WT/TPR/S/22
Page 20Trade Policy Review
III. POLICY DEVELOPMENTS AFFECTING TRADE AND INVESTMENT
(1) Main Features
1. Since itslastTrade Policy Review in1994, Canada hascontinued aprocess ofgradual economic
andtrade liberalization. Thisprocess hasbenefited from acombination ofexternal requirements, in
particular under theNAFTA andWTO, domestic fiscal constraints, andagenuine re-definition ofpublic
sector responsibilities. Recent initiatives haveaffected awiderange ofpolicy areas atfederal level
-tariffs, subsidies, investment andother business regulations -andarealsoinfluencing provincial
practices. Atthesame time, recourse totrade defence mechanisms, inparticular anti-dumping, has
declined inthewake ofcurrency depreciation andbooming exports. Competition policy, including
aspects ofCanada 'sintellectual property régime, hasunderpinned thedrive towards economic and
trade liberalization.
2. Particular attention ispaidtopolicy areas associated withnotions ofcultural andeconomic
independence. Investment controls haveremained inmany services sectors, inparticular in"cultural
industries",andsignificantcontinuedassistanceaimstopromoteheadquarterfunctions,includingresearch
anddevelopment, inCanada. Advanced manufacturing activities areexpected, atleastinpart,toreduce
Canada 'srelatively strong reliance onresource-based exports, which haveproved vulnerable toboth
cyclical andpolicy developments abroad. With aview toforestalling newanti-subsidy complaints,
theauthorities recently undertook tomonitor andcontain, intheformofanexport tariffquota, exports
ofsoftwood lumber totheUnited States.
3. Available information onprovincial policies, although sketchy, alsopoints tosome progress
inreducing subsidies. Inaddition, therecent Agreement onInternal Trade isintended toinitiate changes
inareas covered bylocal-content provisions, procurement preferences, residence requirements and
other investment restrictions. However, supply management policies inthedairy andpoultry sectors
haveremained, andhavedefied significant reform todate.
(2) Tariffs andTrade-related Taxes andCharges
(i) Border taxation
4. Canada started acomprehensive process oftariff review andreform in1994, which involved
extensive consultations. Thestated objectives aretoimprove industrial competitiveness, easethe
administrative burden forbothbusiness andGovernment, enhance transparency, andgenerally simplify
thetariffsystem. Thereform process takesintoaccount industry concerns, following closer economic
integration inNorth America, about theimpact oncompetition ofhigher Canadian thanU.S.m.f.n.
duties onmanufacturing inputs, andtherestrictions imposed ondutydrawbacks forexports under the
NAFTA. Inaddition, thereforms areintended toaccommodate widespread criticism, including in
thecontext ofprevious Trade Policy Reviews, ofthecomplexity ofCanada 'smulti-layered tariffrégime
anditsbroad range ofspecial relief instruments (tariff concessions, etc.).1
1Forexample, some items currently carry ninedifferent tariffs inaddition tothem.f.n. tariff or,forproducts
originatingincertainnon-WTOmemb ers,theGeneralTariff.Ratesmaydifferbetweenimportsfromadeveloping
countryqualifyingundertheGeneralPreferentialTarifforaleast-developedcountryeligibleforadditionalbenefits;
theUnited States orMexico; theUnited States withsome processing inMexico andviceversa;NewZealand
orAustralia; aBritish Commonwealth oraCommonwealth Caribbean country. TheBritish Preferential Tariff
provides lower preferential rates forselected items originating inCommonwealth countries other thanthe
United Kingdom, Ireland andSouth Africa; thescheme isaremnant ofasystem ofBritish Preferences introducedCanada WT/TPR/S/22
Page 21
(a) M.f.n. tariff reform
5. InJune1995 Canada reduced m.f.n. tariffs onabout 1,500 items covering abroad range of
manufacturing inputs, andeliminated orsimplified several tariffconcession, remission andother tariff
relief instruments. The1995reform, together withUruguay Round-related tariffreductions, lowered
theunweighted m.f.n. tariffaverage onmanufactures from9percentin1994to6.6percentatpresent
(Chart III.1).2
6. Asurge inthetariffaverages foragricultural andfoodproducts between 1994and1996mirrors
thetariffication ofprevious quantitative restrictions under theWTO Agreement onAgriculture. It
resulted insignificant tariff peaks onabove-quota supplies, most notably inareas subject tosupply
inCanada in1867. Under CARIBCAN, duty-free treatment hasbeengranted since 1986 forvirtually allimports
from Commonwealth Caribbean Countries, withspecifically listed exceptions inareas suchastextiles, clothing,
footwear andcertain leather goods, lubricating oilsandmethanol.
2Thedatabase usedforalltariff analysis inthissection consists ofadvalorem tariffs, advalorem equivalents
ofspecific duties where available, andtheadvalorem component ofalternate, compound andother mixed duties.
Amore detailed tariff profile foragriculture andmanufacturing industry isshown inChapter IV(2)(ii) and(4)(i).WT/TPR/S/22
Page 22Trade Policy Review
management (milk anddairy products, chicken, turkey andeggs; Table III.1).3Intotal, over100tariff
rates forabove-quota imports currently exceed 50percent. TheUnited States haschallenged the
application ofthese ratestobilateral supplies under NAFTA provisions; therelevant Panel decision
of16July1996 reportedly upheld Canada 'suseoftariffs intheareas concerned.4
Table III.1
Selected tariffs exceeding 50percent, 1996
(Percent)
HScode Product Duty ratea
0105.11.22 Broiler chicks 266.4
0207.13.92 Chicken 278.3
0209.00.22 Chicken 278.3
0210.90.12 Chicken 278.3
0401.30.20 Milk, cream andproducts 327.1
0402.21.22 Milk, cream andproducts 330.4
0403.10.20 Milk, cream andproducts 265.5
0404.90.20 Whey 301.8
0405.90.20 Butter 350.5
0406.90.12 Cheese 274.5
0407.00.12 Eggs andproducts 266.4
0408.91.20 Eggs andproducts 201.1
1001.90.20 Wheat 85.5
1003.00.12 Barley 105.8
1101.00.20 Cereals 88.6
1103.11.20 Cereals 89.6
1107.10.12 Malt 105.8
1108.1912 Starch 105.8
1302.11.00 Opium 74.0
1517.90.22 Butter substitutes 244.0
1601.00.23 Chicken sausage 266.9
1602.39.14 Prepared turkey, meals 283.0
1806.20.32 Chocolate icecream mix 296.5
1901.90.32 Icecream mixes 299.3
2105.00.92 Icecream 309.7
2106.90.32 Other foodpreparations 237.2
2202.90.42 Beverages containing milk 286.2
2302.40.12 Brans 105.8
2309.90.32 Feeds 230.1
a Rateforabove-quota supplies. Theselection ofitems hasbeenmade fromamong HS-categories atfour-digit levelwhich include
tariffs ofover50percent; thetable liststheitemcarrying thehighest ratewithin theindividual category.
Source: Government ofCanada andWTO Secretariat estimates.
3According toCanadian observers, thesupply-management system "regulates farm income forover
35,000 Canadian farmers andgrocery prices formillions ofconsumers bykeeping imports outofthecountry"
(Infoflash, 30May 1996).
4Reuter, 17July1996.Canada WT/TPR/S/22
Page 23
7. Recent tariffreforms, while bringing down overall protection, imply anelement ofdistortion.
Thefocus oninputs tends toincrease tariffescalation, thusproviding additional protection forindustries
further down theprocessing chain.5Calculations based on1996tariffdatashow significant escalation
inareas suchastextiles, rubber products andnon-ferrous metal products. Inthese areas, tariffs of
lessthan2percent(textiles) orevenzeroonunprocessed inputs compare withaverage tariffs ofover
18percent(textiles), 11percent(rubber) and7percent(non-ferrous metals) onthefullyprocessed
products.
8. Public consultations arecurrently taking place onproposals forasimplified Customs Tariff,
which isintended tocome intoeffect in1998. Proposed changes include theconsolidation ofthecurrent
seven Schedules totheCanadian Tariff, providing numerous tariff concessions orreductions, into
oneSchedule6;theconversion ofspecific, alternate, compound andother duties(e.g. floorrates) into
advalorem rates; theremoval of"nuisance" rates; andtheharmonization ofduties onsimilar products.
TheBritish Preferential Tariff would beabolished andtheMachinery Remission Programme terminated.
Existing legislation providing authority fortariffreductions onmaterials would bebroadened toinclude
allinputs,includingthoseusedbyservicessectors,whereactionmayimproveindustrialcompetitiveness.7
Theenvisaged reform alsoincludes thepossibility ofaccelerated implementation, byJanuary 1998
rather thanJanuary 1999, ofsome oftheUruguay Round finaltariffs onindustrial products.
9. Thetariffreform process includes acomprehensive review ofsome 500dutyremission orders
andother tariff regulations, withaviewtoeliminating orreplacing them bytariff provisions within
theproposed consolidated schedule. Alldutyremission programmes thatareconditional onproduction,
investment orlocal-content criteria havealready expired orwillbephased outby31December 1997,
inaccordance withCanada 'sWTO andNAFTA obligations. Therelevant schemes benefit mainly
clothing andcarproduction.8Toavoid disadvantages forcarproducers relying onthird-country inputs,
tariffs onallautomotive parts usedforassembly operations were eliminated inJanuary 1996.
10. Inaddition tofiling requests withtheDepartment ofFinance fortariff reductions ontextiles
andclothing inputs (fibres, yarns andfabrics), Canadian producers mayapply totheCanadian
International Trade Tribunal (CITT) fortariff relief onthese products. Theapplications totheCITT
mustcontain information on,among other things, thecommercial availability ofdomestic substitutes,
prices andtheestimated domestic market fortheendproduct. Iftherequest issufficiently documented,
theTribunal launches aninvestigation; interested parties have aright toparticipate. Innormal
5These effects willbemitigated, however, byUruguay Round-related tariff cuts.
6Thecurrent system consists ofSchedule I(normal tariff rates); Schedule II(600statutory codes andthree
codes implementing theWTO Agreement onTrade inCivil Aircraft); Schedule III;Schedule IV(20statutory
drawbackcodes);ScheduleV(nineOrder-in-Councildrawbackcodes,theCustomsDutiesReductionorRemoval
Order withabout 950"temporary" codes, andtheChemicals andPlastics Duties Reduction Order withsome
280codes); Schedule VI(Machinery Programme); andSchedule VII(goods whose import isprohibited). Of
totalimports ofCan$172 billion in1993, overCan$12.5 billion entered under these codes; twothirds came
from theUnited States.
7Canada Gazette, PartI,23March 1996.
8Alistofthe500schemes iscontained inCanada Gazette, PartI,11November 1995.WT/TPR/S/22
Page 24Trade Policy Review
circumstances, theCITT istosubmit arecommendation totheMinister ofFinance within 120days.9
Twenty applications were filedinthethirdquarter of1995.
11. Canada'sexportdutydrawbackschemesaretoremain,inastreamlinedandconsolidatedformat.
However, under NAFTA provisions, theirapplication toexports totheUnited States wasrestricted
on1January 1996; therelevant datevis-à-vis Mexico is1January 2001. From these dates, partial
drawback willbeavailable fordutiable goods traded within thefree-trade area; itamounts tothelesser
oftheduties paidoninputs imported intoCanada andtheremaining duties imposed byNAFTA partners
onCanadian exports ofthefinalproduct.
12. Asapercentage ofimport value, dutyrevenue came down from 4percentin1987-88 to
1.6percentatpresent (Chart III.2). Thedecline reflects m.f.n. tariff reductions andthephasing in
oftheFreeTrade Agreement withtheUnited States and,since January 1994, oftheNorth American
FreeTrade Agreement (NAFTA). Fullimplementation ofUruguay Round-related tariff reductions
hasbeenestimated totranslate intorevenue losses ofCan$1.2 billion; totaldutyreceipts in1995-96
were Can$2.8 billion.10
9Details ofthescheme canbefound inCanadian International Trade Tribunal (1994).
10Thedetails oftheproposed reform arecontained intheCanada Gazette Notice of23March 1996.Canada WT/TPR/S/22
Page 25
13. InOctober 1995, Canada extended m.f.n. tariff treatment toMongolia. Incontrast, imports
fromAlbania,theDemocraticPeople'sRepublicofKorea,LibyaandOmanremainsubjecttotheGeneral
Tariff, currently levied at35percentonmost products.
(b) Tariff adjustments under NAFTA
14. Imports from NAFTA partners accounted for68percentofCanada 'stotalimports in1995.
Under theNAFTA, most remaining tariffs onimports from theUnited States aretobephased out
by1998, while duty-free trade withMexico isscheduled for2003. However, asindicated above,
over-quota imports ofsupply-managed products areexempt from dutyelimination.
15. Table III.2provides anoverview ofcurrent tariff treatment under Canada 'smain import
régimes.11NAFTA andGPTpreferences aresignificant inparticular fornon-food items. Duties on
imported manufactures from theUnited States currently average 1.1percent, onesixth ofthe
corresponding m.f.n. rate. Average dutyratesonimports fromdeveloping countries under GPTare
4.4percent. Significant tariffs onU.S.supplies havepersisted onfoodproducts and,toalesser extent,
textiles, clothing andfootwear. Over58percentofalltarifflinescurrently carry zeroratesforimports
from theUnited States asagainst 32percentform.f.n. imports.
Table III.2
Tariff treatment byorigin, 1996a
(Unweighted tariff averages, percent)
Product M.f.n. United States Mexico GPT
Agricultural products andfood 7.8 5.1 4.9 6.7
Food, beverages andtobacco 33.8 28.2 28.3 31.6
Mining 0.8 0.0 0.1 0.3
Manufacturing (excl. food) 6.6 1.1 3.0 4.4
a Aggregated according toISIC; seealsoChart III.1. Tariff items carrying non-ad valorem rates, forwhich noadvalorem
equivalents were available, havebeenomitted.
Source: WTO Secretariat calculations.
(c) TheGeneral Preferential Tariff (GPT)
16. Canada'sGPT-schemeprovidespreferentialtarifftreatmentforimportsfromdevelopingcountries
andcountries intransition; therelevant ratesaregenerally setattwothirds ofthem.f.n. rateorlower.
In1995, totalimports from GPT-eligible countries reached overCan$28 billion. Ofthese, supplies
worth some Can$3.8 billion actually benefited frompreferential treatment. Aslight decline from1994
(Can$4.3 billion) maybeattributed toanerosion ofpreferences inthewake oftheUruguay Round
andNAFTA implementation processes.12Main suppliers under GPTin1995werethePeople 'sRepublic
ofChina (Can$1.5 billion) andtheRepublic ofKorea (Can$785 million), which relied onthescheme
forbetween onequarter andone-third oftheirexports. Significantly higher shares wererecorded for
Tajikistan (75percent), Zimbabwe (58percent), Lebanon (48percent)andSwaziland (47percent).
11Given thedifferences inclassification, thedatapresented inChart III.1andTable III.1, concorded with
ISIC, arenotfully comparable withCharts IV.2 andIV.6, which areentirely HSbased.
