RESTRICTEDWORLD TRADE
ORGANIZATIONWT/TPR/G/112
12 February 2003
(03-0720)
Trade Policy Review Body Original:  English/
                French
TRADE POLICY REVIEW
CANADA
Report by the Government
Pursuant to the Agreement Establishing the Trade Policy Review Mechanism
(Annex 3 of the Marrakesh Agreement Establishing the World Trade
Organization), the policy statement by the Government of Canada is attached.
Note: This report is subject to restricted circulation and press embargo until the end of the meetingof the Trade Policy Review Body on Canada.Canada WT/TPR/G/112
Page 3
CONTENTS
Page
I. TRADE AND ECONOMIC POLICY ENVIRONMENT 5
II. TRADE POLICY DEVELOPMENTS 2000-2002 6
III. FUTURE POLICY DIRECTIONS 19Canada WT/TPR/G/112
Page 5
I. TRADE AND ECONOMIC POLICY ENVIRONMENT1
Sound Policy, Strong Economy
1. Sound economic and fiscal policies continue to foster economic expansion in Canada.  Real
GDP growth has outstripped that of all other G8 countries in recent years and the nation’s
macroeconomic prospects remain solid.  Although economic growth in 2001 was the lowest since the
early 1990s, and included a contraction in the third quarter of that year, a strong and broad-basedrecovery has been achieved.  Indeed, growth resumed in the fourth quarter of 2001 and GDP
expanded at an annualized rate of 6.2% in the firs t quarter of 2002.  Growth moderated slightly in the
second and third quarters of 2002, but remained solid at annualized rates of 4.4% and 3.1%
respectively.  Private sector forecasters expect solid growth in 2003.
2. This strong growth during a period of global slowdown is attributable to sound economic
policies in Canada. The elimination of the deficit and the restoration of fiscal and monetary policy
credibility have underpinned this solid economic performance.  Canada remains committed to the
reduction of the public debt and has achieved a budget surplus at the federal level in every fiscal year
from 1997-98 to 2001-02.  The ratio of federal debt to GDP fell from a high of approximately 71% in
1995-96 to roughly 49% in 2001-02.
3. This fiscal consolidation and debt reduction since the mid-1990s have provided room for an
easing of tax burdens and some modest discretiona ry spending measures.  In 2000, the Government of
Canada introduced a Five-Year Tax Reduction Plan, the largest tax cut in Canadian history.  Under
this plan, personal income tax rates were reduced at all income levels and a number of tax measures
were introduced to create tax incentives for investment and entrepreneurship in Canada.
4. Monetary policy is motivated by the desire to maintain a low and stable inflation rate in order
to reduce uncertainty and facilitate consumption and investment decisions. In 2001, the Bank ofCanada and the Government of Canada agreed to extend the inflation target to the end of 2006.  The
target range for inflation will remain between 1% and 3%.
5. Furthermore, Canada’s flexible exchange rate regime has been effective in cushioning the
economy from external shocks.  The depreciation of the Canadian dollar in recent years has helped to
offset the effects of world commodity price movements and to mitigate the impact of the globalcyclical decline.
A Trading Nation
6. These solid results are, in many ways, attributable to the degree of openness in the Canadian
economy.  Liberalization has encouraged productivity gains and improved competitiveness,
permitting Canadian enterprises to pursue new opportunities in the global marketplace.  Internationaltrade and investment have contributed to improved prosperity in Canada.  Over the past decade,
Canadian exports of goods and services as a proportion of total GDP have risen from 25.1% in 1991
to 43.3% in 2001.  Imports have recorded a similar increase, rising to 38.1% of GDP in that year.
7. A total of 167,100 net new jobs were created in Canada in 2001, attributable in part to trade
and investment with the world; an estimated one of  every four jobs in Canada has been linked to our
export success in global markets.  Canada has weathered the global economic slowdown of 2001
                                                     
1 Please note that unless otherwise indicated, all figures are in Canadian Dollars.WT/TPR/G/112 Trade Policy Review
Page 6
better than most major economies, with a further half a million jobs created over the first eleven
months of 2002.
8. Canada's principal trading partner overwhelmingly remains the United States, accounting for
roughly 82% of Canadian exports and some 71% of our imports in 2001 (though these figures may be
somewhat inflated due to transhipments).  Two way trade in goods and services with the United States
declined by 3% in 2001 and by 3.5% through the first nine months of 2002.  Part of this decline isattributable to the interruption of Canada-US trade flows associated with the September 11, 2001,
terrorist attacks while some is due to the US recession that began roughly six months earlier.
Canada’s strong economic performance during this period of declining cross-border trade has,
however, highlighted the robustness of the economy apart from simply the Canada-US relationship.
9. In recent years, trade was the engine of growth as both exports and imports expanded faster
than GDP.  However, exports contracted by 2.4% in 2001 while imports fell by 2.9% – the first such
drop since 1982.  This decline primarily reflected weaker import demand in the United States, which
affected both Canadian exports and imports (due to the large import content of Canadian exports).
10. As of the third quarter of 2002, Canada's merchandise trade has not rebounded and is below
2001 levels, though only slightly in the case of imports to Canada.  This is a reflection of ongoingweakness in the US market, as Canada has enjoyed modest increases with other major trading
partners.
Investment
11. Two-way direct investment flows with the world remained at historically high levels, though
down from the 2000 peak.  In 2001, Canada’s net external indebtedness as a percentage of GDP
declined to its lowest point since the mid-1940s.
12. Canada’s direct investment abroad (CDIA) exceeded the inflow of foreign direct investment
(FDI) in Canada in 2001, reversing the situation from 1999-2000.  The flow of CDIA remained at the
very high level of $54.9 billion in 2001, thoug h down from a record of $70.5 billion in 2000.
Meanwhile foreign direct investment fell to $42.5 b illion in 2001 from $98.9 billion the previous year.
