrengthening ofCanada 'seconomy since early 1994. Both "traditional" industries suchas
minerals, lumber andautomobiles, and"advanced" sectors havebenefited fromstrong demand inthe
United States, currency depreciation vis-à-vis theU.S. dollar andliberalization under NAFTA and
theWTO. During theperiod, theUnited States 'share inCanada 'stradehascontinued torise,currently
accounting forfourfifths ofmerchandise exports andtwothirds ofimports.
External liberalization isbeing complemented byaprocess ofinternal deregulation,
commercialization andgovernment retrenchment. Thishashelped toeasedistortions intheincentive
system, consolidate public finances andcreate astronger basis forlonger-term economic expansion;
inthemeantime, however, unemployment remains highanddomestic demand lagsGDPgrowth. Under
thenewAgreement onInternal Trade (AIT), efforts arebeing made toharmonize conditions fortrade
andinvestment andfacilitate factor flows among theprovinces. Thecombined effects ofdomestic
andexternal reforms touch virtually allsectors oftheeconomy, withtheexception ofafewsensitive
areas suchascultural industries andsupply-managed agriculture.
Trade Policy Developments
Canada became afounding Member oftheWTO on1January 1995. TheWTO Implementation
ActofNovember 1994involved amendments to29federal statutes covering virtually alltrade-related
areas. Inaddition tochanges intheSpecial Import Measures Act(SIMA) necessary toimplement the
WTO Agreements, ageneral review ofanti-dumping provisions iscurrently under way. Canada has
fulfilled most ofitsWTO notification obligations, buthasyettocomplete these insome areas of
agriculture andsubsidies.
Tariff liberalization hasproceeded inlinewithbothNAFTA andWTO obligations. Tariffs
onU.S.-mademanufacturescurrentlyaverageabout1percentasagainst6.6percentonm.f.n.imports.
Over58percentofalltarifflinescarryzeroratesforU.S.supplies, withfullbilateral tariffelimination,
except forcertain farmitems, scheduled for1998. Toprevent further erosion ofGeneral Preferential
Tariffbenefits,areductioninpreferentialratesonsome3,000itemsandanextensioninproductcoverage
arebeing phased in.
Canada hasalsoembarked onatariff review process intended tosimplify thepresent multi-
layered tariffrégime. Toenhance industrial competitiveness, tariffs onsome1,500 items, mainly inputs
formanufacturing,werereducedinJune1995.Performance-baseddutydrawbackandremissionschemes
arebeing phased outunder WTO andNAFTA provisions.
Anti-dumping remains apotentially powerful tradedefence instrument, withover90measures
currently inforce(including priceundertakings). However, thenumber ofnewinitiations hasdeclined
inthewake ofbooming exports andcurrency depreciation, continuing adownward trend since the
mid-1980s. Canada 'sonlysafeguard measure under Article XIX, concerning boneless manufacturing
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beef, expired asscheduled on31December 1994. Fiveoutofsixcountervailing actions applied at
end-1995 concerned processed foodproducts from theEU.
There isnoevidence ofCanada 'simports being subject toany"voluntary" restraints affecting
prices,quantitiesorothersupplyconditions.Theauthoritiesreportedlyrefusedtomonitorcerealexports
totheUnited States aftertheexpiry ofabilateral Memorandum ofUnderstanding in1995. Under
arecent bilateral arrangement onsoftwood lumber, Canada undertook toimpose anexport charge on
shipments above certain thresholds totheUnited States; thearrangement isintended tosafeguard
exporters fromtherisksandlegalcosts, estimated atsome US$100 million overthepastthree years,
oftrade remedy complaints intheUnited States.
Other Policies Affecting Adjustment andGrowth
Given strong fiscal constraints, recent internal policies haverelied strongly onnon-budgetary
measures torevitalize theeconomy andimprove Canada 'sattraction forinvestment andproduction.
Avariety ofpolicy initiatives areaimed atremoving regulatory barriers tobusiness expansion, reducing
subsidies, andopening factor andproduct markets tointerprovincial competition. While theprovinces
arefullyassociated withthefiscal consolidation process, itisdifficult toidentify itsimpact onindividual
subsidy programmes. Inthisarea, theAITcontinues toallow considerable leeway.