12Foramore detailed description seeGATT (1995).WT/TPR/S/22
Page 26Trade Policy Review
17. InMarch 1994, Canada 'sGPTlegislation wasextended fortenyears. Withaviewtorestoring
theprevious status ofGPTrecipients, reduction ofpreferential rateson3,000 items andextension of
GPTcoverage by220items isbeing phased inasfrom January 1996. (Forabout 1,000 items, the
finalGPTratewasimplemented withimmediate effect.) While thescheme nowincludes mostindustrial
andagricultural items, textiles, clothing andfootwear areonlypartly covered, andagricultural products
under tariff quotas areexcluded.
18. TheextensionofpreferencestoindividualcountriesisatthediscretionoftheMinisterofFinance.
Since January 1996, carsimported from theRepublic ofKorea havenolonger qualified forGPT
treatment, given thecompetitive performance oftheKorean automotive industry.13Mongolia wasmade
eligible forGPTbenefits inDecember 1995. Based onaUNresolution ofDecember 1994, Angola
andEritrea wereadded to,andBotswana removed from, thelistofleast-developed countries eligible
forspecial GPTtreatment. Thechanges tookeffect on1July1996.
(d) Export charges
19. InanarrangementwiththeUnitedStates,concludedinApril1996forafive-yearperiod,Canada
undertook tointroduce anexport feeonitssoftwood lumber exports. Thefeeapplies toexports from
British Columbia, Quebec, Ontario andAlberta inexcess of14.7billion board feetayearandislevied
atarateofeither US$50 (first650million board feetabove theceiling) orUS$100 perthousand board
feet(anyadditional quantities).14Theceiling issetbelow Canada 'saverage exports overtheperiod
1993 to1995. Inreturn, theUnited States undertook nottolaunch orpursue anti-dumping,
countervailing, safeguards orother specified trade actions onCanadian softwood lumber supplies.15
Shipments toother destinations, accounting forabout onefifthofCanada 'ssoftwood lumber exports,
remain unaffected.16
20. From theCanadian perspective, thearrangement appears economically attractive ifcompared,
forexample, withthecostoflegaldefence incountervailing cases. Costestimates forthepastthree
years areintheorder ofUS$100 million, although nodefinitive measures were taken bythe
United States. Thearrangement hasbeendescribed bytheChairman oftheCanada Business Council
onNational Issues asa"dangerous precedent, demonstrating anincreased tendency forprivate party
actions toforce governments toact,andashifttowards managed trade".17Atthetimeofwriting,
theconditions forquota allocation among exporters hadnotbeendetermined.
13Duties onm.f.n. imports ofmotor vehicles (HS8703) aresetat8.5percent, compared with6percent
under GPT.
14Atcurrent price levels, theadvalorem incidence oftheUS$50 feeisestimated atslightly above 10percent.
However, given thevolatility ofthemarket, there maybesignificant variations over time.
15Inthiscontext, theagreement refers toinvestigations andpetitions under Title VIIoftheU.S. Tariff Act
of1930; actions under Sections 201-204 oftheTrade Actof1974 andunder Section 204oftheAgricultural
Actof1956; andinvestigations andactions under Sections 301-305 oftheTrade Actof1974. SeealsoWTO
(1997).
16Exports tonon-U.S. destinations, inparticular theEuropean Union, havebeenonadownward trend since
1991.
17International Trade Reporter, 24April 1996.Canada WT/TPR/S/22
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(ii) Internal taxation
21. Internal salesandexcises taxes currently account forsome 19percentoffederal government
revenue (Chart III.3). TheGoods andServices Tax(GST) applies tovirtually allgoods andservices
atarateof7percent. Some supplies, including residential rentsandcertain usedresidential property,
aretax-exempt, others arezerorated (e.g.certain basic groceries andagricultural goods). Exports
arenotcovered.
22. Arange ofluxury articles andproducts deemed sensitive forhealth orenvironmental reasons
carry excise taxes orduties: automotive fuels, tobacco products, alcoholic beverages, jewellery, car
airconditioners, heavy automobiles andairtransportation. Inaddition, inDecember 1995, theExcise
TaxActwasamended tointroduce anexcise taxonso-called split-run editions ofperiodicals. The
relevant magazines contain editorial material prepared foraforeign (home) market, while the
advertisements aretargeted atCanadian readers.18Thetaxissetatarateof80percentofthevalue
oftheadvertisements. AWTO Panel, established attherequest oftheUnited States, iscurrently
examining theconformity ofthetaxwithWTO provisions (Annex Table II.1)
18"Split-run edition" falling under thetaxisdefined asaperiodical distributed inCanada containing more
than20percenteditorial material thatisnotexclusive totheCanadian market andfeatures oneormore
advertisements directed attheCanadian public.WT/TPR/S/22
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(3) Other Policies Directly Affecting Trade
(i) Trade prohibitions, licensing requirements andquantitative restrictions
23. There havebeennomajor changes inCanada 'simport prohibitions overthepasttwoyears.19
While imports ofmargarine arenolonger prohibited, theyhavebeenmade subject toa100percent
tariff. Aprohibition oncommercial imports ofusedvehicles remains inplace, except vis-à-vis the
United States under FTA/NAFTA provisions; imports fromMexico aretobeprogressively liberalized
withunlimited access planned in2019. Canada doesnotapply anytrade embargoes other thanthose
decided bytheUNSecurity Council.
24. Anumberofdomesticlawsallowforimportcontrolsorprohibitionsforenvironmentalpurposes.
CITES provisions areimplemented under Canada 'sWildAnimal andPlant Protection Act,submitting
specified imports (species ofwildfauna orfloraandtheirderivatives) tocontrols. Import prohibitions
under theMontreal Protocol areimplemented through Ozone-Depleting Substances Regulations, while
theBasel Convention isimplemented through Export andImport ofHazardous Waste Regulations (see
below). Before being admitted formanufacturing orimportation onacommercial scale, anynew
substance issubject tohealth andenvironmental riskassessment; substances suspected ofbeing toxic
maydraw controls orprohibitions (New Substances Notification Regulations ofJuly1994).
25. UndertheWTOAgreementonAgriculture,previousquantitativerestrictionsandothernon-tariff
measures onavariety ofproducts havebeenreplaced bytariff quotas. They apply towheat, barley
andtheirproducts; beefandveal, turkeys, chicken, eggsandchicks; dairy products, drycasein and
caseinate (Table III.3). Under theWTO Agreement onTextiles andClothing, quantitative restrictions
onimports ofwork gloves havebeenremoved; restrictions remain, however, onawiderange ofother
textiles andclothing items (Chapter IV(4)(ii)(b)). Carbon andspecialty steelcontinue tobesubject
toimport monitoring, andimports ofmost alcoholic beverages remain inthehands ofprovincial
monopolies (section (5)(iii)).
26. Export controls andprohibitions aremaintained mainly forhealth, security andenvironmental
reasons. Therelevant products and,asthecasemaybe,countries arespecified intheExport Control
ListandtheArea Control List,established under theExport andImport Permit Act.
27. InSeptember 1995, Canada accepted aconsensus decision under theBasel Convention imposing
animmediate banonshipments ofhazardous waste fromOECD tonon-OECD countries. Expressing
concern thatthebanalsocovered hazardous recyclables by31December 1997, Canada declared it
would beunable toconsider ratification oftheamendment before aTechnical Working Group had
developed definitional terms. While theauthorities are"generally pleased withtheprovisional results"
19Thefollowing products arecurrently subject tounconditional import prohibitions: livemongooses; certain
starlings; cigarettes; wildbirdfeathers; coincounterfeits; immoral publications, pornographic films andvideos;
posters depicting crime andviolence; issues offoreign periodicals including asplit-run orregional edition
containing advertisement specifically directed attheCanadian market; goods manufactured withprison labour;
smoke screen apparatus foruseinvessels; metallic trading checks; usedorsecond-hand motor vehicles and
aircraft ofallsorts; usedorsecond-hand mattresses; weapons; white phosphorous matches; reprints ofCanadian
andBritish works copyrighted inCanada; andgoods inviolation oftheTrade-marks Act.
Theimport prohibition onforeign periodicals (split runs) hasbeen made ineffective bytechnological
developments, allowing forelectronic transmission toCanadian printers. Canada thusintroduced theexcise tax
referred toabove.Canada WT/TPR/S/22
Page 29
achieved intheTechnical Working Group todate, theyhavenotyetdecided onratification. Since
November 1995, exports ofPCBwaste totheUnited States havebeenbanned; thebanwasintroduced
under theemergency provisions oftheCanadian Environmental Protection Act.20
Table III.3
Imports subject tolicensing ,June 1996
Legislation Products Purpose
Narcotics Control Act,
Food andDrug ActControlled, restricted drugs andnarcotics. Toensure thatthequantity of
drugs imported doesnotexceed
medical needs.
Explosives Act Blasting explosives, detonators, propellants, sporting and
industrial cartridges, andalltypes offireworks and
pyrotechnic devices.Toensure thesame degree of
safety between imports and
domestic manufactures.
Atomic Energy Control Act Uranium, thorium, plutonium deuterium, theirrespective
derivatives andcompounds andradioactive isotopes ofall
kinds.Safety.
Wild Animal andPlant
Protection ActPlants, plant parts andproducts. Plant andanimal protection
measures, including CITES
provisions.
Health ofAnimals Act Animals, birds andproducts. Health andsanitary regulations.
National Energy Board Act Natural gasandethane. Equitable distribution ofnatural
gas.
Export andImport Permit
ActTurkeys, eggs, chickens, broiler hatching eggsandchicks.
Beefandveal(U.S. andMexican supplies excluded);
margarine (Mexican supplies excluded); Wheat and
products (U.S. andMexico excluded); barley andproducts
(Mexico excluded). Dairy products (butter, milk, their
products, animal feeds, cheese, icecream andyogurt);
margarine andbutter substitutes.Implementation ofWTO Tariff
quotas.
Handbags, outerwear garments, hosiery, pants, blouses and
ladies 'shirts, pyjamas andsleep wear, raincoats,
sportswear, foundation garments, swim wear, underwear,
topcoats andovercoats, men'sandboys'suitsandjackets,
leather coats, men'sandboys'shirts; andsweaters. All
textile products.Toimplement restraints maintained
under theWTO Agreement on
Textiles andClothing.
Drycasein andcaseinate. Statistical purposes.
Endangered species. Conservation.
Carbon andspecialty steel. Import monitoring.
Source: WTO document G/LIC/N/3/CAN/1, 2February 1996.
(ii) Trade defence mechanisms
(a) Anti-dumping
Overview
28. Asinmanyindustrialcountries,anti-dumpingisthemostfrequentlyusedtraderemedyinstrument
inCanada. With 90anti-dumping duties inforce atend-1995, Canada ranked third among WTO
20According toGlobe andMail, 19June1996, thebanmayresult inextra costs ofCan$200 million tothe
Canadian economy asshipments areredirected towards twodomestic companies.WT/TPR/S/22
Page 30Trade Policy Review
Members, following theUnited States (292measures) andtheEuropean Union (137).21However,
although thenumber ofoutstanding actions hasincreased since the1994 Trade Policy Review, there
hasbeenasignificant decline inthenumber ofnewinitiations.
29. Canada 'sSpecial Import Measures Act(SIMA) provides thelegal framework forthefiling
andprocessing ofanti-dumping complaints and,asdeemed necessary, theimposition andadministration
ofremedial measures (duties andundertakings). While Revenue Canada ismandated tocarry out
anti-dumping investigations covering allquestions related totheexistence ofdumping andthecalculation
ofdumping margins, theCanadian International Trade Tribunal (CITT) conducts thedefinitive enquiry
intoquestions ofinjury andcausation (Annex III.1).
30. Witheffectfrom1January1995,theSIMAandsubsequentRegulations(SIMRs)wereamended
toimplement provisions ofthenewWTO Agreement onAnti-Dumping (Agreement onthe
Implementation ofArticle VIoftheGATT 1994).22According totheauthorities, while noadditional
modifications were made onthatoccasion, amore general review ofSIMA ispresently under way
toexamine whether changes arenecessary "tomeet thecurrent needs ofCanadian businesses and
consumers".23Inthiscontext,andinresponsetoconcernsexpressedbysteelproducersaboutinsufficient
protection under current provisions, theDepartment ofFinance commissioned anindependent expert
study comparing Canadian andU.S.anti-dumping legislation. Thestudy wastofocus oninstitutional
structures, procedures andpractices (including thedetermination ofnormal values, export prices and
injury, andtheenforcement ofinjury findings). Theauthors, whowerenotmandated tomake specific
recommendations, submitted thestudy inMay1996.
Recent cases
31. Between July1994 andJune1995, theauthorities initiated nineanti-dumping investigations
(excluding review cases), followed bysixinvestigations overtheperiod untilJune1996. Thisseems
tocontinue adownward trend, since themid-1980s, which wasinterrupted byawave ofnew
21Source: WTO documents G/ADP/N/9/EEC, G/ADP/N/9/USA andG/ADP/N/9/CAN. The90measures
notified byCanada under theWTO Agreement onAnti-Dumping arebased onatotalof93injury findings;
inaddition, there arefourprice undertakings. While towards theendofthe1980s close to1percentofCanada 's
imports were subject toeither anti-dumping orcountervailing measures, thisshare hashovered since ataround
0.6percent.Thereare,however,significantdifferencesbetweenproducts;forexample,in1994,over7percent
ofCanadian textile imports and10percentofleather imports carried anti-dumping orcountervailing measures.
Campbell andLee(1996).
22Theamendments wereintroduced viatheB-57Omnibus Billimplementing theUruguay Round Agreements
Act.
23Statementinthecontextofthisreport.Asageneralpolicypractice,suchreviewsareundertakenperiodically
forallpolicy instruments toensure thattheycontinue toserve theirinitial purpose. In1994, however, thepublic
phase ofanongoing review oftheSIMA wasinterrupted toawait theoutcome oftheUruguay Round negotiations
andofthediscussions within NAFTA ontrade remedy instruments. InMay 1996, theMinister ofFinance
requested theParliamentary Standing Committees onFinance andonForeign Affairs andInternational Trade
toconduct areview, including public consultations, withaview tomaking recommendations onwhether and
howtoimprove Canada 'santi-dumping andcountervailing dutylegislation.Canada WT/TPR/S/22
Page 31
investigations atabout thetimeofthe1994Trade Policy Review (Chart III.4).24Primary metal products
accounted for40percentoftheanti-dumping duties inforce atend-1995, followed byphoto-albums
(20percent) andrubber footwear (9percent).
32. U.S. suppliers havebeenlessfrequently involved inanti-dumping cases thantheirshare in
overall imports would suggest, andthenumber ofinitiations hascome down overtime-fromtenin
1992totwoin1994andthreein1995(Table III.4).25Inturn,U.S.investigations affecting Canadian
exports dropped from 17in1993 to10in1994 and2inthefirsthalfof1995.26While "sensitive"
industries, including steel, might havefeltcomfortable withtheexisting levelofprotection, thedecline
24Between January 1992 andApril 1994, theperiod covered bythelastTPR ofCanada, 67investigations
were initiated. Ofthese, twothirds concerned steelproducts, reflecting adjustment pressures duetoworldwide
over-capacity andfalling prices inaperiod ofrecession, andtheremoval ofimport controls. Frictions occurred
inparticular withtheUnited States after U.S. producers hadfiled anti-dumping petitions against most steel
exporters, including Canadian companies, following theexpiry ofaVoluntary Restraint Arrangement in1992.
