00-5471 MOREPRESS RELEASE
EMBARGO:  NOT FOR PUBLICATION UNTIL
1300 GMT 15 DECEMBER 2000
PRESS/TPRB/151
15 December 2000
CANADA IS REAPING THE FRUITS OF A LIBERAL TRADE REGIME WHILE
BARRIERS REMAIN IN SOME KEY AREAS
Canada's trade and investment regime is amongst the world's most transparent and liberal
notwithstanding persistent barriers in a few important areas, says a new WTO report on the trade
policies of Canada.  Reaping the fruits of a generally outward looking environment, both trade and
investment flows have continued to expand rapidly since Canada's previous Trade Policy Review in
1998.  Barriers persist in certain agri-food industries, textiles and clothing, and some servicesactivities, notes the report.
Sound economic policies have allowed Canada to enjoy its ninth consecutive year of
economic growth, achieve an improved fiscal balance, reduce unemployment, and increase real after-
tax incomes.  Canada's liberal trade regime has played an important role in these achievements,highlighting the benefits of trade for specialization, resource allocation and, ultimately, living
standards.
The new WTO Secretariat report, along with policy statements by the Canadian government,
will serve as a basis for the trade policy review of Canada by the Trade Policy Review Body of theWTO on 13 and 15 December.
The report says that Canada participates fully in the work of the WTO, including through
information sharing, support for trade facilitation initiatives, and active efforts to increase
transparency.  Canada is active in the ongoing negotiations in agriculture and services.  In agriculture,it seeks on the one hand improved market access, export subsidy elimination, and reduced trade-
distorting domestic support, while on the other it wishes to preserve its right to operate "orderly
marketing systems" in the wheat, dairy, poultry and egg sectors.  In services, Canada seeks to
strengthen multilateral rules and improve market access, while ensuring that its public health and
education systems are not jeopardized, and that new obligations do not run counter to its culturalpolicy objectives, the report also says.PRESS/TPRB/151
Page 2
MOREUnder the WTO dispute settlement mechanism, Canada has been involved as a complainant
in various cases seeking to preserve market access for its exports (e.g., aircraft, asbestos, beef, andsalmon).  Concurrently, a number of long-establi shed Canadian sectoral support programmes have
been challenged under multilateral rules, including those for dairy exports, aircraft, motor vehicles,
generic drugs, and magazines.
Canada has continued to build up its already extensive network of preferential arrangements.
These have helped open the Canadian market.  Such arrangements, however, may also distort trade
and investment patterns as they involve different margins of preference and rules of origin.  Since
1998, Canada has engaged in negotiations for new FTAs with Costa Rica, EFTA, and is exploring
such negotiations with Singapore.  Notwithstanding these efforts, the privileged relationship with the
United States is likely to remain paramount for Canada for years to come.  The relationship has served
well Canada's economic interests, but also magnified its exposure to the U.S. market, which now
receives some 86% of Canadian merchandise exports.
Overall Canada's market access in services is relatively liberal and has been further enhanced
since 1998.  Thus, in financial services, steps have been taken to improve foreign access, while in the
telecommunications industry certain domestic ownership requirements and monopolies have been
abolished.  Some restrictions have come under close domestic scrutiny:  in air transport, competitionpolicy concerns led the competition authority to question existing barriers to foreign participation;  in
the cultural sectors, new instruments are being soug ht to promote Canadian culture in the face of an
increasingly rigorous application of multilateral disciplines.
The WTO report stresses that for goods, tariffs are the main trade instrument.  The tariff
regime offers duty-free entry to over 90% of imports, either under MFN or preferential rules, resulting
in a trade weighted average tariff of only some 0.9%.  By contrast, the simple MFN average tariff
stands at 7.1%, while the average on dutiable items is some 13% due to the higher tariff applied to a
number of sensitive products;  these include vegetables, cut flowers, sugar, wines, textiles, clothing,
footwear, and ships, many of which are of export interest to developing countries.  In this respect, anddespite changes to the tariff regime for least developed countries since 1998, Canada's autonomous
tariff concessions in favour of developing countries remain modest compared with preferences
established under reciprocal free-trade agreements (FTAs).  Extending such preferences on a MFN
basis would both enhance welfare in Canada itself and improve market access to developing and other
partners.