This is due to FDI from the EU dropping to $0.1 billion after unusual merger activities had caused it
to jump to $82.5 billion in 2000. This decline was partially offset by increased inflows of FDI fromthe United States.
13. Canada remained a net recipient of overall foreign investment, with liabilities exceeding
assets by $203.4 billion in 2001.  This is a small increase from $202.5 billion in 2000, but down
substantially from $290.2 billion in 1997.  This decline in Canada's foreign investment deficit is a
result of changes relative to the US economy, which during the late 1990s acted as a magnet,attracting foreign as well as Canadian investment.  In 2001 the decline began to reverse as the
Canadian economy started to accelerate.
II. TRADE POLICY DEVELOPMENTS 2000-2002
Multilateral Liberalization
14. The WTO is the cornerstone of Canada’s trade policy and the foundation for our relationships
with trading partners. Canada retains a fundamental interest in the continued expansion and
modernization of an open, transparent, rules-based trading system. Changes to Canada’s trade policyCanada WT/TPR/G/112
Page 7
regime both underline our respect for the existing multilateral system and reinforce our dedication to
further liberalization.
15. The promotion of prosperity and employment, both in Canada and internationally, is a pillar
of Canadian foreign policy.  Our commitment to this goal has informed our actions in the past and
will continue to be reflected in our decisions in the future.
Commitment to the Doha Development Agenda16. The Government of Canada maintains that the Doha Development Agenda (DDA) holds the
promise of benefits for all countries – developed and developing.  Canada believes that active
participation in the multilateral trading system can play a positive role in reducing poverty, enhancing
security and improving the quality of life for people around the world.
17. Canada's priority objective in the Doha negotiat ions is to increase economic growth and social
prosperity for the benefit of all Members by reducing impediments to trade and by enhancing
predictability in the multilateral trading system.  Central to this is fundamental agricultural reform,
where Canada seeks the elimination of export subsidies, the substantial reduction or elimination of
trade-distorting domestic support, and substantial improvements in market access for all agriculture
and food products.
18. As an export-oriented economy, Canada also attaches priority to improving market access for
services and non-agricultural goods.  All Members stand to gain substantially from the elimination of
barriers to trade, and Canada seeks an outcome that results in commercially significant and
progressive liberalization.  Canada is also seeking improved transparency in domestic regulatory
regimes.  We have expressed interest in exploring current best practices with respect to regulatory
transparency and in determining whether existing mu ltilateral provisions in this area can be enhanced.
19. An effective system for the settlement of trade disputes that furthers the security and
predictability of the multilateral rules-based trading system is critical to our economic success.
Canada strongly supports negotiations on rules governing the use of trade remedies and subsidies and
believe that improvement and clarification in these areas are necessary in order to achieve greater
convergence in interpretation and to curtail the abuse of trade remedy measures.  Canada is also
seeking improvements to the dispute settlement system, including greater transparency, rules foramicus  participation and enhanced rights for WTO Members as third parties, in order to strengthen
and clarify multilateral disciplines.
20. The Government of Canada supports the adoption of a voluntary, facilitative, simple and low-
cost registration system for geographical indications for wines and spirits and favour increasing
predictability in new areas including electronic commerce.  Canada also supports discussions leadingto negotiations on the four Singapore issues: investment, competition policy, transparency in
government procurement, and trade facilitation.
21. Addressing the coherence agenda, particularly on trade, finance and development,  is also a
Canadian priority and is integral to this round of negotiations.  Canadian objectives with respect to
coherence also include greater clarity in the interplay of WTO and regional trade regimes and betweenWTO disciplines and  multilateral environmental rule s affecting trade.  Consideration of these cross-
cutting issues will help to advance Canada’s objective of better integrating broader concerns with
trade.WT/TPR/G/112 Trade Policy Review
Page 8
22. Given the continued expansion of developing country trade and output, and their growing
representation in the membership of the WTO, developing countries have an increasing stake in the
multilateral trading system.  Consequently, the Doha Development Agenda must address a range of
issues such as special and differential treatment and improving market access for developing country
exports, in order to make the world trading system better serve the interests of development.   A point
of great significance to Canada is that the DDA shall take into account the ability of developing andleast developed countries to implement any new rules, which may be improved through the provision
of technical assistance.
Participation in Negotiations
23. Canada is fully engaged in the current round of WTO negotiations.  In addition to our active
participation in discussions, Canada has submitted formal papers in a number of negotiating areas.
24. We have put forward specific and practical ideas for agricultural reform during discussions in
the modalities phase on export competition, domestic support and market access.  In September 2002,
we tabled a proposal on domestic support. Canada al so presented a proposal with the Cairns Group on
export competition.
25. Canada submitted a paper to the Non-Agricultural Market Access Negotiating Group on
October 8, 2002.  The paper outlined Canada's priorities for the Doha Round and stated our position
with respect to negotiating modalities.
26. Canada tabled the first submission to the Negotiating Group on Rules on April 15, 2002.  This
submission aimed to explain our general orientation to the negotiations and indicated an intention to
provide more detailed submissions on both anti-dumping/countervail and subsidies.  Canada  tabled
an anti-dumping issues paper in January 2003 and intends to submit a subsidy paper in March 2003.
27. Canada co-sponsored two papers on the negotiation of a multilateral system of notification
and registration of geographical indications for wine and spirits.  These papers, the first supporting a
voluntary system of notification and registration, and the second providing additional details on the
proposed voluntary system, were tabled at the September 2002 meeting of the TRIPS Council.
28. Canada submitted its initial services market access requests in July 2002 to over fifty WTO
Members and received initial requests from approximately twenty Members.  Bilateral discussionswith Members are currently underway.  Canada will respect the March 30, 2003, date for submission
of initial offers.
29. Canada has been equally active in the Work Programme.  On trade and environment, Canada
has submitted a paper on labelling in both the Committee on Technical Barriers to Trade (TBT) and in
the Committee on Trade and the Environment (CTE), which proposed a framework for a structureddiscussion in the TBT Committee on labelling issues.  Canada has taken a lead role in the discussion
on labelling in the TBT Committee and actively participated in the discussion in the CTE.