25Over theperiod 1988 to1994, while theUnited States accounted forsome twothirds ofCanada 'stotal
merchandise imports, itsshare inimports subject toanti-dumping orcountervailing actions waslessthan
40percent. Bycontrast, forcountries inthePacific Rim, thelatter share wasalmost three times higher than
theshare inoverall imports. Campbell andLee(1996).
26WTO documents ADP/102/Add.8, ADP/114/Add.9, ADP/127/Add.6, ADP/134/CAN, ADP/138/CAN,
G/ADP/N9/CAN,ADP/102/Add.7,ADP/114/Add.8,ADP/127/Add.12,G/ADP/N/2/USAandG/ADP/N4/USA.WT/TPR/S/22
Page 32Trade Policy Review
might alsobeattributed toagenerally more favourable business climate and,ontheCanadian side,
thepositive effects ofaweaker currency onindustrial competitiveness.27
Table III.4
Initiation ofanti-dumping investigations, January 1994 toDecember 1995
Country Product
(Date ofinitiation)Preliminary
determinationaFinal
determinationaMarket shareb
China Portable filecases
(21.09.95)70.7% Confidential
Denmark Refined sugar
(17.03.95)64.16% 64.29% 0.61%
Germany Refined sugar
(17.03.95)49.69% 49.74% 0.26%
Italy Drypasta
(30.08.95)27% 14.6%
Netherlands Refined sugar
(17.03.95)64.06% 64.19% 0.20%
Republic ofKorea Refined sugar
(17.03.95)63% Noinjury 0.31%
United Kingdom Refined sugar
(17.03.95)63.64% 63.77% 0.14%
Bacteriological culture media
(29.09.95)40.8% Confidential
United States Redandgolden delicious apples
(14.07.94)22% 24% 22.1%
Residential steelstorage buildings
(9.09.94)Price undertaking Confidential
Refined sugar
(17.03.95)44% 43.86% 11.6%
Caps, lidsandjars 36% 31.85% Confidential
Bacteriological culture media
(29.09.95)36.8%/40.8% Confidential
a Weighted average margin ofdumping.
b Dumped imports aspercentofdomestic consumption (12-month period prior totheinitiation ofaninvestigation).
Source: WTO documents ADP/127/Add.6, ADP/134/CAN, ADP/138/CAN, G/ADP/N9/CAN.
33. Fiveofthenewmeasures introduced since 1994 concerned refined sugar, involving exports
from several EUmember States andtheUnited States. Therelevant investigation resulted from a
complaint filedinearly 1995 bytheCanadian Sugar Institute (CSI). TheCITT found thatimports
fromDenmark, Germany, theNetherlands, theUnited Kingdom andtheUnited States werethreatening
tocause injury, butcleared Korean suppliers which hadalsobeencovered bythecomplaint. Inan
investigation under Section 45oftheSIMA (Annex III.1), theCITT concluded thattherewasnopublic
27Inarecent injury determination, theCITT considered theprotective effects ofalowCanadian dollar as
atemporary phenomenon thatcould, orshould, notbeextrapolated. Concerning subsidized EUexports ofcanned
porkandcanned ham, a1995 review order heldthat"iftheCanadian dollar were tostrengthen from itscurrent
levels, ...anypresent gapbetween domestic prices andthose ofsubsidized imports could berapidly eliminated,
inwhole orinpart. While thefuture value oftheCanadian dollar will, ofcourse, besubject tothevagaries
oftheinternational markets, itisknown thattheEU'sExport Refund Program isdesigned toprovide subsidies
ataratesufficient tomove products intoexport markets, taking intoaccount changes inmarket variables."
(CITT Review No.R-94-002 of21March 1995.)Canada WT/TPR/S/22
Page 33
interest inthereduction orelimination ofduties. TheCITT alsoturned down arequest under Section 76
asthere were noreasonable indications ofchanged circumstances thatwould haveinvalidated the
findings. Inaddition, aU.S.-based company hasrequested theestablishment ofabi-national panel
under Chapter 19ofNAFTA toreview thecasewithregard tothedetermination ofdumping margins.
(b) Countervailing measures
34. While subject tothesame framework provisions asanti-dumping measures, countervailing
actions havebeenrelatively rareinCanada. Atend-1995, sixmeasures wereinforce, affecting mainly
farmexports oftheEuropean Union orindividual EUmember States (Table III.5). Ofthese, four
were introduced inthemid-1980s andhave been renewed since.28Among theinitiations since
January 1994, subsidized sugar fromtheEuropean Union wasfound tohavebeenthreatening injury,
attracting acountervailing dutyofECU 50.79 per100kg.,while aninvestigation intosubsidized sugar
fromtheUnited States wasterminated because thesubsidies weredetermined tohavebeennegligible;
aninvestigation intosubsidized pasta from Italyresulted inanegative injury determination.
Table III.5
Countervailing dutymeasures inforce, 31December 1995
Country Product Date offinding
Denmark Canned ham 07.08.84 (16.03.90) (21.03.95)
European Union Canned pork 07.08.84 (16.03.90) (21.03.95)
Boneless beef 25.07.86 (22.07.91)
Refined sugar 06.11.95
India Black granite memorials 20.07.94
Netherlands Canned ham 07.08.84 (16.03.90) (21.03.95)
Note: Asubsequent dateisshown inbrackets iftheinjury finding wasreviewed andre-affirmed.
Source: G/SCM/N/12/CAN.
(c) Safeguards andother emergency trade measures
35. Canada 'slatest safeguard measure under Article XIXoftheGATT, concerning boneless
manufacturing beef, expired on31December 1994.29
36. Under theNAFTA, theapplication ofArticle XIXactions issubject tospecific provisions.
Chapter 8requires thatNAFTA partners beexempt fromanyglobal action unless theirexports account
forasubstantial share oftotalimports andcontribute importantly to(thethreat of)serious injury.
Bilateral actions under theNAFTA canbetaken onlyintheevent ofimport surges asaresult ofduty
reductions oreliminations. Therelevant rulesprovide forimmediate compensation andprevent import
restrictions below recent trade levels; theconcessions offered must haveequivalent trade effects.
Thefollowingpossibilitiesexist:thereintroductionofdutiesorthesuspensionoffurthertariffreductions
28Asaresult ofareview under Section 76oftheSIMA, theCITT rescinded itsfinding concerning boneless
manufacturing beeffrom theECasof22July1996.
29Fordetails seeGATT (1995), p.129.WT/TPR/S/22
Page 34Trade Policy Review
under theFTA intheevent ofbilateral imports causing serious injury; the"snapback" mechanism
forfruitandvegetables under theFTA; safeguards under Chapter VIIIoftheNAFTA onimports
fromMexico, except agriculture andtextiles; aseparate provision forimports offarmproducts from
Mexico; andaspecial mechanism, under Annex 300-B oftheNAFTA, forimports oftextiles from
either theUnited States orMexico. However, there havebeennocases since January 1994.
37. According totheauthorities, Canada isnotinvolved inanyarrangements withtrading partners
that,specifying prices, quantities orother supply conditions, would amount toa"voluntary" restraint
ontheirexports. Inturn, Canada reportedly refused toagree onanyexport monitoring oncereals
after thetermination ofamemorandum ofunderstanding with theUnited States in1995
(Chapter IV(2)(iii)). TheGovernment 'sstated position inthisareais"nottoparticipate inanyprocess
aimed atlimiting ourexports".30
38. InApril 1996, however, Canada concluded anarrangement withtheUnited States governing
itssoftwood lumber exports. Asnoted insection (2)(i)(d), Canada iscommitted under thearrangement
tophase inanexport charge ifbilateral shipments exceed specified thresholds.31
(iii) Local-content, performance andpurchase requirements
39. Implementing WTO andNAFTA provisions, Canada recently abolished local performance
requirements intheautomotive sector; similar measures intheclothing industry aretobeeliminated
before theendof1997.32Atfederal level, local-content requirements persist inthepublishing and
audio-visualindustries(ChapterIV(5)(v)(b));requirementsatprovinciallevelarepresentedinBoxIII.1.
40. Asarule,Canadian materials, equipment andprofessional services mustbeusedinprojects
carried outunder regional development programmes (section (4)(iv)(a)).
30H.E. Mr.Ralph Goodale, Minister ofAgriculture andAgri-Food, Government ofCanada News Release,
No.162, 12September 1995.
31Article 11(1)(a) oftheWTO Agreement onSafeguards stipulates thatMembers "shall notseek, takeor
maintain anyvoluntary export restraints, orderly marketing arrangements oranyother similar measures onthe
export orimport side. These include actions taken byasingle Member aswellasactions under agreements,
arrangements andunderstandings entered intobytwoormore Members." Intheview oftheauthorities, the
softwoodlumberarrangementdoesnotinfringetheseorotherWTOprovisions,norisitcoveredbyanynotification
requirements under theWTO.
32Forexample, theBlouse andShirts Remission Order allows manufacturers toimport upto20percent
oftheir production ofblouses dutyfree. TheOrder expires on31December 1997.Canada WT/TPR/S/22
Page 35
BoxIII.1 Local performance requirements atprovincial level
Licences andforest management agreements toharvest timber from public lands inOntario, andsome
other provinces contain astipulation requiring primary processing totakeplace locally, i.e.inCanada.
Alloresorminerals extracted inOntario must betreated andrefined inCanada intoproducts suitable for
direct usewithout further treatment. Mining leases inNew Brunswick areconditional onlocal
processing oftheminerals extracted.
Licensed wine manufacturers inOntario maysellwine containing imported grapes orgrape products only
ifthey purchase Ontario grapes ataquota determined bytheprovincial Wine Council. Theannual
amount ofOntario grapes purchased byallwine producers must beatleast 25,000 tonnes. Wineries are
obliged toincorporate nolessthan25percentofOntario grapes orgrape products ineach brand of
wine.
Source: Government ofCanada, reservations made bytheprovinces inthecontext ofNAFTA.
(iv) Export subsidies andexport promotion activities
41. Over thepasttwoyears, theGovernment hassought torefocus export promotion policies in
thecontext ofanew"International Business Strategy" (CIBS). TheStrategy isgeared toidentify priority
markets and,given thatonly50companies currently account forclose tohalfofmerchandise exports,
broaden theeconomy 'sexport base. For23sectors, "national teams" wereestablished, pooling expertise
from federal andprovincial governments, industry associations andprivate sector companies. The
teams areexpected topin-point export opportunities andprovide trade intelligence through various
channels. Forlarge-scale projects, provincial andfederal government officials arecalled upontosupport
Canadian exporters through "team Canada" missions. Thenewapproach isdeemed tocomplement
theGovernment 'sofficial network of128foreign posts and600trade commissioners.
42. Therefocusingofexportpromotionisalsoreflectedinthe1995restructuringofCanada'sExport
Development Corporation (EDC) intoninedepartments which areresponsible forthemajor exporting
sectors. NewEDCsubsidiaries havebeencreated, suchasExinvest in1995, toprovide equity financing
inanattempt tobroaden theselected companies 'riskbearing capital base. (Forexample, Exinvest
hasconcluded ajointventure withBombardier tofinance exports ofregional jets.) Inrecent years,
theEDChasdeveloped mainly itsownexport insurance activities; loans andguarantees ontheCanada
account, backed upbytheGovernment ongrounds ofnational interest, have stagnated invalue
(Table III.6).33Although wholly government-owned, theEDC iscommercially independent.
43. EDCcurrently assists Canadian exporters intradewithsome 120countries. Thetopcountries
interms ofbusiness volume in1994weretheUnited States (Can$4.4 billion), Japan (Can$697 million),
Mexico andtheUnited Kingdom. Exports financed orinsured byEDCtotalled arecord Can$18 billion
in1995.
33Theloans granted ontheEDC'saccount in1995 were destined forforestry (29.7 percent); baseandsemi-
manufactured goods (19.8 percent); consumer goods (10.6 percent); engineering andprofessional services
(5.9percent); financial institutions (4.2percent); industrial equipment (4.7percent); information technologies
(12.8 percent); emerging exporters (2.4percent); andtransport (9.9percent).WT/TPR/S/22
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Table III.6
Direct export financing, insurance andguarantees provided bytheExport Development Corporation, 1991-94
(Can$ billion)
Agency 1991 1992 1993 1994
Loans onEDC'saccount 1.4 2.1 3.2 1.9
Loans ontheCanada accounta0.2 0.6 0.9 0.5
Guarantees andinsurance onEDC'saccount 5.1 6.6 8.6 9.8
Guarantees andinsurance ontheCanada accounta0.1 0.3 0.4 0.2
Total direct financing, insurance andguarantees (includes
CIDAbfinancing)6.9 9.5 13.1 12.2
a TheCanada account isusedfortransactions which exceed theCorporation 'slimits interms ofvalue orrisk.
b Canadian International Development Agency.
Source: Export Development Corporation.
44. Thereorientation ofCanada 'sexport promotion activities reflects fiscal constraints, efficiency
considerations andageneral reassessment oftheGovernment 'sproper rôleintheeconomy. These
factors, combined withnewmultilateral disciplines, havealsoledtosignificant reductions inexport
subsidies. Under theWTO Agreement onAgriculture, thesearecapped atCan$689 million in1995-96
(Chapter IV(2)(ii)). Export credits granted bytheCanadian Wheat Board covered 1.86million tonnes
ofwheat in1994-95, withIran(1.18 million tonnes) andBrazil asmajor destinations. Noexport credits
were granted forbarley in1994-95.
45. InJune1995, theGovernment established theAgri-Food Trade Service (ATS) to"identify
competitive market opportunities withanemphasis onexport markets offering growth potential" and
"assist inmaintaining established oressential markets".34ATS activities centre onco-ordinating
information,expertiseandsupportbetweenexistingmechanisms;reimbursingcompaniesorassociations
partofthecosts involved ingeneric export market development; andproviding export intelligence,
advice andrelated support through country studies, fairparticipation andthelike. According tothe
authorities, barter tradehasnotbeenactively promoted andnosuchdealshavebeenconcluded todate.
46. TheCanadian Commercial Corporation (CCC) actsastheGovernment 'sprime contractor for
purchases ofgoods andservices when foreign buyers prefer totrade onagovernment-to-government
basis. TheCCC isaCrown Corporation wholly owned bytheGovernment ofCanada. Itdoesnot
provide company- orindustry-specific support, according totheauthorities. In1995-96, theCCC
received Can$1,017 million oforders from 41countries and11international organizations.
47. Nodetailed information wasavailable onexport promotion andsupport initiatives atprovincial
level.35
34Liberal Party "Red Book".
35Adevelopment association, Société dedéveloppement industriel duQuébec ,provides financial support for
exports ofsmall andmedium-size enterprises inQuebec.Canada WT/TPR/S/22
Page 37
(4) Policies Affecting Adjustment andGrowth
48. Over thepasttwoyears, efforts havecontinued toremove barriers toeconomic expansion,
redress regulatory distortions andpromote aunified market across Canada. Major initiatives inthis
context areanongoing regulatory reform process andtheconclusion oftheAgreement onInternal
Trade. TheAgreement 'smainfocus isonachieving thefreeflowofproducts, capital andlabour through
mutual recognition ofprovincial requirements, including technical regulations andprofessional
certificates, andtheabolition oflocal-residence provisions. Theauthorities havenoted thatcompanies
from across thecountry nowhaveequal access opportunities tofederal andprovincial government
procurement, andthatgovernments haveagreed todiscontinue investment incentives. Local-residence
requirementswereeliminatedasapreconditionforthelicensing,registrationorcertificationofsuppliers,
except forreasons ofconsumer protection (Box III.5). Incontrast, supply management systems in
thedairy, poultry andeggssectors have remained andcontinue tosegment theCanadian market
(Chapter IV(2)(v) and(vi)).