Canadian producers have continued to seek protection against imports through anti-dumping
(AD) actions;  85 definitive AD duties were in force in mid-2000 making Canada one of the most
intensive AD users.  Exports from some 35 partners  are affected, 58% of which cover steel products.
About 16% of AD measures have been in place for ten years or more.
The report points out that a number of quantitative restrictions are maintained to protect
domestic producers against foreign competition.  Canada has taken unilateral liberalizing steps in
textiles and clothing but import quotas impose significant restrictions to certain products, some of
great interest to developing countries.  Tariff on products subject to tariff quotas (TQs) ranging to
over 300% in the dairy and poultry industries continue to amount to de facto quantitative restrictions.
By shielding those industries from market opening, TQs are perpetuating inefficiencies at the cost ofCanadian consumers, and denying trade opportunities to more efficient foreign producers.
Market distortions may arise from local-content requirements in place at federal or provincial
level, says the report.  The first apply in the "cul tural" subsectors and under the Auto Pact;  recent
WTO panels found that in both cases certain schemes were inconsistent with multilateral rules.Provincial  local-content requirements apply to wine production, and wood and mineral processing.
In three provinces, local wines benefit from less restrictive marketing conditions than foreign
products.PRESS/TPRB/151
Page 3
MOREFinancial support is made available to selected activities, with effects on production and,
potentially, trade and investment.  Some 40% of total financial transfers to the economy goes to theagri-food sector, mainly in the form of income risk management programmes.  Reversing earlier
trends, assistance to that sector has increased substantially since 1998.  Although Canadian assistance
to agriculture remains minor relative to other large agricultural exporters, it can but compound the
problem of subsidies and market distortions affecting world markets.  Federal financial transfers to
non-agricultural sectors include grants and direct investment schemes, one of which was found by a
panel to provided WTO-inconsistent subsidies to the regional aircraft industry.
Notes to Editors
Trade Policy Reviews are an exercise, mandated in the WTO agreements, in which member
countries’ trade and related policies are examined and evaluated at regular intervals. Significant
developments which may have an impact on the global trading system are also monitored. For eachreview, two documents are prepared: a policy stat ement by the government of the member under
review, and a detailed report written independently by the WTO Secretariat. These two documents are
then discussed by the WTO’s full membership in the Trade Policy Review Body (TPRB). These
documents and the proceedings of the TPRB’s meet ings are published shortly afterwards. Since 1995,
when the WTO came into force, services and trade- related aspects of intellectual property rights have
also been covered.
For this review, the WTO’s Secretariat report, together with policy statements prepared by the
Government of Canada, will be discussed by the Trade Policy Review Body on 13 and 15 of
December 2000. The Secretariat report covers the development of all aspects of Canada trade policies,including domestic laws and regulations, the institutional framework, trade policies by measure and
by sector.
Attached to this press release is a summary of the observations in the Secretariat report and
parts of the governments policy statements. The Secretariat report and the governments' policystatements are available for the press in the newsroom of the WTO internet site (www.wto.org). These
three documents and the minutes of the TPRB’s discussion and the Chairman’s summing up, will be
published in hardback in due course and will be available from the Secretariat, Centre William
Rappard, 154 rue de Lausanne, 1211 Geneva 21.