30. Likewise, Canada has submitted papers on investment, trade and competition policy, trade
facilitation, trade and technology transfer, and transparency in government procurement, as well as a
non-paper on electronic commerce.  In response to the Doha Ministerial mandate, Canada hasincreased the resources devoted to investment and other Singapore issues at the WTO.   We are
presently preparing further submissions in these and other areas.Canada WT/TPR/G/112
Page 9
31. Recognizing the importance of trade to the overall Canadian economy, the Government of
Canada has expanded research and analysis efforts directed at supporting trade policy development.
Supporting Development
32. While development is broader than the mandate of the WTO or trade negotiations in general,
the Government of Canada believes that the character of agreements can support or detract from
development objectives.  Consequently, Canada will continue to attach high priority to supporting theintegration of developing countries into the global economy.  The Government of Canada considers
trade to be only one essential component of an integrated and comprehensive approach to sustainable
growth and poverty reduction.
Trade Related Technical Assistance and Capacity Building (TRTA/CB)
33. An integral part of Canada's approach to trade and development is the delivery of needs-
based, coordinated, trade-related technical assistance and capacity-building programs.  Specifically,
such assistance aims to help developing countries ne gotiate effectively, to mainstream trade into plans
for national development, and to build both institutional and supply side capacity to take advantage of
emerging trade opportunities in order to achieve poverty reduction.
34. Total TRTA/CB expenditures by the Government of Canada on projects active in the period
from January 2000 to July 2002 amounted to over $522 million, including $32 million in new
commitments in 2001 (a figure that also includes funding allocated for years after 2001).  Over that
period, Canada has focussed expenditures on such areas as business support services and institutions
($173 million), trade and environment ($102 million), and trade education/training ($60 million).
35. At the 2002 G8 Summit in Kananaskis, Canada announced $20 million over three years in
TRTA/CB funding for Africa.  This amount includes: $7 million for the Joint Integrated Technical
Assistance Program (JITAP) to assist African countries participation in the multilateral trading systemand to improve their ability to take advantage of tr ade opportunities; $8 million to be invested in the
International Trade Centre and the Trade Facilitation Office of Canada for practical assistance to
enhance the capacity of the African private sector to do business internationally; and $5 million to
develop a trade policy expertise centre in Africa, in partnership with the Economic Commission for
Africa.
36. Canada acknowledges, however, that increased expenditures alone are not sufficient.  The
Government favours an effective and efficient approach coordinated with other partners that
recognizes the importance of recipient countries  assuming ownership and control over TRTA/CB
efforts.  In particular, Canada supports initiatives such as the Integrated Framework for Trade Related
Technical Assistance for Least Developed Countries as a means of integrating trade policy intonational development plans.
37. The Government of Canada also funds the Trade Facilitation Office of Canada (TFOC), a not-
for-profit organization that serves as the primary Canadian provider of export training and marketing
assistance for developing and transitional countries.  The TFOC currently offers export marketing,
trade policy development and training, and investme nt promotion programs and services to over 130
client countries qualified to receive assistance from the Canadian International Development Agency.WT/TPR/G/112 Trade Policy Review
Page 10
LDC Market Access Initiative
38. At the 2002 G8 Summit in Kananaskis, Canada announced a new market access initiative for
least developed countries.  Since January 1, 2003, Canada has provided duty-free and quota-free
access to all imports (excluding only the over-quota tariffs on dairy, poultry and egg products) from
48 LDCs, of which 34 are in Africa.
39. These measures are some of the most accessible in the world, particularly in the way they
permit exporters in these countries to source inputs from Canada or other developing countries.  This
reflects Canada’s goal of establishing a mechanism characterized by its simple administrative process
that will result in a real increase in market share for least developed countries.
New Partnership for Africa’s Development (NEPAD)
40. Canada has been a strong advocate of the New Partnership for Africa’s Development, a
realistic and comprehensive program of action to end Africa's economic marginalization.  It is led by
African nations and endorsed by the 53 member states of the Organization of African Unity.  It
emphasizes African leadership and ownership of the development process and calls for a new global
partnership based on shared responsibility and mutual interest.
41. The NEPAD offers the opportunity to define a new relationship between Africa and its
development partners – one that is based on issues of mutual concern such as good governance, trade,
human rights, and security for Africa's people. The underlying objective is for countries to work
together to attract resources, both public and private, over the medium and long term.
42. In the December 2001 federal budget, Canada committed $500 million to support the
objectives of the NEPAD through the G8 Africa Action Plan .  This plan sets out an enhanced
partnership between the G8 and African governments committed to implementing NEPAD, including
its provisions regarding democracy, good governance and human rights.
Official Development Assistance (ODA)
43. In the September 2002 Speech from the Throne  (the main policy statement of the Government
of Canada), we committed to increase official development assistance funding by 8% per year with
the aim of doubling ODA volumes by the end of the decade and raising ODA as a percentage of Gross
National Income to roughly 0.35%.  One half of this increase will be dedicated to assisting Africancountries; this is above amounts in the Africa Fund and in addition to existing flows.
44. Complementing efforts to liberalize trade with developing countries, Canada will further untie
its bilateral aid, except food aid, in accordance with an OECD-DAC agreement endorsed at the 2001
G8 Summit.
Focus on the Canada-US Relationship
45. Even in an interdependent world, certain relatio nships have particular importance.  None is
more vital to Canada than the one we share with the United States.  As a dominant factor in Canada’s
trade and investment performance, our economic relationship with the United States will continue to
receive priority attention.
46. Canada and the United States share the largest bilateral flow of goods, services, people and
capital between any two countries in the world.  Moving roughly $1.9 billion worth of goods andCanada WT/TPR/G/112
Page 11
services across the border each day, Canada and the United States are each other's largest customers
and biggest suppliers.  In 2001, Canada exported $351 billion in goods to the United States and
imported $218 billion in return. Services exports totalled $31.7 billion in 2000, with corresponding
imports at $37.6 billion.