(i) Regulatory reform
(a) Domestic reform agenda
49. Regulatory reform became anincreasingly prominent issueasCanada 'spastlackofeconomic
momentum drew attention topolicy-induced barriers liable toimpede investment andgrowth. The
focus onderegulation wasfurther increased asfiscal constraints severely limited thescope for
budget-related initiatives thatmight havecontributed tostimulating theeconomy. Given thevariety
ofregulatory changes inrecent years, itisdifficult, however, toprovide anoverall picture or,even
more ambitiously, assess theirimpact oneconomic performance.36
50. Sixsectors havebeenearmarked bytheFederal Government, inconsultation withproducers
andother interested parties, fora"Priority Regulatory Review": biotechnology; health, foodand
therapeutic products; mining; thecarindustry; aquaculture; andforestry. Theregulatory framework
governing biotechnology isbeing revised toprovide more certainty, increase consumer protection and
allow fortheapproval ofnewfoodproducts. Regulations affecting theautomotive sector arebeing
reviewed intheareas oftaxation, workplace hazardous materials, information systems andtechnical
requirements. Inthehealth sector, announced changes focus onmarket access andproduct development
withaview toachieving "better riskmanagement ofsafety issues andgreater useofinternational
standards".37Inmining, regulatory reforms areintended topromote sustainability, reduce overlap
andduplication, provide greater certainty forinvestors, andrender environmental andland-use
assessments more efficient. Regulations arealsobeing reviewed inaquaculture andforestry witha
focus onissues suchastaxation andharmonized environmental requirements.
36Ingeneral terms, notdissimilar from initiatives elsewhere, theGovernment seeks "toensure thattheuse
of...regulatory powers results inthegreatest netbenefit toCanadian society". Inthiscontext, theauthorities
arecommitted toupholding andimproving health, safety andenvironmental standards, andeconomic andsocial
well-being; public funds aretobespent wisely. Before taking action regulatory authorities must verify that:
ademonstratedproblemorriskexistsandregulationisthebestalternativesolution;benefitsofregulationoutweigh
costs andresources aredirected tothemost beneficial uses; Canadians areconsulted andhave theopportunity
toparticipateinformulatingregulationsandprogrammes ;theburdenonregulatedsectorsisminimized;regulators
takefulladvantage ofopportunities forco-ordination withother governments andagencies; andsystems are
inplace tomanage regulatory resources effectively.
37Treasury Board Secretariat (1996).WT/TPR/S/22
Page 38Trade Policy Review
51. Regulatory Process Management Standards areexpected toserve asaframework forpolicy
development, consultation, communication, training anddocumentation within theFederal Government.
Seven departments, covering thebulkoffederal regulatory activities, aretoimplement suchstandards
byend-1996.38
52. Effortstoco-ordinatefederalandprovincialregulationshavecontinuedunderthe1995Agreement
onInternal Trade, which contains ageneral commitment toreconcile standards andregulations inorder
toensure thefreeflowofgoods, services andproduction factors (Box III.2).39Inagriculture, steps
havebeentaken toharmonize theentire foodinspection system. Other measures considered toimpede
interprovincial trade, forexample incompatible environmental regulations, arethesubject ofongoing
harmonization efforts.
BoxIII.2 Harmonization oftechnical trade barriers under theAgreement onInternal Trade
Inthe11areas covered bytheAgreement onInternal Trade (Box II.1), thefederal andprovincial
governments undertook toreconcile their standards andstandards-related measures byharmonization,
mutual recognition orother means. Specific areas requiring reconciliation include extra-provincial
corporate registration (Article 606); occupational qualifications andstandards (708); standards-related
measures regarding alcoholic beverages (1007); natural resources processing measures (1105);
transportation regulatory andstandards-related measures (1408); andenvironmental measures (1508).
Theprovisions forregulatory measures andregulatory régimes aremore permissive than those for
standards, providing onlyforco-operation "with aview toaddressing difference, duplication oroverlap".
Consumer-related measures andstandards arethesubject ofaseparate Chapter oftheAgreement. The
parties totheAgreement areprohibited from applying different licensing, registration orcertification fees
tosuppliers depending onwhether they areresidents. Three specific consumer-related measures and
standards areearmarked forharmonization: direct selling contracts andcancellation rights, forwhich
harmonized rules hadtobeadopted nolaterthan1July1996; upholstered andstuffed articles, forwhich
trade-impeding registration requirements andlabelling standards were tobeharmonized nolater than
1January 1996; andlegislation concerning thedisclosure ofthecost ofcredit, which must be
harmonized nolater than1January 1997.
Foragricultural andfood products, anAgri-Food Inspection Committee ismandated toidentify any
measures acting astechnical barriers totrade. Thefollowing barriers have been identified: inspection
requirements formilk andmeat products; inconsistencies between federal andprovincial sanitary
inspection standards forprocessing plants; andregulations governing thelicensing andbonding of
livestock traders. Efforts arecontinuing toharmonize therelevant regulations.
BoxIII.2 (cont'd)
38Thedepartments concerned arethose forAgriculture andAgri-Food; Environment; Fisheries andOceans;
Health; Industry; Revenue; andTransport. Allother departments aretoimplement thestandards byend-1997.
39Examples oftechnical barriers tointernal trade include construction regulations; obligations incertain
provinces tolabel products inonelanguage particularly clearly; criteria andprocesses forinclusion ofdrugs
under provincial health plans; criteria forlisting, de-listing andreimbursement ofdrugs; andprohibitions on
advertising.Canada WT/TPR/S/22
Page 39
Areview oftechnical policy measures must becompleted nolater than1September 1997 (Article 902)
withtheobjective ofliberalizing internal trade inagricultural andfoodproducts. Aninitial listofbarriers
covers areas such asmargarine colouring; bulk shipments offruit andvegetables; inter-provincial
shipment ofsmaller grade potatoes; andimitation dairy products andbutter blends. Theharmonization
ofunderlying regulations isnot,however, mandatory under theAgreement. Areview oftheinternal
trade aspects ofsupply management programmes (Article 903)istobeundertaken within anunspecified
timeframe.
Source: Agreement onInternal Trade andsupplementary material.
(b) International developments
53. Canada 'simplementation oftheWTO Agreement onTechnical Barriers toTrade (TBT) has
notrequired substantive changes indomestic legislation.40Themonitoring andnotification process
under theAgreement hasbeenextended totechnical regulations, standards andconformity assessment
measures under provincial competence. In1995, Canada made 29notifications ofnewtechnical
regulations totheWTO Committee onTechnical Barriers toTrade; ofthese, 27werenotified under
Article 2.9andtwounder Article 3.1.(While Article 2.9specifies notification requirements forWTO
Members, Article 3.1contains abest-efforts clause withregard toregulations established bylocal
governments andnon-governmental bodies.) Most measures hadbeen taken onhealth, safety or
environmental grounds. Food, electric appliances, drugs, chemical substances, motor vehicles,
telecommunicationsequipmentandservices,weretheproductareaspredominantlyconcerned.Canadian
policies inareas covered bytheTBTAgreement havenotgiven risetoanyformal complaints todate.
54. Achapter ontechnical barriers totrade under theNAFTA, while recognizing thesignatories '
right tocreate technical regulations andstandards, aimstoprevent unnecessary impediments. The
relevant provisions encourage theuseofinternational standards whenever possible, thenotification
ofproposednewtechnicalregulationsforcommentbyothersignatories,andnationaltreatmentofimports
inthecontext ofcertification andother conformity assessment procedures. Thechapter alsocallson
signatories tomutually recognize theequivalence ofstandards-related measures andwork towards
establishing compatible measures. Finally, thechapter provides fortheaccreditation ofconformity
assessment bodies oftheother Parties. ACommittee onStandards-Related Measures (CSRM) is
responsible fortheimplementation ofthese provisions; itoversees foursectoral subcommittees
responsible forremoving regulatory incompatibilities intheareas oftelecommunications equipment,
automobiles, textile labelling, andlandtransport.
55. Canada hashelddiscussions withtheEuropean Union since 1992 onamutual recognition
agreement withsectoral annexes. InJune1996, thetwoparties agreed inprinciple onthecontent of
anagreement covering telecommunications andinformation technology equipment, pharmaceuticals,
medical devices, low-voltage electrical equipment, andgood laboratory practices forchemicals.
Discussions inother areas areunder way. Mutual recognition agreements covering seafood inspection
systems havebeenconcluded withAustralia andNewZealand, while discussions havestarted with
theUnited States intheareas offishproduct inspection andpharmaceuticals.
56. Canada isamember oftheAPEC Committee onStandards andConformance andparticipates
inseveralworkinggroupsdiscussingmutualrecognitionagreementsforconformityassessmentinsectors
suchastelecommunications, energy, transport andfishproducts. Canada alsoparticipates inaworking
40CanadaGazette,PartI,Agreemen tEstablishingtheWorldTradeOrganization,DFAIT,31Decemb er1994.WT/TPR/S/22
Page 40Trade Policy Review
group onstandards andtechnical barriers totrade oftheFreeTrade AreaoftheAmericas (FTAA).
Thegroup aims, interalia,tofurther theimplementation oftheWTO Agreement onTechnical Barriers
toTrade inthehemisphere andexplore waystoenhance co-operation among participants onstandards,
technical regulations andconformity assessment procedures.
(c) Environmental regulations41
57. Ingeneral, environmental issues areashared federal-provincial domain, without explicit
constitutional provisions. Constitutional competencies thatsupport federal involvement include those
forinterprovincial andinternational trade andcommerce; seacoast andinland fisheries; navigation
andshipping; federal lands; Indians andlands reserved forIndians; interprovincial andinternational
transportation; andthegeneral authority tomake lawsforthepeace, order andgood government of
Canada.42Atfederal level, Environment Canada administers legislation andregulations dealing with
environmentprotection,thepreventionofpollutionandpreservationofwildlife,inparticularofmigrating
andendangered species. Environment-related competencies under explicit provincial authority include
natural resources, civilandproperty rights, andlocalworks. Theprovinces arealsoempowered to
takeenvironmentalmeasuresinresponsetouniqueregionalconditions,includingintheareaofemissions.
58. ATask Force onCleaner Vehicles andFuels, established in1994 bytheCanadian Council
ofMinisters oftheEnvironment (CCME), hassincedeveloped recommendations onvarious emission-
related issues. These include theadoption oftighter newvehicle emissions standards inharmony with
U.S.requirements, thedevelopment ofregulations forcleaner gasoline andlow-sulphur diesel fuels
aswellastheintroduction oflow-emission vehicles bytheyear2001. Pursuant toTask Force
recommendations, Transport Canada hasproposed amendments totheMotor Vehicle Safety Regulations
which would harmonize Canadian emissions standards with those applicable under theU.S.
EnvironmentalProtectionAgency'semissionprogrammefrom1September1997.EnvironmentCanada
iscurrently developing guidelines forcleaner gasoline andlow-sulphur diesel fuel.
59. According totheauthorities, Canada hasnoplans tointroduce acarbon tax.
60. Canada hasactively participated inthework oneco-labelling recently performed inWTO fora
(Committee onTrade andEnvironment, andCommittee onTechnical Barriers toTrade).43Itconsiders
eco-labelling programmes asvalid environmental policy instruments which should bedeveloped and
implemented inaWTO-consistent manner. Canada 'sobjective forcurrent WTO discussions isnot
"toexaminethemeritsonlegitimacyofeco-labellingpersenortoquestionthevalidityorappropriateness
ofdomestic standards"44,buttodiscuss thepotential tradeeffects ofsuchprogrammes andtheirimpact
41Seealsosection (3)(i) above.
42Given these responsibilities, international environmental treaties, conventions andprotocols arenormally
implemented viafederal legislation. Thisincludes the1972 London Convention withrespect todisposal ofwastes
atsea;theConventiononInternationalTradeInEndangeredSpecies;theBaselConventionontheTransboundary
Movement ofHazardous Wastes; theMontreal Protocol onSubstances thatDeplete theOzone Layer; the
Canada-U.S. Agreement onAirQuality; theConvention onBiological Diversity; Agenda 21,theaction plan
anddeclaration following the1992 United Nations Conference onEnvironment andDevelopment; and
Commitments under theUnited Nations Environment Programme inrelation toexport oftoxic substances.
43Eco-labelling isencouraged under Canada 'sEnvironmental Choice Programme (GATT, 1992).
44WTO document G/TPT/M/2, 4October 1995.Canada WT/TPR/S/22
Page 41
onimports compared todomestic production. Given theincreasing number ofeco-labelling programmes
andtheir expanding product coverage, Canada hasproposed submitting these programmes tothe
disciplines oftheWTO Agreement onTechnical Barriers toTrade (e.g. transparency and
non-discrimination). Bythesame token, Canada favours theextension oftheAgreement totheuse
ofcriteria based onprocess andproduction methods ineco-labelling programmes ifthese criteria rely
oninternationally agreed guidelines.45
(ii) Government procurement46
(a) Recent international developments
61. Under theWTO Agreement onGovernment Procurement (GPA), which entered intoforce
on1January 1996, Canada extended itslistoffederal entities toinclude theDepartment ofTransport,
theDepartmentofCommunications,andtheDepartmentofFisheriesandOceans.47Federalprocurement
inanumber ofservices sectors hasbeenopened toforeign competition, subject totheAgreement 's
threshold value ofSDR 130,000 (including engineering, realestate, accounting, some information
processing andrelated telecommunications services andsoftware).48
62. Incontrast withothersignatories, Canada didnotimmediately offertheinclusion ofsub-federal
government entities initsGPA Schedule. Rather, Canada undertook toprovide afinallistofsuch
entities onthebasis ofcommitments obtained from provincial governments within 18months ofthe
conclusion oftheGPA. According totheauthorities, adetailed assessment oftheoffers received from
other Members wassubsequently undertaken, based ondiscussion withtheprovinces andindustry
associations. Pointing toaccess limitations ofotherMembers, primarily theUnited States (duetosmall
business set-asides, BuyAmerica provisions andlocalpreference exceptions) andtheimportance of
thismarket, Canada stated inOctober 1995 thattheprovinces would beready toproceed withoffers
"only ifMembers wereprepared (i)toinclude sectors ofpriority interest toCanadian suppliers, for
example, inthesteelandtransportation areas; and(ii)toagree tocircumscribe theuseofsmall business
andotherset-asidesinamannerthat,whilenotprecludingtheiruse,wouldprovideanacceptablesecurity
ofaccess".49
45WTO document WT/CTE/W/21 andG/TBT/W/21, 21February 1996.
46Amore thorough presentation ofgovernment procurement ishampered bytheabsence ofrecent dataon
public purchases inCanada. Under the1979 Tokyo Round Agreement onGovernment Procurement, theFederal
Government purchased goods worth about SDR 1.48 billion in1993 (CAN$0.82 billion).
47However, theGPA doesnotcover activities suchasshipbuilding andrepair; urban railandtransportation
equipment, systems, components andincorporated materials aswellasallproject-related supplies ofironand
steel; telecommunications, detection andradiation equipment; agricultural production inthecontext offarm
support orhuman feeding programmes; oilpurchases related tostrategic reserve requirements; andset-asides
forsmall andminority businesses.