Since December 1989, the following reports have been completed: Argentina (1992 and
1999), Australia (1989, 1994 and 1998), Austria (19 92), Bahrain (2000) Bangladesh (1992 and 2000),
Benin (1997), Bolivia (1993 and 1999), Botswana  (1998), Brazil (1992, 1996 and 2000), Burkina
Faso (1998), Cameroon (1995), Canada (1990, 1992, 1994, 1996 and 1998), Chile (1991 and 1997),
Colombia (1990 and 1996), Costa Rica (1995), Cô te d’Ivoire (1995), Cyprus (1997), the Czech
Republic (1996), the Dominican Republic (1996), E gypt (1992 and 1999), El Salvador (1996), the
European Communities (1991, 1993, 1995, 1997 and 2000), Fiji (1997), Finland (1992), Ghana(1992), Guinea (1999), Hong Kong (1990, 1994 and 1998), Hungary (1991 and 1998), Iceland (1994
and 2000), India (1993 and 1998), Indonesia (1991, 1994 and 1998), Israel (1994 and 1999), Jamaica
(1998), Japan (1990, 1992, 1995,1998 and 2000), Keny a (1993 and 2000), Korea, Rep. of (1992, 1996
and 2000), Lesotho (1998), Macau (1994), Malaysia (1993 and 1997), Mali (1998), Mauritius (1995),
Mexico (1993 and 1997), Morocco (1989 and 1996) , New Zealand (1990 a nd 1996), Namibia (1998),
Nicaragua (1999), Nigeria (1991 and 1998), Norw ay (1991, 1996 and 2000), Pakistan (1995), Papua
New Guinea (1999), Paraguay (1997), Peru (1994 and 2000), the Philippines (1993), Poland (1993),
Romania (1992 and 1999), Senegal (1994), Si ngapore (1992, 1996 and 2000), Slovak Republic
(1995), the Solomon Islands (1998), South Africa (1993 and 1998), Sri Lanka(1995), Swaziland
(1998), Sweden (1990 and 1994), Switzerland (1991, 1996 and 2000 (jointly with Liechtenstein),Tanzania (2000), Thailand (1991, 1995 and 1999), Togo (1999), Trinidad and Tobago (1998), Tunisia
(1994), Turkey (1994 and 1998), the United States (1989, 1992, 1994, 1996 and 1999), Uganda
(1995), Uruguay (1992 and 1998), Venezuela (1 996), Zambia (1996) and Zimbabwe (1994).PRESS/TPRB/151
Page 4
MORETRADE POLICY REVIEW BODY
CANADA
Report by the Secretariat – Summary Observations
OVERVIEW
1. Canada's trade and investment regime is amongst the world's most transparent and liberal
notwithstanding persistent barriers in a few but important areas, including certain agri-food
industries, textiles and clothing, and some service activities.  Even these areas have come under
increased scrutiny recently, and in some of them changes are under way.  Reaping the fruits of a
generally outward looking environment, both trade and investment flows have continued to
expand rapidly since Canada's previous Trade Policy Review in 1998.  Sound economic policiesand the United States' cyclical lead have allowed Canada to enjoy its ninth consecutive year of
economic growth, achieve an improved fiscal balance, reduce unemployment, and increase real
after-tax incomes.  Canada's liberal trade regime has played an important role in these
achievements, highlighting the benefits of trade for specialization, resource allocation and,
ultimately, living standards.
2. Canada participates fully in the work of the WTO, including through information sharing, support
for trade facilitation initiatives, and active efforts to increase transparency.  Under the WTO
dispute settlement mechanism, Canada has been involved as a complainant in various cases
seeking to preserve market access for its exports (e.g., aircraft, asbestos, beef, and salmon).Concurrently, a number of long-established Canadian sectoral support programmes have been
challenged under multilateral rules, including those for dairy exports, aircraft, motor vehicles,
generic drugs, and magazines.
3. Canada is active in the ongoing negotiations in agricultural and services.  In agriculture, it seeks
on the one hand improved market access, export subsidy elimination, and reduced trade-distorting
domestic support, while on the other it wishes to preserve its right to operate "orderly marketing
systems" in the wheat, dairy, poultry and egg sectors.  In services, Canada seeks to strengthen
multilateral rules and improve market access, while ensuring that its public health and education
systems are not jeopardized, and that new obligations do not run counter to its cultural policyobjectives.