47. Increasing economic integration with the United States has contributed to the rising share of
Canada’s exports destined for the US.  Since the implementation of the Canada-US Free TradeAgreement (CUSFTA) in 1989, two-way trade has more than doubled.  Between 1992 and 2000,
two-way trade in goods increased by approximately 12% per year.
48. Because of the influence of Canada and United States, together with other members of the
Quad, in the world economy and the world trading system, it is essential to maintain a continuing
dialogue on a range of shared interests going well beyond the bilateral agenda.
49. Looking to the future, management of the Canada-US trade relationship needs to take into
account our increasing economic integration.  This means the Government must manage different
approaches to social, cultural, environmental and economic policies.  We must also see whether it is
possible to reduce these differences through harmonization, regulatory cooperation and mutual
accommodation.
Canada-US Smart Border Declaration
50. Public security and economic security are mutually reinforcing.  On December 12, 2001,
Canada and the United States signed the Smart Border Declaration and immediately began
implementing a 30-point action plan to build a border for the 21st century.  The initiative, built upon
previous cooperative efforts between our two countries, including the Canada-US Partnership, is
intended to enhance the security of our shared border while facilitating the legitimate flow of people
and commerce.  The action plan has four pillars: the free flow of people, the free flow of goods,secure infrastructure, and coordination and information-sharing in the pursuit of these objectives.
51. Efforts associated with the Smart Border Declaration have not resulted in resource
reallocation from other entry points, such as ports and airports, to the Canada-US frontier.
52. Two important components of the Smart Border initiative are the NEXUS and the Free and
Secure Trade (FAST) programs.  The NEXUS program provides dedicated "fast lanes" for pre-approved, low-risk travellers, while the FAST prog ram partners our two governments with the private
sector to ensure a secure supply chain for low-ri sk goods.  FAST will improve security while making
many cross-border commercial shipments simpler, cheaper, and subject to fewer delays.
53. A one-year status report was released on December 6, 2002.  NEXUS is now running at four
border crossings and will be expanded to a further six major crossings by Spring 2003.  Joint NEXUSapplication centres have opened in Windsor-Detroit and in Fort Erie-Buffalo.   NEXUS will be
operational at all high-volume crossings by th e end of 2003.  A NEXUS-Air program is also in
development and will be piloted in airports in early 2003.  FAST opened in December 2002 at
crossings at: Douglas/Blaine, Windsor/Detroit, Sarnia/Port Huron, Fort Erie/Buffalo,
Queenston/Lewiston, and Lacolle/Champlain.
54. During the coming months, border agencies will continue to work toward the full
implementation of the action plan.  Initial efforts are already underway on an additional five action
items: biosecurity, science and technology research and development, maritime security, synchronized
smart card technology for truck drivers and interoperable communications.WT/TPR/G/112 Trade Policy Review
Page 12
Regional and Bilateral Initiatives
55. As a trade-oriented and globally-integrated economy, Canada benefits from a healthy, open,
transparent, rules-based international trading sy stem.  Bilateral and regional initiatives can
complement and reinforce multilateral liberalization by generating political momentum, by
developing and refining elements of the trade regime, and by preparing domestic industries for the
further opening of markets.
56. Canada’s multilateral and bilateral initiatives are designed to be mutually supportive.  Rather
than detract from multilateral efforts, bilateral ag reements allow us to explore new commitments and
disciplines in areas such as investment, services, competition, and trade and development, making
them broader than existing multilateral rules.  In this sense, Canada believes that regional and bilateral
agreements can help place new issues on the global agenda and provide innovative solutions to thechallenges posed by trade integration.
57. Regional and bilateral free trade agreements also serve to secure markets for Canadian
business and to permit them access to lower-cost goods and services.  Furthermore, by aiming at free
trade, they can go deeper than WTO commitments, thereby strengthening markets and providing
competitive stimulus.  Closer economic relations, as well as the closer governmental relations forgedby the negotiating process, also contribute to progress on the broader social, political and
environmental fronts.
North American Free Trade Agreement (NAFTA)
58. The tenth and final scheduled cut in tariffs between Canada and Mexico was implemented on
January 1, 2003, eliminating almost all remaining ta riffs on trade between our two nations.  Trade
between Canada and the United States has been virtually tariff-free since 1998.  January 1, 2004 will
mark the tenth anniversary of the entry into force of the NAFTA.
59. In July 2001, the NAFTA Commission signed a note of interpretation regarding provisions
related to access to documents and to the minimum standard of treatment on certain investment issues.
This note contributes to the efficient and transparent operation of the NAFTA investor-state dispute
settlement process (Chapter 11) and to the proper and responsible participation of the disputing parties
in such proceedings.
Free Trade Area of the Americas (FTAA)
60. In addition to liberalizing trade in goods and services, the FTAA holds the potential to
establish stronger investment protection measures  throughout the hemisphere.  The Government has
maintained permanent and active engagement in the FTAA process since its launch.  The
development of closer relations with hemispheric trade partners continues to be a priority for Canada.
61. The Government is pursuing a number of specific objectives in FTAA negotiations, including
increased market access for goods and services; the elimination of agricultural export subsidies in the
hemisphere; measures to protect investment; rules of origin that are clear, transparent, predictable and
leave little room for administrative discretion; a transparent and non-discriminatory framework for
government procurement; and a state-to-state dispute resolution system within the FTAA.
62. Recent developments include the November 1, 2002 gathering  of Ministers responsible for
trade in the hemisphere in Quito, Ecuador to review progress and provide guidance to the negotiators.Canada WT/TPR/G/112
Page 13
Ministers recommitted themselves to the timetable  for the negotiations, including completion by
January 2005.