48Thisexcludes,forexample,marketresearch,advertisingandmanagementconsultingservices;publicrelations
services; scientific andtechnical consulting services; legalservices (except onforeign law); health andeducation
services.
49Statement intheInterim Committee onGovernment Procurement; Canada maintained thisposition inthe
firsttwomeetings oftheCommittee onGovernment Procurement. SeeWTO documents GPA/IC/M/5 and6,
andGPA/M/1 and2.WT/TPR/S/22
Page 42Trade Policy Review
63. NAFTA provisions arealsoconfined tofederal government purchasing. While thecoverage
interms ofgoods andservices issimilar tothatoftheGPA, therelevant thresholds, though notfully
identical forallsignatories, arewellbelow those under theWTO Agreement (Table III.7). Asinthe
relevant WTO provisions, theNAFTA provides foranindependent review authority, which ismandated
toreceive complaints, conduct enquiries andmake recommendations intheevent ofdisputes. The
Canadian International Trade Tribunal actsastheindependent authority forfederal government
procurement under theAgreement onInternal Trade, theNAFTA andtheGPA; potential suppliers
whofeeldisadvantaged during thebidding oraward process maylodge acomplaint withtheTribunal.
During fiscal year1995-96, theCITT issued sixdeterminations, three ofwhich upheld thecomplaint
onmerit; 18enquiries were notinitiated onprocedural grounds, while tencases were resolved by
orbetween theparties.
Table III.7
Procurement thresholds under theWTO Agreement andNAFTA, 1January 1996
Product/Service Institution WTO NAFTA
SDR (CAN$) CAN$
Goods Federal Government entities 130,000 (259,000) 34,300a
70,700b
Services Federal Government entities 130,000 (259,000) 70,700
Goods/Services Federal Government enterprises n.a. 353,800
Construction Federal Government entities 5,000,000 (9,900,000) 9,100,000
Construction Federal Government enterprises n.a. 10,300,000
n.a. Notapplicable.
a Between Canada andtheUnited States.
b Between Canada andMexico.
Source: Government ofCanada.
(b) Internal policies
64. While federal government procurement ofgoods generally liesinthehands oftheDepartment
ofPublic Works andGovernment Services (PWGSC), other purchases aredecentralized toindividual
departments andagencies. Larger projects notcovered byinternational agreements maybemade subject
toanindustrial andregional benefits policy. Although allpurchases byalldepartments worth over
Can$2millionarereviewedtoassess"theopportunitiesforachievingsocio-economicbenefitsinCanada",
according totheauthorities, thepolicy israrely applied tocontracts below Can$100 million. Inaddition,
ifthere aresufficient potential suppliers (usually three ormore) ofdomestic goods orservices, the
PWGSCmayuseCanadian-contentrequirements,subjecttoevaluationcriteria,forpurchasesnotcovered
byinternationalagreements.Underbuy-regionalprovisionsforfederalprocurement,PWGSCpurchases
below Can$25,000 through regional offices aretobemade asclosely aspossible totheplace offuture
use.
65. Inthecontext oftheAgreement onInternal Trade (AIT), work hascontinued toremove
"buy-provincial" andother procurement practices thatdiscriminate against suppliers from other
provinces.50Asarule,provincial governments mustnotgrant price preferences, usediscriminatory
50Inthiscontext Quebec recently signed anagreement ongovernment procurement with Ontario and
New Brunswick.Canada WT/TPR/S/22
Page 43
technical specifications, apply "unfair" registration requirements orimpose "unreasonable" time
constraints tosuppliers incorporated inCanada. Foreign-based suppliers arenotcovered.
66. Asaresult oftheAIT,Canadian-based suppliers maybidforfederal andprovincial government
contracts exceeding Can$25,000 inthecaseofgoods andCan$100,000 inthecaseofservices and
construction. According totheauthorities, theAgreement covers essentially allfederal andprovincial
departments andagencies. Negotiations arecurrently under waytoinclude purchases byCrown
Corporations (public enterprises), valued atsome Can$25 billion annually (1988), aswellas,possibly,
purchases onthepartofmunicipalities, publicly funded academic institutions, school boards, hospitals
andsocial service agencies. BoxIII.3provides anoverview ofthecurrently excluded entities.
BoxIII.3 Selected sub-federal procurement reservations
Quebec
Over 20public entities have been exempted from thedisciplines oftheAgreement onInternal Trade
(AIT) including Hydro Quebec anddevelopment corporations intheforestry, mining andrecycling
sectors.
Ontario
A10percent price preference isgiven ontheCanadian content inasupplier 'sbid. Inaddition,
Ontario 'sIndustrial Review Policy allows forthepreferential selection ofsuppliers onthegrounds of
economic orindustrial benefits.
Asfaraspracticable theOntario Northland Railway isexpected touserailway supplies androlling stock
made, purchased orprocured inCanada, ifavailable onsimilar terms aselsewhere.
Newfoundland andLabrador
Four entities, including electricity andalcoholic beverage producers, areexcluded from theAIT.
Saskatchewan
Thirty-seven entities arefully exempt from theAITprovisions onprocurement. Thisaffects access for
Canadian suppliers inareas such asenergy, primary sectors, telecommunications, transport, housing,
financial andinvestment services.
New Brunswick, Prince Edward Island
TheP.E.I. Energy Corporation, theNew Brunswick Power Corporation, anewBrunswick forestry entity
andtheNew Brunswick alcoholic beverage monopoly have been excluded from AITdisciplines.
British Columbia
Over 20entities infields such aselectric energy, petroleum, alcoholic beverages, forestry, financial
services andhousing areexcluded from theAIT.
Source: GATT (1995); Internal Trade Agreement; andinformation supplied bytheGovernment of
Canada.
67. Internal liberalization doesnotautomatically benefit external suppliers. Article 504.5 ofthe
AITstipulatesthat,intheabsenceofconflictinginternationalobligations,preferencesofupto10percentWT/TPR/S/22
Page 44Trade Policy Review
maybegranted forCanadian value added, subject tospecified procedural requirements.51Where a
party limits itstendering toCanadian goods orsuppliers, itmust ensure under Article 504.6 that:
sufficient competition exists among thesuppliers; allqualified suppliers areinformed inadvance of
thepreference anditsapplication; andtherequirement forCanadian content isnotmore restrictive
thannecessary toqualify theprocured good asaCanadian good.52
(iii) Investment policies
(a) Recent developments
68. Since theentry intoforce oftheFreeTrade Agreement withtheUnited States in1989,
conditions forforeign investors havesteadily improved. Thistrend hasbeenstrengthened inrecent
years through ratification oftheNAFTA, theWTO Agreements andalarge number ofbilateral
investment treaties (Chapter II).Nevertheless, asnoted inthe1994 Trade Policy Review, Canada
hascontinued toregulate and,incertain cases, restrict inward foreign direct investment (FDI) insectors
deemed sensitive forstrategic, economic orcultural reasons. Regulations atboththefederal and
provincial levels mayaffect market access andnational treatment.
69. Thegeneral NAFTA thresholds forinvestment review (Can$168 million; seesection (b)),
havebeenextended toallWTO members.53Liberalization hasalsoadvanced onasectoral basis, inspired
bytheGeneral Agreement onTrade inServices. Preferences granted tosubsidiaries ofNAFTA-based
banks wereextended ergaomnes, andremaining restrictions onforeign ownership infederally chartered
insurance, trustandloans andinvestment companies wereabandoned. Theforeign ownership ceiling
inCanadian broadcasting firms wasincreased from20to33.3percentofthevoting shares attheholding
company level(Chapter IV(5)(v)(b)).
70. Following theentry intoforce ofNAFTA in1994, totalforeign FDIstocks inCanada rose
by11percenttoreach Can$168 billion in1995. Ofthis,U.S.investors contributed about twothirds,
while theUnited States accounted foroverhalfoftheFDIstock heldbyCanadian-based firms abroad
(Can$76.5 billion in1995). Investments inMexico doubled between 1993 and1994 toreach
Can$1 billion, andincreased further toCan$1.1 billion in1995.
71. Canada hasshown strong interest instrengthening international disciplines oninvestment
measures, including intheOECD context, andestablishing aWTO work programme ontrade and
investment.
51Noting thattherelevant provisions arepermissive innature, thefederal authorities have stated thatthey
donotcurrently maintain such preferences.
52Canadian good isdefined asagood produced exclusively from domestic materials; agood manufactured
inCanada; oragood thatwould qualify abroad asaCanadian product under appropriate rules oforigin.
53Investors from non-WTO countries aresubject tolower thresholds: Can$5 million fordirect acquisitions
andCan$50 million forindirect acquisitions. Indirect acquisitions between Can$5 million andCan$50 million,
which represent more than50percentofthevalue ofthetotalinternational transaction, mayalsobereviewed.
Theacquisition ofaCanadian enterprise isconsidered "direct" where itinvolves thecontrol ofacorporation
carrying onaCanadian business, and"indirect" where itinvolves thetransfer ofcontrol ofanon-Canadian
corporation that, inturn, controls aCanadian corporation carrying onbusiness inCanada.Canada WT/TPR/S/22
Page 45
(b) Review provisions
72. Under the1985 Investment Canada Act,foreign investment isreviewed byIndustry Canada
todetermine the"netbenefit toCanada". Thereview requirement applies from ageneral threshold
ofCan$168milliontoalldirectacquisitionsofinvestorsestablishedinWTOMembercountries;indirect
acquisitions arenolonger subject toreview. Different thresholds apply toinvestments infinancial
andtransport services industries, energy anduranium production; andallinvestments incultural sectors
arereviewable.54Anoverview ofcurrent review requirements atfederal level, concentrated mainly
inmining, energy andservices sectors, isgiven inChapter IV.According totheCanadian Government,
withtheexception ofthecultural sector, noinvestment proposals havebeenformally disallowed since
thepassage oftheActin1985.
73. Under theCanada Business Corporations Act,companies mayimpose theirownownership
restrictions ifthese aredeemed necessary, under federal orprovincial law,toqualify fortheoperation
ofabusiness orforlicences, permits andother benefits. TheActrequires thatthemajority ofthe
board members offederally-incorporated companies beresident Canadians.55Foreign ownership may
belimited, onacase-by-case basis, incompanies emerging from theprivatization ofState assets.
74. Adescription ofinvestment restrictions maintained atprovincial levelisprovided inBoxIII.4.
BoxIII.4 Investment-related restrictions andcontrols atprovincial level
Alberta
For investments inlarge-scale projects, including those needing industrial development, forest
management, oilsands, power-plant orgasplant coal development permits, Alberta may favour
competitive suppliers, interms ofprice andquality, from within Alberta orCanada. Liquor licences are
restricted toCanadians andpermanent residents. Non-Canadian companies (i.e.companies with over
25percentforeign equity) andindividuals maynotpurchase more than20acres ofnon-urban land.
British Columbia
Liquor licenses arerestricted toresidents from British Columbia. Foreign share ownership inacompany
under theHydro andPower Authority Privatization Actmust notexceed 20percent; atleast70percent
ofdirectors shall beCanadian citizens resident intheProvince.
BoxIII.4 (cont'd)
54Thisappliestobothacquisitions,regardlessofvalue,andnewbusinessesrelatedtoCanada'sculturalheritage
ornational identity, e.g.inareas such asbooks, magazines andnewspapers; films; music; video andaudio
recording; andradio andtelevision.
55Resident Canadian means aCanadian citizen residing inCanada, orapermanent resident living inCanada
formore thanoneyearbeyond thedateofeligibility forCanadian citizenship.WT/TPR/S/22
Page 46Trade Policy Review
Manitoba
Non-residents oftheprovince maynotownmore than10acres ofManitoba farm land.
Under theManitoba Dairy Act,investments indairy processing facilities require approval from theDairy
Board, based on:(i)volume ofmilk; (ii)marketing facilities; and(iii)other factors which mayaffect
thedevelopment ofthedairy industry inthedistrict tobeserved bytheproposed plant.
Allcorporations incorporated outside Manitoba must beregistered prior tocarrying onbusiness forover
30days. AManitoba-incorporated corporation may restrict thetransfer ofitsshares tonon-Canadian
residents.
New Brunswick
Mining leases areconditional onprocessing orfurther processing intheProvince.
Newfoundland
Petroleum andgasprojects areapproved iftheyresult insufficient local employment andpurchases of
goods andservices produced.
Nova Scotia
Petroleum exploration rights areconditional onanattempt touselocal labour andservices. Investment
inelectric power systems bynon-residents isrestricted.
Ontario
Foreign corporations must obtain alicence inorder tocarry onbusiness inOntario. Thelicensing feeto
operate tourist accommodation ishigher fornon-Canadians thanforCanadian citizens orresidents. Only
residents ofOntario qualify forabasic quota toproduce chickens. Acquisition ordevelopment ofasmall
hydroelectric power site, which includes Crown-owned lands, isreserved forresidents ofOntario or
companies incorporated inOntario. Thetotalnumber ofequity shares oftheOntario Energy Corporation
directly orindirectly owned bynon-Canadian residents islimited to10percentofthetotal number of
equity shares. Liquor licences arerestricted toCanadians andpermanent residents. Additional taxes are
levied ontransfers oflandtonon-residents.
Prince Edward Island
Gasoline service stations operated byretailers, wholesalers andwholesaler-retailers must belicensed.
Thecriteria forissuing alicence include public interest considerations. Acquisition oflandorshore
frontage beyond acertain sizebynon-provincial residents issubject tocabinet approval.
Quebec
Purchase offarm land bynon-residents issubject toauthorization. Construction companies must be
locally licensed andestablished tooperate inQuebec. Specialized workers must beinpossession ofa
competence certificate: non-residents have been admitted since 1995. Fishing andhunting rights differ
between residents andnon-residents. Lottery operators must beCanadians andestablished inQuebec.
Butterfat testers fordairy products must beresidents ofQuebec.
Saskatchewan
Licences totrade inalcoholic beverages arereserved forCanadian nationals, permanent residents and
companies established inSaskatchewan. Companies must beregistered under provincial lawtodo
business intheProvince. Farm-land ownership andfishing andhunting licences aresubject tocertain
restrictions.
Source: WTO Secretariat based onreservations made inthecontext ofNAFTA.Canada WT/TPR/S/22
Page 47
75. Canadahasmadeanumberofreservationsconcerningtaxandsubsidymeasuresattheprovincial
level initsSchedule ofGATS commitments (Chapter IV(5)(ii)). Forexample, inQuebec, the
development association, Société dedéveloppement industriel duQuébec ,provides differential treatment
inthecaseofloans tofirms notcontrolled andheadquartered inQuebec. Similarly, aProgramme
Favouring Strategic Alliances andGroupings islimited toQuebec-controlled entities, asarebenefits
available fromtheQuebec Business Investment Corporation. Allpartners ofanypartnership applying
forassistance under theCommunity LoanFund Corporations ofOntario mustbeCanadian residents.56
Ontario 's"MDNM" Programme provides assistance totradeable services sectors.
(c) Provisions intheAgreement onInternal Trade
76. Chapter SixoftheAgreement onInternal Trade commits thesignatories, among other things,
toensure non-discriminatory treatment between firms established indifferent provinces andtorefrain
fromusing local-presence andresidence requirements asacondition forinvestment. Existing measures
aretobeidentified andexamined by1January 1997 (BoxIII.5). Thesignatories alsoundertook "to
work towards reconciling" corporate reporting andregistration requirements. Local-content, sourcing
andpurchasing requirements asacondition forinvestment aretobeabolished, "except forregional
development purposes inexceptional circumstances".