4. Canada has continued to build up its already extensive network of preferential arrangements.
Although these have helped open the Canadian market, such arrangements may also distort trade
and investment patterns as they involve different margins of preference and rules of origin.  Since
1998, Canada has engaged in negotiations for new FTAs with Costa Rica, EFTA, and Singapore.
Notwithstanding these efforts, the privileged relationship with the United States is likely to
remain paramount for Canada for years to come.  The relationship has served well Canada's
economic interests, but also magnified its exposu re to the U.S. market, which now absorbs some
86% of Canadian exports.
5. Canada has also continued to seek and conclude new bilateral and regional investment agreements
but its support for a multilateral agreement on investment appears  to have become mainly limitedto the related "analytical and educative" work in the WTO.  Since 1998, Canada has remained a
powerful magnet for foreign investment despit e existing review requirements on foreign
acquisitions exceeding a threshold, and outright restrictions applied in some primary and tertiaryactivities.PRESS/TPRB/151
Page 5
MORE6. Restrictions remain in areas such as financial services, transportation, telecommunications, and
"cultural sectors", but overall Canada's market access in services is relatively liberal and has beenfurther enhanced since 1998.  Thus, in financial services, steps have been taken to improve
foreign access, while in the telecommunications industry certain domestic ownership
requirements and monopolies have been abolished.  Other restrictions have come under close
domestic scrutiny:  in air transport, competition policy concerns led the competition authority to
question existing barriers to foreign participation;  in the cultural sectors, new instruments arebeing sought to promote Canadian culture in the face of an increasingly rigorous application ofmultilateral disciplines.
7. For goods, tariffs are the main trade instrument.  The tariff regime offers duty-free entry to over
90% of imports, either under MFN or preferential rules, resulting in a trade weighted averagetariff of only some 0.9%.  By contrast, the simple MFN average tariff stands at 7.1%, while the
average on dutiable items is some 13% due to the higher tariff applied to a number of sensitive
products;  these include vegetables, cut flowers, sugar, wines, textiles, clothing, footwear, and
ships, many of which are of export interest to developing countries.  In this respect, and despite
changes to the tariff regime for least developed countries since 1998, Canada's autonomous tariffconcessions in favour of developing countries remain modest compared with preferences
established under reciprocal free-trade agreements (FTAs).  Extending such preferences on a
MFN basis would both enhance welfare in Canada itself and improve market access to developingand other partners.
8. Canadian producers have continued to seek protection against imports through anti-dumping
(AD) actions;  85 definitive AD duties were in force in mid-2000 making Canada one of the most
intensive AD users.  Exports from some 35 part ners are affected, 58% of which cover steel
products.  About 16% of AD measures have been in place for ten years or more.
9. A number of quantitative restrictions are maintained to protect domestic producers against foreign
competition.  Despite its unilateral liberalizing efforts, Canada's import quotas on textiles and
clothing impose significant restrictions to certain products, some of great interest to developing
countries.  Tariff on products subject to tariff quotas (TQs) ranging to over 300% in the dairy and
poultry industries continue to amount to de facto quantitative restrictions.  By shielding thoseindustries from market opening, TQs are perpetuating inefficiencies at the cost of Canadian
consumers, and denying trade opportunities to more efficient foreign producers.  Other import
controls relate to health and sanitary reasons:  SPS concerns have resulted in meat being importedfrom only four countries.
10. Canada has gone a long way towards setting up a transparent procurement regime;  in particular,
under the Agreement on Internal Trade, procurement disciplines have been extended to
municipalities, amongst other entities.  Neverthele ss, buy-local restrictions remain in force that
deny taxpayers the best value for money and can distort trade.  Canada is a signatory of the WTO
Agreement on Government Procurement but it  continues to condition market opening
commitments under the Agreement to moves that it  deems economically equivalent by the United
States.