63. In Quito, Ministers approved the release of the second draft version of the consolidated text –
an exercise in transparency put forward initially by Canada at the Buenos Aires Ministerial in April
2001.  Ministers also approved a conceptual framework known as the Hemispheric Cooperation
Program (HCP) for technical cooperation to assist smaller economies in the negotiations.  Althoughthe framework does not identify specific sources of funding, it will  utilize a mechanism (the specific
characteristics of which remain under discussion) to contribute to the identification of predictable and
multifaceted sources of financial and non-financial support (e.g., regional and multilateral financial
and development institutions).
64. Ministers also formally recognized for the first time the external context of the FTAA,
specifically with respect to labour and the environm ent.  This had been a priority of the Canadian
Government.
Bilateral Initiatives
65. The Canada-Chile Free Trade Agreement (CCFTA) marked its fifth anniversary in 2002 with
encouraging results in terms of trade and investment.  Seven scheduled tariff cuts have taken place, aswell as two agreed early tariff eliminations.  Bilateral trade is virtually tariff-free as of January 1,
2003.  On October 31, 2002, the Free Trade Commission signed a note of interpretation concerning
certain provisions of the Investment Chapter of the CCFTA that is similar to the note agreed earlier in
the NAFTA context.
66. The Canada-Costa Rica Free Trade Agreement (CCRFTA) was signed in April 2001 and
entered into force on November 1, 2002, together with side agreements on labour and environmental
cooperation. The CCRFTA offers a market access package providing comprehensive tariff reductionsfor both industrial and agricultural goods, including the immediate elimination of tariffs on most
industrial products upon implementation.  The CCRFTA takes into consideration differences in the
levels of development and size of the free trade partners. In market access, for example, the
Agreement is asymmetrical: Costa Rica will eliminate its tariffs immediately on some 67% of its tariff
lines and over a period of up to 14 years for the remaining goods covered by the Agreement.  For itspart, Canada will provide immediate duty free access for some 86% of its tariff lines; the remaining
goods covered by the Agreement are subject to tariff elimination over a period of up to 8 years.
67. On October 9, 1998, the Canadian Government announced the launch of negotiations with the
EFTA states (Iceland, Norway, Switzerland and Liechtenstein).  Negotiations have been largely
completed and agreement has been reached in most areas.  The deal focuses on the elimination ofindustrial tariffs, some liberalization for agriculture, and new cooperation in the area of trade
facilitation and competition.  However, outstanding issues remain, principally related to the treatment
of ships and industrial marine products.
68. Canada and Singapore launched negotiations toward a free trade agreement in October 2001.
Since then, four full rounds of negotiations have been held, with more detailed discussions takingplace intersessionally.  Canada is interested in bringing the negotiations to a successful conclusion,
but a deadline for completion has not yet been determined.
69. In November 2001, Canada entered into free trade negotiations with four Central American
countries: El Salvador, Guatemala, Honduras and Nicaragua.  Since that time, five rounds ofWT/TPR/G/112 Trade Policy Review
Page 14
negotiations have been held and talks are progressing well.   Both sides hope to conclude an
agreement in 2003.
70. Canada and CARICOM agreed to initiate discussions toward bilateral free trade in January
2001.  Public consultations were held in early 2002 to obtain advice and views on the priorities,
objectives and concerns of Canadians.  Officials have met twice for exploratory discussions, most
recently in September 2002, as a prelude to possible negotiations.
71. Canada has also agreed to a request by the Dominican Republic to launch exploratory
discussions on a possible bilateral free trade agreement.  Initial meetings were held in April and
August, 2002.  Canada is consulting domestically in order to determine the possible scope of such an
initiative.
72. In August 2002, Canada and the Andean Community (Bolivia, Colombia, Ecuador, Peru and
Venezuela) announced that they would begin preliminary talks towards a possible free trade
agreement. Later that month the parties met for preliminary discussions.  The Government of Canada
is consulting domestically in order to determine the possible scope of the agreement.
73. In 2002, Canada and Israel were actively engaged in negotiations to further liberalize
agricultural trade under the Canada-Israel Free Trade Agreement (CIFTA), which has been in placesince January 1997.
Asia-Pacific Economic Cooperation (APEC)
74. Since Canada’s last review, we have used our participation in APEC to promote trade
liberalization and the successful conclusion of the current round of trade negotiations.  In response to
calls in the Doha Declaration for increased trade-related technical assistance, Canada has been one of
APEC’s strongest proponents of TRTA, co-chairing its WTO Capacity Building Group and
organizing several of our own capacity building projects.
75. Canada has also been active in APEC on the subject of trade facilitation.  At Canada’s behest,
APEC sponsored a World Bank study on the potential benefits of trade facilitation in APEC in order
to guide that forum’s future trade facilitation and capacity building efforts.
76. Since 2000, Leaders have agreed to reduce transaction costs in the region by 5% over five
years, endorsed an Action Plan to achieve this reduction, and agreed on a menu of concrete actionsand measures that member economies can use to reach the 5% target.  The APEC Economic
Committee estimates that reaching the 5% target would increase the GDP of the APEC region by
US$154 billion.  Canada plans to organize further capacity building projects in this area in order to
help APEC member economies reach this goal.
Organisation for Economic Cooperation and Development (OECD)77. Canada has worked to ensure effective OECD support for the Doha Development Agenda.  In
many important ways, the OECD trade policy work program parallels efforts in the DDA.
78. Canadian support was critical to the creati on of the joint OECD/WTO Doha Development
Agenda Trade Capacity Building Database  launched in December 2002.  Canada has also been a
strong supporter of the OECD Tool Kit for Trade Policy Makers: Responding to the Doha
Development Agenda , a CD ROM containing over 40 OECD analytical publications and reports onCanada WT/TPR/G/112
Page 15
trade policy issues of relevance to the DDA, which was released by the OECD Secretariat in
September 2002.