BoxIII.5 Residence requirements atprovincial level
Most provinces require thatamajority ofdirectors ofanycompany beCanadian residents. Provincial
residence requirements generally exist forrealestate agencies, public notaries, debtcollection agencies
andfuneral services.
Provincial residence andmembership intheprovincial chartered accountants 'body isrequired inorder to
practice inBritish Columbia, Manitoba, New Brunswick, Newfoundland, Ontario andSaskatchewan.
Similar requirements areinplace inBritish Columbia, Manitoba, Nova Scotia, Ontario andSaskatchewan
forpublic accountants, certified technicians, engineers, music teachers andinBritish Columbia for
livestock dealers anddetectives. Quebec operates comparable measures foraccountants andengineers.
Only Canadian citizens orpermanent residents maypractice asveterinary surgeons inNewfoundland and
Ontario.
Allmortgage brokers providing services inBritish Columbia andSaskatchewan must beengaged bya
head office orbranch office. Architects must belicensed byand, insome cases, registered with
provincial architects 'associations inorder topractice inManitoba, Newfoundland, Ontario and
Saskatchewan. Licensing requirements inManitoba, Newfoundland andSaskatchewan include a
minimum ofoneyearoflocal experience.
BoxIII.5 (cont'd)
56Preparatory Committee fortheWTO, document PC/SCS/W/3, 15June1994. Noinformation wasavailable
ontheassistance offered.WT/TPR/S/22
Page 48Trade Policy Review
Direct sellers inBritish Columbia andOntario arerequired tohave aplace ofbusiness intheprovince.
Motor vehicle dealers inBritish Columbia, Newfoundland, Ontario andSaskatchewan must maintain local
business premises sufficient fordisplaying motor vehicles. InNova Scotia, residence isrequired to
obtain alicence toselllightning rods.
Truck transport companies andcouriers must register, licence andinsure vehicles inBritish Columbia,
Manitoba andQuebec before theycanoperate onaprovincial highway. Taxi drivers andpassenger bus
transport companies inQuebec must beresidents toobtain apermit fortheir activities. Manufacturers of
farm equipment wishing tosellinSaskatchewan must appoint licensed local dealers andmaintain a
separate place ofbusiness.
Source: Government ofCanada.
(iv) Government financial assistance
77. Fiscal constraints, combined withnewinternational disciplines, haveresulted insignificant
reductions infinancial assistance toindustry since 1991 (Chart III.5). Thecutswere particularly
significant atfederal level; theyformed partofawider policy package toconsolidate public finances
(Chapter I(1)(ii)).
Canada WT/TPR/S/22
Page 49
(a) Sectoral andregional assistance atfederal level
78. Financial assistance toagriculture takesplacethrough bothfederal andprovincial programmes,
amounting tosome 17percentofagricultural GDP in1995-96. Thesingle mostsignificant change
inrecent years wasthetermination oftheWestern Grain Transportation Actin1995(Chapter IV(2)(iii)).
Under Canada 'sWTO commitments, theTotal Aggregate Measure ofSupport (AMS) isnottoexceed
Can$4.3 billion in200057;according totheauthorities, theAMS for1995remained significantly below
therelevant commitment level.
79. Federal assistance toindustrial enterprises isgranted viaregional andsectoral programmes.
Amounts disbursed onselected programmes arepresented inTable III.8. Regional assistance isprovided
mainly through thefederal agencies responsible fortheAtlantic region, thefourwestern provinces,
Northern Ontario, Quebec, andaboriginal development. Regional incentive schemes include grants,
favourable loans, taxcredits, loanguarantees, contributions tosalaries, andtraining assistance.
Recognizing thatthese schemes havenotgenerally beensufficient toattract investment andreduce
economic disparities, theFederal Government hasscaled themdown (1994 Budget).58Thestated policy
objective istofocus onprogrammes thatarelikely toencourage innovation andjobcreation, while
reducing allother initiatives.
80. Support forindustrial development isconcentrated onthemachinery andtransport equipment
(aircraft) industries. According totheauthorities, grants andcontributions provided under the
responsibility ofIndustry Canada declined fromCan$460 million in1992-93 toCan$55 million in1995.
However, thisdoesnotinclude some ofthelargest sources offederal support, suchastheDefence
Industries Productivity Program andother R&D-oriented initiatives (Table III.8).
81. Taxpreferences areavailable forsmall Canadian-controlled private corporations withanequity
capital ofCan$15 million orless. Thepreferences include small-business deductions which lower
thebasic federal taxratefrom 28to12percentuptoaceiling ofCan$200,000 ofactive business
income. Small foreign-controlled companies operating inCanada arenoteligible.
57TheAMS, developed inthecontext oftheUruguay Round negotiations, encompasses allproduction-related
transfers tofarmers andfood producers.
58TheAtlantic Canada Investment TaxCredit allows adeduction from income taxof10percentofall
investment inbuildings, machinery andequipment usedforhunting, fishing, logging, mining, oilandgas,and
manufacturing andprocessing; theratewasreduced from 15percentin1993.WT/TPR/S/22
Page 50Trade Policy Review
Table III.8
Expenditure onselected federal programmes forindustry, 1993-94
(Can$ million)
Programme Expenditure in
1993-94
Defense Industries Productivity Programme 248
Aboriginal Economic Programmes 69
Sector Campaigns (Sectoral Competitiveness Initiatives) 25
Strategic Technologies Programme 21
Technology Outreach Programme/Tech. Opportunities inEurope Programme 16
Northern Ontario Development Initiatives 9
Small Business Loans Act 8
Microelectronics andSystems Development Programmes 8
R&D Incentive Programme fortheMontreal Area 6
Canadian Institute forAdvanced Research 4
Canadian Network fortheAdvancement ofResearch, Industry andEducation 4
Satellite Communications Development Programme 3
Industrial andRegional Development Programme 3
St.Lawrence River Environmental Technology Development Programme 3
Environmental Technology Commercialization Programme 2
Advanced Manufacturing Technology Application Programme 1
Atlantic Enterprise Programme 1
Western Transportation Industrial Development Programme 1
Advanced Train Control System Programme 0
Note: Noinformation wasavailable onseveral programmes referred tobyWTO Members intheCommittee onSubsidies and
Countervailing Measures. However, Canada 'swritten replies totheCommittee aredueon18October 1996.
Source: Government ofCanada.
(b) Support forresearch anddevelopment
82. TheFederal Government provides substantial assistance, intheformofincome taxdeductions
andinvestment taxcredits, forscientific research andexperimental development. Taxpayers mayfully
deduct bothcurrent andcapital expenditure onprojects performed inanygiven year; non-deducted
expenditure maybecarried forward indefinitely. Theauthorities consider thesystem tobethemost
financially attractive among major OECD countries forlarge manufacturing companies.
83. Inaddition, investment taxcredits maybeusedtoreduce orrefund federal income taxes. The
general rateoftaxcredit is20percent(regardless ofnationality), while aspecial rateof35percent
isavailable forcertain small Canadian-controlled businesses. Total taxcredits amount toabout
Can$1.2 billion annually.
84. Thesingle largest R&D-related initiative, theDefense Industries Productivity Programme, is
progressively being replaced by"Technology Partnerships Canada" (Chapter IV(4)(iii)(a)). Funding
istoincrease from Can$150 million in1995-96 toCan$250 million in1998-99.Canada WT/TPR/S/22
Page 51
(c) Provincial initiatives
85. Lasting progress inscaling down subsidization inCanada requires active participation bythe
provinces,whoseshareintotalgovernmentassistancehasdoubledsince1981,reachingsome50percent
(Can$6.4 billion) in1993.59Fiscal constraints mayproduce similar results asatfederal level.
86. Canada 'srecent notification ofsubsidy programmes under Article XVI:1 ofGATT 1994and
Article 25oftheWTO Agreement onSubsidies andCountervailing Measures, doesnotinclude subsidies
extended atprovincial levelandsubsidies granted byCrown corporations.60Provincial programmes
onwhich information wasavailable arelisted inTable III.9; support maybemade subject toprovincial
orCanadianresidencerequirements(section(iii)(b)above).Theprogrammesarefundedeitherexclusively
bytheprovinces concerned orincombination withfederal contributions. Forexample, 60percent
oftheexpenditure under theCanada-Quebec Agreement onIndustrial Development isborne bythe
Federal Government.61
87. TheBritish Columbia Government provides a30percenttaxcredit forinvestments inshares
ofventure capital corporations which holdstakes insmall B.C.companies. InManitoba, taxcredits
areavailable forinvestments ina"Crocus Fund" which, inturn,invests inentities withassets worth
lessthanCan$50 million andwithamajority ofemployees inManitoba. Similar measures areinplace
inAlberta andOntario.
88. Under theAgreement onInternal Trade, aCode ofConduct onIncentives prohibits provinces
from"poaching" anenterprise fromanother province orterritory. However, incentives maybegiven
inorder toprevent relocation outside Canada ifsuchapossibility is"imminent, wellknown andunder
active consideration". Ingranting incentives forregional economic development, thesignatories are
committed "totakeintoaccount theeconomic interests ofother Parties"; inparticular, noincentive
should begiven that(i)sustains foranextended period oftimeaneconomically non-viable operation
which adversely affects thecompetitive position ofafacility located elsewhere inCanada; (ii)increases
capacity regardless ofmarket conditions; or(iii)isexcessive inviewofsuchfactors astheviability
oftheproject andtheeconomic disadvantage theincentive isdesigned toovercome.
59SeeChart III.5 (excluding taxbreaks).
60The issue wasraised byother WTO Members indocuments G/SCM/Q2/CAN/1 (Norway) and
G/SCM/Q2/CAN/3 (European Community). Additional questions were received from theUnited States
(G/SCM/Q2/CAN/5) andJapan (G/SCM/Q2/CAN/2).
61Infoflash, 20May 1996. Under thisAgreement, ahelicopter manufacturer wasrecently granted
Can$16.2 million ininterest-free loans andtaxcredits toexpand anewcivil helicopter programme. Total
programme costs areCan$40 million.WT/TPR/S/22
Page 52Trade Policy Review
Table III.9
Selected provincial assistance programmes forindustry, 1993-94
(Can$ million)
Programme Type ofassistance
Alberta
Market Development Assistance Programme ...
Hydrogen Technology Research Programme ...
Manitoba
Manitoba Industrial Opportunities Programme ...
Manitoba Capital Fund TaxCredit
Newfoundland
Canada-Newfoundland benefits plan ...
Enterprise Newfoundland andLabrador Corporation Softloans, services
Fisheries Loan Board Softloans
Fishing andCoastal Vessels Bounties Act Bounties
Ontario
"MDNM" -Programme d'encouragement audéveloppement commercial ...
"MDNM" -Programme d'aideausecteur desservices échangeables ...
Ontario Winery Adjustment Programmes Softloans based onperformance
Community Loan Fund Corporations ...
Ontario Capital Fund Taxcredit
Prince Edward Island
Grants toenterprises ...
Saskatchewan
Agricultural Credit Corporation Softloans
Quebec
Canada-Quebec Agreement onIndustrial Development ...
Société dedéveloppement industrial duQuebec Softloans
Programme enfaveur desalliances stratégiques ...
... Notavailable.
Note: Noquantitative information (e.g. onbudget appropriations ordisbursements) wasavailable.
Source: Government ofCanada.
(5) Competition Policy
(i) Recent developments
89. While therehavebeennomajor changes inCanada 'sCompetition Actsinceitsentry intoforce
in1986, consultations onasignificant revision arecurrently under way.62Inthesecond halfof1995,
theCompetition Bureau heldapublic enquiry toupdate andamend theActonanumber ofprovisions,
62Anti-competitivepracticesproscribedunderCanadiancompetitionlawaredescribedinthe1994TPRreport,
GATT (1995).Canada WT/TPR/S/22
Page 53
including thoseoninternational co-operation andinformation sharing. Thiswould include theexchange
ofconfidential information anduseofcompulsory powers.63
90. Areview ofcompetition cases ispublished annually bytheCompetition Bureau, grouped by
nature ofoffence andrelevant provisions oftheAct.According totheauthorities, international aspects
ofenforcement arecurrently involved insome 44percentofallcases, reflecting theglobalization
ofeconomic activity.64
91. In1994and1995, fourcases ofmarket foreclosure werebrought totheCompetition Tribunal
under abuse ofdominance provisions. Allcases concerned contractual practices ofdominant firms
orgroups offirms. Forexample, inNovember 1994, theCompetition Tribunal issued aconsent order
prohibiting publishers ofYellow Pages from allocating advertisers among themselves, maintaining
exclusive selling arrangements, andrefusing todealwithindependent selling companies.
(ii) International co-operation
92. During 1994 and1995, several conspiracy cases involved co-operation between U.S. and
Canadian competition authorities, inparticular under theMutual Legal Assistance Treaty (MLAT)
of1984.65Theproducts concerned included plastic dinnerware, thermal facsimile paper andductile
ironpipes. Thelatter caseresulted inaconviction inCanada, following extensive co-operation with
theUnited States, although theU.S.authorities hadconcluded thatthere wasnoinfringement ofU.S.
law.66AccordingtotheCanadianGovernment,cross-borderassistancewasvitaltothesuccessfulsolution
oftheCanadian case,including aCan$2.5 million fine,thehighest everinCanada forasingle charge
ofconspiracy. Inthefaxpaper case, U.S., Canadian andJapanese firms conspired tofixprices of
paper soldinNorth America. Under theMLAT, assistance wasprovided foroffice searches andthe
taking ofstatements from employees.
93. Several co-ordination instruments ininternational competition policy havebeenamended. The
Canada-UnitedStatesAgreementregardingtheApplicationoftheirCompetitionandDeceptiveMarketing
PracticesLawswassignedinAugust1995.ItreplacedaMemorandumofUnderstandingwhichprovided
fornotification andconsultation incases where onecountry 'senforcement activities could affect the
national interests oftheother. While the1995 Agreement incorporated main features oftheMOU,
italsoaddressesdeceptivemarketingpracticesandspecificallyencouragesco-ordinationofinvestigations
63Report oftheConsultative Panel onAmendments totheCompetition ActtotheDirector ofInvestigation
andResearch, 6March 1996. Specific topics outlined forreview were: notifiable transactions, confidentiality
andmutual assistance, misleading advertising anddeceptive marketing practices, regular price claims, price
discrimination andpromotional allowance, access totheCompetition Tribunal, prohibition orders, anddeceptive
telemarketing solicitations.
64Thelatter share corresponds totheproportion ofcases, overthe1992-93 to1994-95 period, where the
relevant market wasdefined toinclude oneormore foreign jurisdictions orwhere atleastoneoftheparties was
foreign-owned orcontrolled.
65TheCanada-United States Mutual Legal Assistance Treaty provides forcross-border assistance inrespect
ofcriminal,butnotcivil,competitionlawmattersinthetwocountries.Thisincludeslegalassistanceinallaspects
relating totheinvestigation, prosecution andsuppression ofoffences. Itisnotnecessary fortheconduct under
investigation tobeillegal under bothjurisdictions.
66Canada PipeCompany Ltd.pleaded guilty toconspiring withU.S. PipeandFoundry Company tomake
thelatter exittheCanadian market forductile ironpipe.WT/TPR/S/22
Page 54Trade Policy Review
andenforcement.67Contrasting withtheMLAT, the1995 Agreement applies tobothcriminal and
civillawmatters.