11. Market distortions may arise from local-content requirements in place at federal or provincial
level.  The first apply in the "cultural" subsectors and under the Auto Pact;  recent WTO panelsfound that in both cases certain schemes were inconsistent with multilateral rules.  Provincial
local-content requirements apply to wine production, and wood and mineral processing.  In three
provinces, local wines benefit from less restrictive marketing conditions than foreign products.PRESS/TPRB/151
Page 6
MORE12. Financial support is made available to selected activities, with effects on production and,
potentially, trade and investment.  Some 40% of total financial transfers to the economy goes to
the agri-food sector, mainly in the form of income risk management programmes.  Reversing
earlier trends, assistance to that sector has increased substantially since 1998.  Although Canadian
assistance to agriculture remains minor relative to other large agricultural exporters, it can butcompound the problem of subsidies and market distortions affecting world markets.  Federal
financial transfers to non-agricultural sectors include grants and direct investment schemes, one of
which was found by a panel to provided WTO-inconsistent subsidies to the regional aircraftindustryPRESS/TPRB/151
Page 7
ENDTRADE POLICY REVIEW BODY
CANADA
Report by the Canadian Government
TRADE AND ECONOMIC POLICY ENVIRONMENT
(i) Strong economic fundamentals
1. Canada marked its eighth consecutive year of economic growth in 1999 with strong growth
continuing through this year.  Domestic demand, investment, and trade continued to support Canada's
solid performance, with real growth in Gross Domestic Product (GDP) accelerating from 3.3%
in 1998 to 4.5% in 1999.  Consumer price inflation remained low at 1.7% and the unemployment rate
dropped to 6.8% in September 2000, close to the 24-year low of 6.6% recorded in May and June of
this year.  Job growth reached 3% with 427,000 net new jobs created in 1999.
2. The federal government recorded a surplus of Can$12.3 billion for fiscal year 1999-2000, boosted
by stronger economic growth and spending restraint.  This was the third straight surplus, a situation
not seen since the early 1950s.  The Government has now reduced the public debt by Can$19 billion,
freeing more than Can$1 billion a year to support program spending and lower taxes.  The net federal
debt has fallen to Can$565 billion for 1999-2000.  The debt-to-GDP ratio also declined 12 percentage
points from the peak in 1995-96, to 58.9% in 1999-2000.
3. Improvement at the provincial-territorial level accompanied fiscal progress at the federal level.
The provincial-territorial sector had an estim ated surplus of Can$2.4 billion in 1999-2000, the first
aggregate surplus in at least 30 years.
(ii) International trade sustains economic growth
4. International trade has played a significant role in sustaining Canada's economic growth.  As of
the second quarter of 2000, Canada's exports of goods and services represent about 45% of GDP, a
substantially higher proportion than that of our major trading partners. This share is up from 43%
in 1999 and just 28% a decade ago.  Trade accounts for one in three new jobs in Canada.
5. Resources now represent about 35% of our exports compared to 60% 20 years ago.  Most of our
exports are now high value-added goods and services - telecommunications, aerospace, software,environmental technologies, and other areas of the "new economy".  The automotive sector is
Canada's leading export sector, followed by m achinery and equipment, including new technology
products.  With regard to trade in services, th e strongest growth occurred in knowledge-based
commercial services.  Exports of goods and services increased by 11.3% in 1999 and imports
increased by 7.4%.  Import growth was driven by investment demand for machinery and equipmentand oil price increases.  As a net energy exporter, however, Canada gained from the sharp rebound of
international oil prices.
6. The continued higher rate of growth of exports over imports reflects the new opportunities created
by technological advances, the health of the U.S. economy, NAFTA, and the reduction of trade
barriers following the conclusion of the Uruguay Round of trade negotiations.
(iii) Outward investment exceeds inward investment
7. Foreign direct investment (FDI) rose by almost  10% in 1999 to reach a total of Can$240 billion or
25% of GDP.  Canadian direct investment abroad (CDIA) reached Can$257 billion, confirming
Canada's status as a major global investor.  Finance and insurance accounted for the largest share of
CDIA and FDI stocks.