79. Canada has also commissioned, through the OECD, an analysis of the impact on global trade
of the September 11, 2001, terrorist attacks.  The Government continues to support the work of the
OECD in examining the benefits of trade and investment liberalization in a globalizing world.
Resolution of Disputes
80. Since the last review, Canada has been involved in several disputes under both the NAFTA
and the WTO.  As both a complainant and a third party, Canada utilized the WTO dispute settlement
mechanism to address trade barriers that are inconsistent with these agreements. We have also
participated in dispute settlement to respond to complaints from Members alleging the inconsistency
of Canadian measures under the agreements.
81. Canada continues to seek improvements to the DSU that will serve Members' shared interests
in enhancing compliance with trade rules and ensuring the integrity and credibility of the rules-based
system with both Members and the wider public.  To this end, Canada places great importance on
achieving a successful outcome to the DSU negotiations and has been an active participant in the
discussions to date.
Consultations and Transparency
82. Canada continues to create opportunities for all interested Canadians to participate in the
development of our national trade priorities and positions.  Broad citizen engagement strengthens the
durability and effectiveness of Canada’s contribution to the multilateral trading system and challenges
the Government to test the coherence of its domestic policy direction.
83. Open and transparent exchange of information is an essential precondition to substantive civic
participation in the policy development process. Information and updates on the international tradeagenda are available to all Canadians on a dedicated Trade Negotiations and Agreements web site, via
periodic video and teleconferencing, and through formal public notices and the media. These
initiatives provide for a two-way exchange in wh ich the public may convey their comments and views
to the Government.
84. Canadian Parliamentarians participate in consultations and roundtable discussions, and as
advisors on trade delegations.  Canada will examine ways to strengthen the role of Parliamentarians
during the negotiation and implementation of trade agreements.  Wherever possible, Canada will
encourage and facilitate the presence and participation of our citizens and Parliamentarians in special
events and activities sponsored by the WTO.
85. In parallel with this process, the Government of Canada works closely with provincial and
territorial governments on a full range of trade policy issues, not simply in those areas where
jurisdiction is shared or provincial.  Furthermore, municipalities have a growing interest in trade
agreements, both in terms of promoting increased trade and investment opportunities and in their
impact on municipal governments. In November 2001, with the endorsement of the provinces and
territories, the Department of Foreign Affairs and International Trade established a joint workinggroup with representatives of the Federation of Canadian Municipalities to address the concerns of
municipal and community-based interests.WT/TPR/G/112 Trade Policy Review
Page 16
86. In addition to broad public input from Canadians at large, the Government relies on expert
advice and support on the trade agenda. There are ten active Sectoral Advisory Groups on
International Trade (SAGITs) which provide the Minister for International Trade strategic,
confidential advice on sector-specific issues.  In  addition, the Academic Advisory Council provides
the Deputy Minister for International Trade with an additional venue to review and identify
knowledge gaps and research opportunities, and to inform trade policy decision-making.
87. The Government plans to further expand the effectiveness and inclusiveness of its permanent
institutional mechanisms for consultation and engagement with Canadians. Currently under
consideration is the establishment of an advisory body having the multidisciplinary capacity to
address the horizontal social dimensions of the trade agenda.
88. Canada will continue to work toward improved procedures for circulation and de-restriction
of documents in the WTO and in other fora.  Both information exchange and outreach increase the
global public’s understanding of and support for the WTO’s work.
Trade Policy and Trade Promotion
89. Many departments of the federal and provincial governments manage programs that
encourage international business expansion.  These federal departments and agencies, together underthe banner of Team Canada Inc., cooperate with provinces and territories to provide business
intelligence and international market access information and advice to Canadian businesses.  Training
programs focussed on trade practices and the rules that govern international business activities assist
in providing services to new and smaller exporters with a view to enhancing their capacity and
preparedness in international market development.  A second network, led by Investment Partnerships
Canada, supports companies, trade associations and municipal and regional development agencies
seeking to attract new investors.
90. The Government manages approximately 140 trade offices in Canadian Embassies and
Consulates around the world.  A principal responsibility of trade staff is familiarity with the
regulations, policy issues and barriers that Canadian businesses may face in exporting goods and
services or making a direct investment in a foreign market. Trade offices provide a direct point of
contact for Canadian firms in foreign markets, teach companies how to build partnerships in an
international environment, and help resolve trade policy issues (via direct demarches) that negatively
impact on commercial relationships.
91. This international business development network is a main source of information for
Canadian trade policy initiatives, together with domestic consultations. The agencies within Canada
are well placed to inform domestic enterprises of their rights under international trade and investmentprotection rules and to identify aspects of business policy that limit the expansion possibilities of
Canadian firms, while they in turn offer the Government practical advice on problems and priorities.
The international network examines how other gove rnments implement the disciplines that they have
accepted and advises the Government of Canada on new issues.
92. Since Canada’s last review, the Team Canada mission program has continued to bring
together business and government representatives in visits to various countries to help companies take
full advantage of international business opportunities.Canada WT/TPR/G/112
Page 17
Other Initiatives
Environmental Assessments
93. In early 1999, the Government of Canada undertook a commitment to assess the domestic
environmental implications of a potential new round of trade negotiations at the World Trade
Organization.  The approach was then broadened in order to develop a framework that could be
applied to bilateral, regional or multilateral trade negotiations.
94. On November 22, 2002, the Government of Canada released its Initial Environmental
Assessment of the World Trade Organization Negotiations , the first of three reports to be prepared for
the Strategic Environmental Assessment (EA) that will help negotiators to integrate environmental
considerations into the negotiating process.  Th e Government of Canada is working closely with
provinces and territories throughout the assessment process.  In assembling the report, theGovernment  consulted with a broad cross-s ection of Canadians, including non-governmental
organizations, business groups, and the general public.
95. The Initial EA addresses the likely and significant impacts on the Canadian environment of
negotiations in the seven areas outlined in the Doha declaration.  It highlights sectors that could be
affected by the negotiations and draws linkages between activity in those sectors and the domesticenvironment.  It also discusses available measures for enhancement or mitigation of environmental
impacts of the negotiations.