94. TheNAFTAcontainsgeneralprovisionsonco-operationincompetitionlawenforcementamong
thesignatories, including onmutual legal assistance, notification, consultation andexchange of
information. AWorking Group onTrade andCompetition istoreport andmake recommendations
totheFreeTrade Commission onissues ofcompetition lawandtrade before 1999.
95. IntheOECD context, arecently revised recommendation endorses closer co-operation between
competition authorities (Revised Recommendation Concerning Cooperation between Member Countries
onAnti-CompetitivePracticesAffectingInternationalTrade).Newprovisionsrelatetotheco-ordination
ofinvestigations, mutual assistance, information sharing andconfidentiality. Although itisnotlegally
binding, theCanadian Government expects theRecommendation toaccelerate international notification
andconsultation activities. Inaddition, inmid-1996, Canada wasnegotiating abilateral agreement
oncompetition policy withtheEuropean Union.
(iii) Exclusivity rights (State trading)
96. UndertheUnderstandingontheInterpretationofArticleXVII(Statetrading),Canadahasnotified
theCanadian Wheat Board, theCanadian Dairy Commission, theCanadian Freshwater FishMarketing
Corporation, andtheprovincial liquor boards.68TheOntario Bean Producers Marketing Board isto
beincluded in1996. Since Canada 's1994 Trade Policy Review, theCanadian Saltfish Corporation
andtheAgricultural Products Board havebeenabolished.69According totheauthorities, NAFTA
membership hasnotaffected thescope andcoverage ofCanada 'sState-trading activities.
97. Intheservices sectors, anumber ofentities enjoy exclusive production ortrading rights under
federal orprovincial law(Table III.10). They cover segments ofthetelecommunications, electricity,
water, transport, andinsurance sectors.
67Inparticular, situations where notification isrequired andtherelevant timing aresetoutingreater detail
thanundertheMOU.Thenotificationrequirementappliestoinvestigationsrelevanttotheotherparty'senforcemen t
activities, merger investigations ofcompanies organized under thelawsoftheother party, remedial orders that
require implementation intheother country, andinterventions bythecompetition authorities inregulatory or
judicial proceedings.
68WTO documents G/STR/N/1/CAN andAdd.1, 29September 1995 and10November 1995.
69TheAgricultural Products Act,previously administered bytheAgricultural Products Board, isnowbeing
applied byofficials ofAgriculture andAgri-Food Canada.Canada WT/TPR/S/22
Page 55
Table III.10
Exclusivity arrangements affecting production ortrade, 1996
Product area Entity Coverage
Primary sectors
Wheat, barley andproducts Canadian Wheat Board Exports
Butter andskim milk Canadian Dairy Commission Exports, imports, interprovincial trade
Freshwater fishandproducts Canadian Freshwater Fish
Marketing CorporationExports, interprovincial trade
White peabeans Ontario Bean Producers
Marketing BoardExports, interprovincial trade
Manufacturing sector andutilities
Alcoholic beverages Allprovinces Imports, interprovincial trade anddomestic
sales
Electricity production Certain provinces Public monopoly
Services
Electricity distribution Certain provinces Public monopoly
Certain telecommunication services Teleglobe International overseas telecommunications
Telesat National satellite communications
Certain local monopolies Specified telephone services (Chapter IV)
Northwest Tel Certain longdistance services inNorthwest
Postal services PostOffice Certain mailservices
Carinsurance services Certain provincial monopolies Mixed public/private monopolies
Health services Certain provincial monopolies Mixed public/private monopolies
Source: Government ofCanada, WTO Secretariat.
(iv) Price regulation andsurveillance
98. Industry-specific regulatory activities aregenerally confined toareaswhere natural monopolies,
policy intervention (e.g. inthecontext ofsupply management) orother factors prevent ordistort
competition. According totheauthorities, therehasbeennosignificant change since1994intherange
ofgoods andservices covered, orintheadministration ofpriceorproduction controls. Thefollowing
areas arecurrently under federal orprovincial regulation: dairy products (prices); beer(minimum
retail prices incertain provinces), rents; tuition fees; health service fees; basic telecommunication
rates; cablevision rates; public transportation fares(excluding airtransport); prices fornatural gas,
water andelectricity. Chicken, turkey andeggproducts aresubject toproduction quotas under supply
management schemes (prices areunregulated); quotas fortobacco production arenegotiated between
producer boards andtobacco firms.WT/TPR/S/22
Page 56Trade Policy Review
(6) Intellectual Property Protection
(i) Recent developments
99. Canada 'sintellectual property legislation hasnotchanged significantly following theUruguay
Round. TheCopyright ActandtheWTO Implementation Acthavebeennotified totheWTO.70In
order toimplement theAgreement onTrade-Related Aspects ofIntellectual Property Rights (TRIPS),
newprovisions havebeenadded totheTrade-marks Acttoprotect registered geographical indications.
TheActnowprohibits theadoption oruseofaprotected geographical indication inrespect ofwines
andspirits notoriginating intheindicated territory.
100. Current procedures foracquiring intellectual property rights, theirduration andthepenalties
under criminal lawfornon-compliance arelisted inTable III.11.
Table III.11
Acquisition andenforcement ofintellectual property rights, 1996
Legislation Acquisition Duration Sanctions
Copyright Act Noregistration isrequired forthe
acquisition ofcopyright andforrights for
performers.Copyright protection generally lastsfor
theauthor 'slifeplus50years (50years
from creation forphotography andsound
recordings). Forworks bymore thanone
author, theperiod starts onthelast
author 'sdeath.Fines upto
Can$1 million
andimprisonment
uptofiveyears,
unlimited civil
damages.
Trade-marks Act Trademark protection issubject to
registration. Theregistration
supplements theprotection provided
under common lawagainst passing-off
andcorresponding protection against
unfair competition under theCivil Code
ofQuebec.Under theTrade-marks Act,trademark
registrations areforaperiod of15years
andcanberenewed indefinitely on
payment ofrenewal fees.Unlimited fines
andimprisonment
uptotwoyears
under the
Criminal Code.
Unlimited civil
damages.
Geographical
indicationsSeeabove. Indefinite.
Industrial Design
ActProtection forindustrial designs is
subject toregistration.Tenyears from thedateofregistration,
subject tothepayment ofmaintenance
fees.Unlimited civil
damages.
Patent Act Protection ofinventions issubject to
registration; the"first-to-file" rule
applies.Twenty years from thedateoffiling
(patents forwhich application wasfiled
afterOctober 1989).Fines upto
Can$200 and
imprisonment up
tothree months.
Unlimited civil
damages.
Integrated
Circuit
Topography ActProtection issubject toregistration
(including layout designs).Uptotenyears from thefiling for
registration orthedateoffirstcommercial
exploitation, whichever isearlier.Unlimited civil
damages.
Undisclosed
informationProtection isprovided under Canadian
common lawandcorresponding
provisions oftheCivil Code ofQuebec
regarding trade secrets. Noregistration
isrequired.Unlimited Unlimited
damages.
Source: Government ofCanada, WTO Secretariat.
70WTO document IP/N/1/CAN/C/1, 3April 1996, contains theCopyright ActandSections 56to69ofthe
WTO Implementation Act.Canada WT/TPR/S/22
Page 57
101. Canadian customs services arenotentitled toseizeinfringing imports ex-officio. Under both
theCopyright ActandtheTrade-marks Act,customs officials areauthorized todetain goods onlysubject
toacourt order obtained bytheholder oftheintellectual property right.71
(ii) Compulsory licensing
102. Provisions forcompulsory licensing exist under thePatent ActandtheIntegrated Circuit
Topography Act.Under thePatent Act(Section 65),acompulsory licence maybegranted intheevent
oftheexclusive rightunder apatent being abused.72Theprocedure under Section 65isavailable only
afterthreeyears frompatent grant andmaybecommenced by"anyperson". Under Section 19,federal
orprovincialgovernmentsmayapplytotheCommissionerofPatentsforauthorizationtousethepatented
invention. Itistobegranted onlyifthegovernment concerned hadmade efforts toobtain approval
from thepatent owner onreasonable commercial terms andconditions, andifthese efforts hadnot
beensuccessful within areasonable timeperiod. Anyuseoftheinvention issubject toremuneration
asdetermined bytheCommissioner.73There havebeennosuchcases since theentry intoforce of
theTRIPS Agreement.
103. UnderCanada'sCompetitionAct,theFederalCourtmayordercompulsorylicensingasaremedy
totheanti-competitive useofintellectual property rights (including patents, trademarks, copyrights,
andrights concerning integrated-circuit topographies). However, according totheauthorities, there
havebeennosuchorders since 1946.74
104. Section86oftheCompetitionActallowsfirmstoenterintoaspecializationagreement,provided
theagreementisregisteredunderCompetitionTribunalauthority.75TheTribunalmayorder,ongrounds
ofabuseofintellectualpropertyrights,thatawiderlicensingofpatentstakeplaceorthatimportlicensing
requirements belifted. However, nosuchagreements havebeenregistered todate.
71While there arenosimilar provisions inthePatent Act,customs officials would actupon acourt order
directed atthem.
72Under Section 65(1) ofthePatent Act,thefollowing practices aredeemed tobeabusive: (i)demand for
thepatented article inCanada isnotmetto"anadequate extent andonreasonable terms"; (ii)Canadian trade
orindustry (ortheirestablishment) isprejudiced bythepatentee 'srefusal togrant alicence, which isinthepublic
interest, onreasonable terms; (iii)Canadian trade orindustry is"unfairly prejudiced" bytheconditions attached
tothepurchase, use,etc.ofthepatented article orpatented process; or(iv)apatent isutilized "unfairly" to
prejudice themanufacture, use,orsaleofnon-protected materials inCanada.
73Section 7.1oftheIntegrated Circuit Topography Actallows theGovernment ofCanada oraprovince to
apply totheCommissioner ofPatents foralicence onthecondition thatitisforpublic, noncommercial use
ofregistered topography bythatGovernment. Inaddition, under theDefense Production Act,theGovernment
ofCanada mayrelieve defence supply contractors from claims forinfringement andfrom theobligation topay
royalties inconnection withanypatent, registered industrial design orregistered topography inthefurnishing
ofengineering ortechnical assistance orservices fortheperformance ofasupply contract.
74Cases under thepreceding legislation (theCombined Investigations Act)during the1960s wereeither settled
ordropped.
75Under aspecialization agreement, parties agree todiscontinue theproduction ofspecified goods orservices
oncondition thatevery other participant doesthesame withanother product, andtobuyfrom each other the
products covered.WT/TPR/S/22
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(iii) Provisions governing parallel imports
105. According totheauthorities, prevailing legalinterpretation makes itgenerally difficult fora
Canadian rightholder toprevent theimportation ofproducts thathavebeenmanufactured andmarketed
inaforeign country. However, incaseswhere alicence toforeign intellectual property rights stipulates
aterritorial limitation excluding Canada, courts haveauthorized bansonparallel imports.
106. Todetermine theability ofproperty rightowners toprevent parallel imports, Canadian law
applies theBerne Convention, theParis Convention, thenational-treatment provisions oftheNAFTA
andTRIPS Agreements, aswellasthem.f.n. principle oftheTRIPS Agreement.76Parallel imports
cannot bebarred under theIntegrated Circuit Topography Act,which provides complete exhaustion
ofproperty rights.
107. Legislation tomodernize Canada 'scopyright law(BillC-32), tabled inApril 1996, isintended
toconfer new"explicit andfar-reaching" rights oncreators andentertainers, according totheMinister
ofCanadian Heritage.77Inparticular, book distributors would beabletoprevent parallel imports of
anybooks protected under Canadian copyright provisions. Thedraftlawincludes thepossibility of
claiming exclusivity fortheimportation ofbooks withregard todifferent geographical partsofCanada
andanyparticular sector ofthemarket (e.g.theretail market ortheeducational market). Remedies
include seizure, injunction anddamages. Accompanying regulations areexpected toinclude safeguards
withregard toprices andthequality ofservice.78
108. BillC-32 alsoprovides fortheextension ofneighbouring rights toperformers andproducers
ofsound recordings. Ifapproved, Canada could become aParty totheRome Convention. Right owners
would receive aroyalty forbroadcasts oftheirwork, provided theircountries aresignatories tothe
Convention.79WhileprimarilyaffectingCanada's468privateradiobroadcasters,theroyaltymechanism
would alsoapply toallpublic stations playing recorded music.80
76Among thetreaties andconventions mentioned intheTRIPS Agreement, Canada isaParty totheParis
Convention (Stockholm textof1967), andtheBerne Convention (Rome textof1928). Thedraft copyright
legislation currently before Parliament foresees theaccession ofCanada totheParis textoftheBerne Convention
andtotheRome Convention. Canada isnotaParty totheWashington Treaty.
77Infoflash, 28May 1996. Thefollowing presentation draws mainly onthissource.
78International Trade Reporter, 1May1996. Parallel importation ofother types ofworks canbeprevented
ifitwould have been infringing fortheperson whomade thework todosoinCanada.
79TheUnited States, which produces overhalfofsound recordings broadcast inCanada, isnotamember
totheRome Convention (International Trade Reporter, 1May 1996).
80Underthebill,allradiostationswouldbeleviedCan$100onthefirstCan$1.25millionofadvertisingrevenue.
TheCopyright Board would beempowered tosetrates applying toadditional revenue aswellaslevies onnew
performances andproductions (International Trade Reporter, 1May 1996).Canada WT/TPR/S/22
Page 59
Annex III.1
Canadian Anti-Dumping Law-Main Features andRecent Modifications
Processing ofcomplaints
109. Anti-dumpinginvestigationsaregenerallyinitiatedonreceipt,bytheDeputyMinisterofRevenue
Canada, ofaproperly documented complaint byoronbehalf ofanaffected Canadian industry.81
Although theDeputy Minister isauthorized toself-initiate investigations ifthereisevidence ofdumping,
injury andacausal link,there havebeennosuchcases since January 1994. (During thepreceding
two-year period, there wasoneself-initiation; itconcerned certain steelplates imported from Italy,
Spain, Ukraine andtheRepublic ofKorea.)82According totheauthorities, theresponsibility for
complaining andpresenting evidence normally restswiththedomestic industry.