Reflecting concerns about Canada 'sperformance inhigh-technology industries, strong attention
continues tobepaidtoresearch anddevelopment. Support programmes havebeenrestructured in
recent years andhavegenerally escaped theeffects offiscal tightening. Thelargest R&D scheme,
theDefenseIndustriesProductivityProgram,wasreplacedin1996by"TechnologyPartnershipCanada",
aventure-capital fundinvesting inadvanced-technology projects.
Conditions forforeign investors haveimproved. Liberalization under theNAFTA, including
higher investment review thresholds andtheremoval ofownership restrictions forfederally-incorporated
financial institutions, wasmultilateralized under theGeneral Agreement onTrade inServices. While
ownership limits havebeeneased onholding companies inbroadcasting, Canada continues tomonitor
and,insome cases, restrict foreign investment insectors considered sensitive forstrategic, economic
orcultural reasons.
Asasignatory tothePlurilateral Agreement onGovernment Procurement (GPA), Canada is
committed totheprinciple ofopening ofprocurement markets among signatories. Itsundertaking to
include sub-federal procurement under theGPAis,however, linked toeconomically equivalent moves
bytheUnited States. While theAgreement onInternal Trade seeks toremove provincial procurement
preferences, significant reservations remain, inparticular forCrown Corporations. Where no
international commitments apply, AITsignatories arefreetoemploy buy-Canadian policies.
Sectoral Developments
Primary industries
Overall, Canadian agriculture benefited fromfavourable priceandexchange ratedevelopments
in1994and1995. Federal outlays foragriculture havebeenreduced bysome 20percentsince 1994,
mainly through theelimination oftransport subsidies under theWestern Grain Transportation Act;
andstrong export demand hashelped traditional export products, inparticular wheat, toadjust tocuts
inpublic support. Themore market-based environment forgrains andmajor livestock industries
contrasts, however, withtheretention ofsupply management régimes fordairy products, poultry and
eggs. These products continue tobesheltered byhighimport barriers, nowintheformofrestrictive
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tariffquotas withexcess supplies carrying prohibitive rates, ranging uptoover300percentforbutter.
Theallocation ofquota entitlements toindividual importers isgenerally based onpastperformance;
inareas suchasbutter, condensed andconcentrated milk, historical monopolies remain.
Canada 'soilandgasindustries haveperformed wellinrecent years. Exports ofelectric power
havecompensated forthesluggishness ofdomestic demand andprovided afavourable background
forprovincial deregulation policies. However, disagreement overtheapproach toliberalizing internal
trade hasdelayed theadoption oftheenergy chapter oftheAIT.
Manufacturing
BilateraltariffreductionsundertheNAFTAhaveintensifiedNorthAmericanmarketintegration.
U.S.-based companies currently account for90percentofallcarsand60percentofallcomputers
produced inCanada. Large foreign-owned plants arecomplemented byanetwork ofsmall andmedium-
sized Canadian firms, including producers oftechnically advanced niche products insuchareas as
information technologies andaviation.
Intandem withtheimplementation oftheNAFTA, Canada hasreduced protection onimports
ofselected products fromm.f.n. sources. Thus, m.f.n. tariffs oncarpartswereeliminated inJanuary
1996, tobalance thetermination ofadutyremission programme inthesector, andautonomous tariff
reductions onfrequently usedtextile inputs arebeing phased in.
Canada hasnotified totheWTO itsfirststage ofintegration under theAgreement onTextiles
andClothing. Restraints aremaintained with31WTO Members inEurope, Asia, theAmericas and
Africa. Inthecontext oftighter origin requirements under theNAFTA, Canada mayexport additional
amounts ofnon-originating clothing totheUnited States under azero-tariff quota.
Services
Concerns about economic andtechnical inefficiencies, andtheirbudgetary ramifications, have
encouraged deregulation, privatization andmanagement reform inmajor services sectors. Competitive
pressuresfromderegulatedU.S.industrieshaveprovidedadditionalstimuli.Inrecentyears,competition
hasbeenintroduced inlarge segments ofthetelecommunications industry, anddomestic airtransport
hasbeenliberalized. Inageneral climate ofderegulation, interprovincial market integration inthe
telecommunications andfinancial sectors hasincreased withtherelative expansion offederal control.