Agricultural Policy Framework
96. Agricultural development is an important part of the Government’s commitment to
international development, and the role of trade is a key consideration in this respect.   The
Agricultural Policy Framework is the Government’s plan to increase the Canadian agriculture sector’s
focus on food safety and quality, environmental sustainability, innovation, and business riskmanagement through non-trade-distorting programs in order to increase profitability.  The
Government of Canada believes this approach will allow producers to respond better to the global
marketplace and compete on the basis of their competitive advantage.
97. An important element in ensuring the success of th is plan is the integration of all international
agricultural activities, including those related to  international development.  Fundamentally, this
means enhancing our partnerships with developing countries to pursue common interests in areas such
as trade and research, and to be better positioned to address developing country needs such as food
security and sustainable agriculture development.
98. Canada has also been sharing our agricultural expertise in unconventional and innovative
ways.  For example, the Canadian Grains Commission provides training in grain quality inspectionand in establishing grain quality systems in a number of countries.
99. Another important aspect of Canada’s trade and development activities in this area is our
commitment to agricultural trade reform.  Many developing countries are seeking a level playing field
through real and meaningful agricultural trade reform through the WTO negotiations on agriculture
within the Doha Development Agenda.  We are work ing with developing countries, including those in
the Cairns Group, and on a bilateral basis with other Members, to keep up the momentum towards our
shared goals in the agricultural negotiations.WT/TPR/G/112 Trade Policy Review
Page 18
Smart Regulation
100. The September 2002 Speech from the Throne  stressed the importance of Smart Regulation, a
strategy to accelerate reforms in key areas and to fa cilitate the development of regulations that would
take competitiveness and inno vation into account.  The Speech from the Throne  also acknowledged
that regulations must contribute to the investme nt climate and economic growth while achieving the
public good.
101. An External Advisory Committee on Smart Regulation will be created in order to pursue this
strategy.  The aims are to make the regulatory system more results oriented, pro-active and creative in
responding to the social and economic interests of Canadians while maintaining a long-term, strategic
view and the flexibility necessary to meet the challenges of the 21 st Century.
Canada’s Innovation Strategy102. Launched in February 2002, Canada’s Innovation Strategy is designed to improve Canada’s
innovation performance in the world.  The Government believes that achieving this goal requires
effort in four areas: knowledge performance, skil ls, the innovation environment, and strengthening
communities.
103. In this spirit, we are working to encourage Canadian firms to expand efforts at creating
knowledge and to reap the benefits of bringing ideas to market.  Canada is also encouraging increased
research and development investment across sect ors.  The Government supports innovation at the
local level and is working to modernize business a nd regulatory policies to support and recognize the
importance of investment in innovation.
New International Instrument for Cultural Diversity (NIICD)
104. In February 1999, the Cultural Industries Sectoral Advisory Group on International Trade
(SAGIT), reporting to the Minister for Intern ational Trade, released a report entitled Canadian
Culture in a Globalized World: New Strategies for Culture and Trade .  This report was the first to
recommend that Canada pursue the development of a New International Instrument on Cultural
Diversity.  The purpose of the NIICD would be to set out clear ground rules to enable Canada and
other countries to maintain policies that promote their culture while respecting the rules of the
international trading system and ensuring markets for cultural exports.  The Instrument would alsorecognize the special role of cultural goods and services and the right of governments to preserve and
promote cultural diversity.
105. The Government adopted this recommendation and further decided that Canada would not
make any commitments in bilateral or multilateral trade negotiations that would restrict our ability to
achieve cultural policy objectives pending the development of a NIICD.
106. Canada is pursuing a multifaceted approach to build support for a NIICD in a variety of
international fora, including UNESCO, the WTO,  the G8, La Francophonie, the OAS and the
International Network on Cultural Policy (INCP).   In October 2002, Culture Ministers participating
in the INCP Annual Ministerial agreed that the dr aft Instrument presented for their consideration
provided an appropriate basis to deepen development of an enforceable agreement and that UNESCOwas the appropriate international institution to hous e and implement the Instrument.  Heads of State of
La Francophonie met in Beirut on October 18-20, 2002, and agreed to establish a working group to
contribute to the adoption of an international convention on cultural diversity by UNESCO.  WithinCanada WT/TPR/G/112
Page 19
Canada, the SAGIT has also produced a draft Instrument  to contribute to a better understanding of this
subject.
Mutual Acceptance of Oenological Practices
107. The Multilateral Acceptance Agreement on Oenological Practices is an agreement signed by
Canada, Argentina, Australia, Chile, New Zealand a nd the United States designed to avoid technical
barriers to trade in wine by providing a mechanism to ensure transparency in the regulatory process in
all signatory countries.
III. FUTURE POLICY DIRECTIONS
Commitment to Further Liberalization
108. Our future is inextricably linked to the future of others beyond our borders.  An open and
prosperous global community will create new opportunities for Canadians and contribute to an openand prosperous Canada.  Interdependence requires that we work with other nations through strong
multilateral institutions capable of addressing the challenges of a continually evolving global
community.  This evolution demands institutions that are also developing in order to keep pace with
changes in business practices, technological developments, economic trends, and social systems.
109. Canadian trade policy will remain open, transparent and inclusive, and will be guided by the
same multilateral rules and principles that Canada helped to establish.  We will continue to be active
in the work of the WTO, including current efforts to improve its structure and operation.  Rules-based
systems provide the certainty and predictability that is fundamental for investment and economic
growth in Canada and in other Members alike.
110. Canada will continue to pursue reductions in barriers to trade and investment at all levels.
Our regional and bilateral trade initiatives are a m eans to secure markets for Canadian interests, to
improve access to lower cost goods and services, and to strengthen rule-making.  By ensuring sucharrangements are consistent with WTO rules, the Government of Canada endeavours to reinforce the
multilateral system.