110. Initiation ofaninvestigating issubject toa"reasonable indication" thatdumping "hascaused
injury orretardation oristhreatening tocause injury" (SIMA, Article 31(1) asamended).83TheDeputy
Minister isrequired, inthiscontext, toverify theaccuracy oftheinformation contained inthecomplaint,
including through anexamination ofitsinternal consistency andtheuseofavailable statistical
information. Ifhedecides thattheevidence ofinjury isnotsufficient toinitiate aninvestigation, the
Deputy Minister orthecomplainant mayrefer thecasetotheCITT foranopinion onwhether the
information available points toa"reasonable indication" ofmaterial injury. (Thesame recourse is
available toanyinterested person orgovernment iftheDeputy Minister initiates aninvestigation).84
111. Thecontent ofa"property documented" complaint isdefined inSection 23.1oftheSIMA
andfurther detailed inSections 37and37.1oftheSIMA Regulations (SIMRs). Accordingly, the
complaint mustinclude listsofCanadian andforeign producers andofexporters andimporters ofthe
goods concerned, aswellasdataonimport trends andontheeffects ofdumped supplies onprices
inCanada. Revenue Canada isrequired todeclare within 21daysofreceipt ofacomplaint whether
itisproperly documented; theexporting country thatmust beinformed.85
112. Section 2(1.1) oftheSIMA provides that,inexceptional circumstances, theCanadian market
maybedivided intotwoormore regions whose producers canbetreated asaseparate industry. This
presupposes thattheysellalmost alloftheirproduction intherelevant market andthatdemand inthis
market isnotsupplied toasubstantial degree bycompanies located elsewhere inCanada. Inaddition,
81Pursuant toArticle 5.4oftheWTO Agreement onAnti-Dumping, Section 31oftheSIMA requires that
"thecomplaint must besupported bydomestic producers whose production represents atleast fiftypercentof
thetotalproduction oflikegoods bythose domestic producers whoexpress either support fororopposition to
thecomplaint. Furthermore, theproportion ofdomestic producers whosupport thecomplaint represents atleast
twenty-five percentofthetotalproduction oflikegoods bythedomestic industry". According totheauthorities,
todetermine thelevel ofsupport andopposition, theDeputy Minister maypollallknown domestic producers
ifnecessary (e.g.where therequired level ofsupport isnotevident onthefaceofthepetition itself); theywould
beasked tosubmit production figures. WTO document G/ADP/W/265, 29January 1996.
82SeeGATT (1995).
83Retardation isdefined intheSIMA asthe"material retardation oftheestablishment ofadomestic industry".
84Canadian International Trade Tribunal (1995).
85These provisions implement Articles 5.2and5.5oftheWTO Agreement onAnti-Dumping.WT/TPR/S/22
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theCITT must ensure thatthere isaconcentration ofdumped imports intotheregional market and
thatdumping hasaffected almost alloftheproduction inthismarket (SIMA, Section 42(5)a andb).86
While twoinitiations were made onaregional basis between January 1992 andDecember 1993,
pertaining tocertain vegetables imported from theUnited States intoBritish Columbia,87there have
beennosuchcases since.
Theinvestigation process
113. TheDeputy Minister hasnomore than90daysaftertheinitiation ofaninvestigation tomake
apreliminarydeterminationofdumpingandofinjury.88Thepreliminarydeterminationmust,inrelation
toeachexporter ofgoods, specify theestimated margin ofdumping andtheexistence ofareasonable
indication ofinjury, threat thereof, orretardation, aswellasthegoods towhich thepreliminary
determination applies andtheirCanadian importer. While, previously, anaffirmative preliminary
determinationbytheDeputyMinisterofRevenueCanadaalwaysresultedintheimpositionofprovisional
duties, hemustnowconsider whether theimposition is"necessary toprevent injury, retardation or
threat ofinjury".89Anaffirmative preliminary determination triggers theCITT'senquiry intothe
existence ofinjury andcausation.
114. Following thepreliminary determination, theDeputy Minister hasafurther 90daystogive
afinaldetermination. Itiscontingent onhisbeing satisfied thatthegoods concerned havebeendumped,
thedumping margin isnotinsignificant, andthevolume ofimports notnegligible. Once theDeputy
Minister hasissued apreliminary determination, theCITT conducts aninjury investigation andissues
afinding.
115. Ananti-dumping investigation maybesuspended through theacceptance ofanundertaking
bytheDeputy Minister ofRevenue Canada. Pursuant toSection 2oftheSIMA, theexporters involved
must account for"allorsubstantially all"ofthesupplies toCanada ofdumped goods and,under
Section 49,apreliminary determination ofdumping must have been made before.90(Hitherto,
undertakings could beaccepted onlypriortoapreliminary determination.) Inaddition, iftheexporter
involved sorequests, bothRevenue Canada 'sinvestigation andtheCITT'senquiry aretobecompleted
aftertheacceptance ofanundertaking.91Undertakings aretobeterminated ifRevenue Canada concludes
initsfinaldetermination thatthevolume ofdumped goods isnegligible orthemargin ofdumping
insignificant, oriftheCITT'senquiry results inafinding ofnoinjury. Before theinjury finding,
86These provisions areinaccordance withArticle 4.1(ii) oftheWTO Agreement.
87SeeGATT (1995).
88Incertain situations, thedeadline canbeextended toupto135days.
89Although ithadalready been thepractice ofRevenue Canada toaddress theexistence ofmaterial injury
initspreliminary determinations, thenewlanguage appears tohave resulted instricter evidential requirements.
Inthecaseofrefined sugar (Table III.4) thepetitioners were required toproduce asupplementary submission,
updating theevidence ofinjury. SeealsoThomas etal.(1995).
90Thomas etal.(1995). Therequirement tocover substantially allsupplies hasbeeninterpreted byRevenue
Canada tomean thatanundertaking must apply toatleast 85percentofthevolume ofdumped imports into
Canada andinclude anyexporter whohasthepotential toshiplarge quantities ofdumped goods intoCanada.
91Theprovisions referred tointhisparagraph areinaccordance withArticles 8.1, 8.2and8.4oftheWTO
Agreement onAnti-Dumping.Canada WT/TPR/S/22
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Revenue Canada mayterminate anundertaking itconsiders asnolonger required. Provisional duties
arenotcollected during theperiod inwhich theundertaking isinforce.
116. Implementing Article 9.5oftheWTO Agreement onAnti-Dumping, Section 13.2oftheSIMA
nowprovides foranexpedited review ofnormal value, export priceanddumping margins. Thereview
maybeinitiated byexporters thatarenotassociated withother companies towhich aCITT injury
finding relates, andthathaveneither beengiven appropriate notice norbeenrequested toprovide
information inrelation totheirexports. Oncompletion ofthereview, Revenue Canada mayeither
confirm oramend normal value, export price ordumping margin.
117. TheSIMA doesnotcontain specific "anti-circumvention" rules. Ifparts orcomponents of
aproduct arenotsubject toanongoing investigation oroutstanding action, theycould beincluded
onlythrough initiating anewinvestigation. However, under Section 38ofSIMRs, aninvestigation
intoaproduct could becombined withaninvestigation intoitsparts andcomponents prior tothe
preliminary determination. TheCITT'sinjury enquiry would thencover allsubject goods. While
theCITT isnotallowed toexpand thescope ofaninvestigation, itmayexclude specified products
andsuppliers.92
Establishment ofdumping margins
118. Asageneral rule,anti-dumping margins areestablished forgroups oflikeproducts exported
toCanada atcompany level. Tothisend,theweighted average export priceoftheproducts issubtracted
fromtheweighted average normal value overthereference period (generally thelast12months prior
totheinitiation).93Anoverall dumping margin maybeestablished forindividual exporters through
averaging therelevant findings across product groups. Withaviewtopreventing groups with"negative"
margins -i.e.withexport prices exceeding normal values -from offsetting positive margins found
forother groups, theformer aretreated asiftherelevant margin waszero(SIMA, Section 30.2(1)).
Section 30.1oftheSIMA alsoallows forthedetermination ofanaverage margin bycountry, based
onthefindings forthevarious exporters.
119. Intheevent of"targeted" dumping, theDeputy Minister maybasethedumping margin on
selectedexportsalesheconsidersrelevant.(AccordingtoSection30.2(2)oftheSIMA,targeteddumping
implies significant pricevariations among purchases, regions ofCanada ortimeperiods.) Asinother
92WTO document G/ADP/W/265 andG/SCM/W/275.
93Asforeseen under theWTO Agreement, thenormal value generally corresponds tothedomestic sales price
oflikeproducts intheexporting country or,ifthisprice isdeemed unreliable forspecified reasons, totheexport
price toathird country or,intheevent ofmonopoly situations orgovernment interventions, toanotional price.
Thelatter relies, forexample, onadjusted third-country market prices oraconstructed value based onproduction
andother costs andareasonable profit margin. Innormal circumstances, theexport price istheexporter 'ssales
price or,iflower, theimporter 'spurchase price (adjusted forcosts, charges, andexpenses incurred inpreparing
thegoods forshipment, anyduties ortaxes, andtransport costs). Inexceptional cases, involving forexample
large capital items, dumping margins foraproduct group maybeestablished onatransaction-by-transaction
basis.WT/TPR/S/22
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cases, theaverage home market priceoflikeproducts would beusedasthenormal value.94However,
there havebeennosuchinstances since January 1994.
120. Ifadeterminationofdumpingmarginsforallgoodsunderconsiderationisdeemedimpracticable-
forexample inviewofthenumber ofexporters concerned orforanyother reason -theDeputy Minister
maylimittheinvestigation tospecified samples. (Canadian lawhasadded "anyother reason" tothe
criteriasetforthintheWTOAgreementwithaviewtocapturinginstances,e.g.inordinatelycomplicated
cases, where sampling might berequired tocomplete theinvestigation within thestatutory timeframe.)95
Therelevant provisions callfortheinclusion of"thelargest percentage ofgoods" from eachofthe
countries under consideration that, intheopinion oftheDeputy Minister, "can reasonably be
investigated" or,alternatively, ofsamples from eachofthecountries that,based ontheinformation
available, are"statistically valid".96Among thecases initiated since January 1994, sampling was
employed intheinvestigations forpasta, bacteriological culture media, andsugar (Table III.4).
Injury determination
121. TheCITT has120daysfromreceiving notice ofthepreliminary determination toconduct the
enquiry andissue afinding; within anadditional 15daysitmustissuereasons forthedecision. The
CITT'senquiry includes thecollection ofinformation, thepreparation anddistribution ofaresearch
report, andapublic hearing. Thehearing gives interested persons anopportunity tomake written
submissions, callandcross-examine witnesses, present evidence andgivestatements.
122. Pursuant totheWTO Agreement, SIMA 'sinjury criterion hasbeenmodified. Theprevious
standard of"hascaused, iscausing orislikely tocause material injury orhascaused oriscausing
retardation" hasbeenreplaced with"hascaused injury orretardation oristhreatening tocause injury".97
Inaddition, anewSection 2(1.5) oftheSIMA conditions injury determinations ontheexistence of
clearly foreseeable andimminent circumstances inwhich dumping would cause injury. While
acknowledging thattheabove changes resulted inclearer andmore rigorous language, theauthorities
haveexpressed doubt, however, astowhether theyamounted toareorientation insubstance.
123. Canadianlawdoesnotcontaina"lesser-dutyrule"underwhich,despitehigherdumpingmargins,
anti-dumping duties maybelimited toanamount necessary toremove injury. Theauthorities have
argued thattherelevant provisions inArticle 9.1oftheWTO Agreement arepermissive innature and,
although notdirectly related tothe"lesser-duty rule,referred toapublic interest clause contained in
Section 45ofSIMA.98Itprovides thattheCITT reports totheMinister ofFinance, andsubmits a
94This provision implements Article 2.4.2 oftheWTO Agreement onAnti-Dumping which provides that
themargin ofdumping canbebased onacomparison ofanormal value established onaweighted average basis
withprices ofindividual export transactions ifthere isapattern ofexport prices which differed significantly
among different purchasers, regions ortimeperiods.
95WTO documents G/ADP/W/265 andG/SCM/W/275.
96Therelevant provisions (Section 30.3(1) oftheSIMA) arebased onArticle 6.10oftheWTO Agreement
whichpermitstheinvestigationtobelimitedintermsoftheexportersorproductsreviewed.Exportersnotincluded
areadvised byRevenue Canada thattheymayvoluntarily submit theinformation requested.
97Inthiscontext, injury isdefined asmaterial injury toadomestic industry.
98WTO documents G/ADP/W/269 andG/SCM/W/279, 29January 1996.Canada WT/TPR/S/22
Page 63
statement offactsandreasons, iftheimposition ofananti-dumping duty, infullorinpart,isdeemed
nottobeinthepublic interest. Section 45allows any"interested" person, including users oflikegoods
andassociations representing consumers, tomake arepresentation inthiscontext. IftheCITT considers
thereisapublic interest issue, aninvestigation isconducted. Since January 1994threerepresentations
havebeenreceived; intwocases (pre-formed fibreglass pipeinsulation; caps, lidsandjars), theCITT
decided nottolaunch aninvestigation. Inathirdcase(refined sugar), theinvestigation showed that
areduction ofduties would notbeinthepublic interest and,asaconsequence, theCITT didnotissue
areport totheMinister ofFinance.
124. Inaddition, Section 14empowers theGovernor inCouncil, ontherecommendation ofthe
Minister ofFinance, toexempt anygoods orclassofgoods fromtheapplication oftheSIMA. However,
thisprovision istobeconsidered asalastresort, e.g.inemergency situations, andhasnotbeeninvoked
todate. According totheauthorities, Section 14must beusedforbroader policy purposes, e.g.on
grounds ofpublic health andsafety, andwhere thenormal process under Section 45would prove too
lengthy inviewoftheimportance ofthepublic interest involved.99
125. Inmaking aninjury enquiry, theCITT mayassess thecumulative effect ofthedumping of
products fromcountries towhich thepreliminary determination applies. However, thispresupposes
that,inrelation toeachcountry, thedumping margin is"notinsignificant" andthevolume ofimports
is"notnegligible" andthatacumulative assessment is"appropriate".100
Final measures
126. FollowinganaffirmativeinjurydeterminationbytheCITT,andintheabsenceofanundertaking,
thefinalduties aredue.However, theymaynotbecollected inpractice. Toavoid payment, exporters
mayraisetherelevant price tothelevelofthenormal value asdetermined bytheDeputy Minister.
Therelevant provisions areintended toensure transparency forthecompanies affected andallow them
-rather thanCanada 'spublic coffers -toappropriate thepricedifferential involved. Ontheotherhand,
ifexporters wanted tonarrow thedumping margin byreducing theirhome market price, theywould
needtoapply forareview ofthenormal value.101
127. Provisional duties arerefunded if,afterthecompletion ofanenquiry, theDeputy Minister
hasfound nodumping oriftheCITT'smakes (only) afinding ofthreat ofinjury. With aview to
refunding anyexcess provisional duties paid, Revenue Canada isrequired, within sixmonths after
issuance oftheCITT'sorder orfinding, toreview thenormal value andexport price thathadbeen
applied during theprovisional period.
128. Section 76oftheSIMA mandates theCITT toreview anorder orfinding onitsowninitiative,
attherequest oftheDeputy Minister oranyother person orgovernment. TheSIMA review provisions
arenowreflected inArticles 11.2and11.3oftheWTO Agreement. (Specific review provisions apply
99WTO documents G/ADP/W/269 andG/SCM/W/279.
100Section 2ofSIMA defines imports as"negligible" iftheyrepresent lessthan3percentofthetotalvolume
ofgoods released intoCanada from allcountries. However, ifthetotalvolume ofimports from three ormore
countries, accounting eachforlessthan3percent, addsuptoover7percent, these supplies arenotconsidered
negligible. Dumping margins oflessthan2percentoftheexport price aredeemed "insignificant".
101SeeGATT (1995).WT/TPR/S/22
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toNAFTA participants.)102Requests forreview could befiledeither inresponse totheCITT'snotice
thatanorder isabout toexpire oratanyearlier dateifcircumstances havechanged. Indetermining
whether anorder should becontinued, theCITT usually considers thelikelihood oftheresumption
ofdumping andofmaterial injury. Between January 1994andMarch 1996, theCITT issued 11review
orders under Section 76;infourcases, thefinding ofdumping wasrescinded.
102SeeGATT (1995).