Restrictions onsectoral diversification financial services have been removed, andinfrastructural
monopolies inairnavigation andtheportsystem arebeing commercialized.
Canada hasgenerally pursued aprocess ofgradual reform intheservice sector. Thismay
havecostsome time, buthassmoothed thetransition process. Asreforms havebeenaccompanied
bynewinternational commitments, firstunder theNAFTA, thenunder theGATS, foreign suppliers
havebenefited. However, cultural industries remain largely untouched byreforms, while foreign
ownership inareassuchastelecommunications carriers andairlines isstillsubject toreview andcontrol
provisions.
Trade Policies andForeign Trading Partners
Asbilateral trade flows havecontinued togrow, adominant policy theme hasbeentoensure
smooth trade relations withtheUnited States. After decades ofNorth American market integration,
starting withtheAuto Pactin1965, most sectors arenowexposed to,andperform wellin,full
competition withtheirU.S.counterparts. Concerns persist, however, about thepotential vulnerability
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oftheCanadian economy deriving fromsuchhighreliance ononelarge trading partner, onahandful
of"traditional"industriesandonrelativelyfewlarge-scaleplants.Canadianpolicythusseekstocombine
external withstronger internal market integration andencourage sectoral diversification inproduction
andtrade.
Inthisconnection, newtradelinksarebeing forged, forexample through APEC andtheFree
Trade AreaoftheAmericas, andafreetrade agreement withChile seeks tocomplement andextend
theNAFTA. These initiatives havenot,however, compromised Canada 'sactions atthemultilateral
level. Rather, Canada hassought todevelop synergies between regional andmultilateral integration,
including bypromoting WTO-compatible rules atregional level and,atthesame time, binding its
NAFTAservicescommitmentsexternallyundertheGATS.Thus,Canada'soveralltradepoliciesremain
firmly anchored intheWTO; however, tradepatterns in"sensitive" industries highlight thecontinuing
importance ofbalancing internal pressures inafederal system, regional integration, andmultilateral
liberalization.
TRADE POLICY REVIEW BODY
CANADA
Report bytheGovernment
EXECUTIVE SUMMARY
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, havebeen dramatic 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.
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.
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.
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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.
THE TRADE AND ECONOMIC POLICY ENVIRONMENT
TheCanadian economy overthepasttwoyears hascontinued therecovery thatbegan in1991.
Exports havebeentheprimary component ofgrowth; theshare ofexports asapercentage ofCanadian
GNPhassteadily increased (from 24percentin1991to37percentin1995), indicating thecontinued
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.
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.
TRADE POLICY DEVELOPMENTS 1994-96
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
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FUTURE POLICY DIRECTIONS
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
donotplaceCanadian-based producers orservices providers atacompetitive disadvantage intheglobal
marketplace, andtomaintain andexpand access toexport markets forbothgoods andservices.
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 aswellasbilateral
arrangements; and
Manage theCanada-USA traderelationship topreserve thebenefits thatCanada derives from
itsmost important export market byfar.
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.
GATT/World Trade Organization
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
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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.
NAFTA
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.
InJune1995, negotiations onChile'saccession totheAgreement wereinitiated. These were
latersuspended when theUnited States administration failed toobtain unfettered negotiating authority
from Congress.
Canada-USA Trade Relations
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.
Other Trading Arrangements
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.
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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.
CanadaisparticipatingintheFTAAworkinggroupscreatedtopreparetheupcominghemispheric
negotiations.Consultationshaveconcentratedsofarintheexchangeofinformationandtheidentification
ofspecific areas fornegotiation.
InMay1996, Canada presented itsAPEC Individual Action Planalong withtheother member
countries asafirststeptowards further trade liberalization inthearea.
Other Administrative Actions
Review oftheSpecial Import Measures Act
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.
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.
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.
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.
MOREPRESS/TPRB/48
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TheEmerging Issues
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.
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 avehicle
forprotectionism. Third, thefundamental premise ofCanada 'sapproach willbethattherulesofthe
multilateral trading system arecomplementary to,andnotcontrary to,theattainment ofbroader societal
objectives.
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.
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.
Once theappropriate analytical work isdone invarious appropriate fora, Canada, working
withitsprivate sector andtheprovinces, willwanttheWTO toproceed onthese matters inamanner
consistent withitscompetence andmandate.
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.
END