Promoting Policy Coherence
111. Surveys demonstrate that Canadians continue to have high confidence in the benefits of trade
and trade agreements and strongly favour further liberalization.  Citizens, however, seek reassurancethat the Government is pursuing policies that both consider social and environmental concerns and
contribute to economic growth; that it has foreseen and mitigated the risks of undesirable impacts on
Canada’s society and environment; and that social and economic progress alike will continue
internationally and domestically.
112. The lens of broader interests allows Canada to factor such objectives as reinforcing
democracy through international engagement and improving environmental protection through
cooperation, into an overall balance of interests that is not definable in purely economic terms.
Canada sees the trade agenda not as an end in itself, but rather as a tool for promoting broader public
interests.  Indeed, our trade policy includes both practical and political support for those initiatives
that contribute to better integration of economic and social policies and that promote long termdevelopment, sustainable growth and social cohesion.WT/TPR/G/112 Trade Policy Review
Page 20
113. Canada will work with other WTO Members and through other intergovernmental
organizations to promote international coherence of policies and institutions.
Trade and Development
114. Trade liberalization promotes economic growth, but gains are not automatic.  In some cases,
WTO commitments provide a powerful stimulus for domestic economic reform, or for creating new
institutions and infrastructure.  At the same time, trade policy initiatives may have unanticipatedramifications across a range of economic and social  issues.  Consequently, development must receive
considerable attention in the negotiation and assessment of trade agreements.  It is a key challenge for
the Government to pursue a coherent trade policy that advances our priorities in a way that responds
to the needs and wants of Canadians while also recognizing the developmental implications of our
actions.
115. Our approach to trade and development rests on the economic fundamental that open trade
and liberalization contribute positively to economic growth and development.  Canada supports
efforts that take into account the level of development of other countries and their ability to
implement new agreements, and that respond to concerns articulated by developing countries.
Trade and the Environment116. Canada remains committed to sustainable development and to integrating trade and
environmental considerations into the policy-making process.  The Government believes that
liberalized trade and environmental protection are important components of sustainable development
and that these can and should be mutually supportive.  Domestic and international coordination and
cooperation are necessary in order to effectively address these issues.
117. Canada supports increased cooperation between the WTO and other international
intergovernmental organizations, the granting of observer status to multilateral environmentalagreement secretariats in relevant committees, and the development of a formalized structure for the
exchange of information.  Canada has also provided support to the United Nations Environment
Programme (UNEP) for capacity building on trade and environment and to assist developing
countries’ environmental officials to attend an information exchange be tween UNEP, multilateral
environmental agreement (MEA) secretariats and the WTO.
118. Canada has followed a two-pronged approach in negotiations concerning the environment,
addressing certain considerations within free trade agreements themselves and others in parallel
environmental cooperation agreements.  Canada has signed three environmental side agreements to
date – the North American Agreement on Environmental Cooperation (NAAEC), the Canada-Chile
Environmental Cooperation Agreement and the Canada-Costa Rica Environmental CooperationAgreement – and is currently engaged in negotiat ions with the Central American Four and with
Singapore.
119. Environmental cooperation agreements focus on strengthening the capacity and integrity of
national environmental management systems and contain provisions that reinforce the environmental
objectives of trade agreements. These agreements promote sustainable development, mutuallysupportive economic and environmental policies, and protection of a country’s legitimate right to
regulate in the public interest.  Furthermore, they discourage parties from waiving or derogating from
laws in order to encourage trade or investment.  In certain instances, they also provide direction
regarding possible conflicts and inconsistencies be tween specific trade obligations in MEAs and
provisions of trade agreements.Canada WT/TPR/G/112
Page 21
Trade, Employment and Labour
120. The integration of employment and labour issues into Canada’s overall trade policy objectives
has drawn on our experience with the negotiation of the 1994 North American Agreement on Labour
Cooperation (NAALC). The NAALC was Canada’s first attempt to find a mechanism to deal directly
with labour issues arising from the impact of a trade liberalization initiative and was based on a
commitment to enforce domestic labour laws in specific areas.  Since 1998, the commitment toenforce domestic labour law has been based on the principles and rights set on in the International
Labour Organization (ILO) Declaration of Funda mental Principles and Rights at Work.
121. Canada has also negotiated labour cooperation agreements in tandem with the 1997 Canada-
Chile FTA and the 2002 Canada-Costa Rica FTA. Labour cooperation agreements are also under
negotiation with four Central American countries and with Singapore in parallel with tradeliberalization negotiations with those countries.
122. Canada’s perspective on policy coherence in the area of trade, employment and labour is also
demonstrated through support for parallel processes such as the Summit of the Americas, where
Canada champions work on the modernization of la bour administrations and analysis of the social
impacts of hemispheric trade liberalization through the Inter-American Conference of Ministers ofLabour.  Canada also continues to support the work of the ILO, including the promotion of core
labour standards, and the ILO World Commissi on on the Social Dimension of Globalization.
Conclusion
123. Rules-based, liberalized trade brings about economic and social benefits, including better
jobs, higher incomes, increased revenues for social programs, a stronger foundation for balanced and
sustainable development, increased productivity and competitiveness of Canadian firms, greater
selection of products at lower prices for consumers, and greater access to technology, investment,inputs, and new customers.
124. Canada will continue to promote the progressive liberalization of trade and the development
of clear and transparent rules that reflect Canadian interests and enrich us as a nation, without
neglecting the interests of our partners, particularly those in the developing world.
125. The Government of Canada will continue to strive to deepen our trade and investment
relationships, and especially that with the United States.  Canada will work with the United States to
reconcile the need for free movement of goods, services and people across the border in accordance
with the priority of our shared security.
126. Canada continues to support efforts at the WTO to reduce barriers to trade and strengthen the
international trade rules that have contributed to making Canada the competitive, innovative, andprosperous country that it is today.
__________