WT/REG334/2  
28 March 2014  
(14-1102)  Page: 1/4  
Committee on Regional Trade Agreements  Original: English/Spanish  
 
  FREE TRADE AGREEMENT BETWEEN CANADA AND PANAMA 
(GOODS AND SERVICES) 
QUESTIONS AND REPLIES 
 The following communication, dated 26 March 2014, is being circulated at the request of the 
delegations of Canada and Panama.  
 This document reproduces the questi ons addressed to the Parties and the 
responses submitted.  
_______________ 
 
 Question from the delegation of Colombia 
 1.1.  Paragraph 4.91: states that a commitment was agreed on the subject of corporate 
social responsibility. What is the scope of  this commitment? Is it excluded from 
the dispute settlement mechanisms? 
The Investment Chapter of the Canada-Pan ama Free Trade Agreement (the Agreement) 
includes an article on Corporate Social Respon sibility (CSR) that encourages corporations 
to voluntarily incorporate internationally recognized standards of CSR in their internal policies 
addressing such issues as labour, the environment, human rights, community relations 
and anti-corruption. CSR is not subject to the dispute settlement procedures of the Agreement.  
Questions from the delegation of Thailand 
 
1.2.  Paragraph 3.27: Accumulation is regulated by Article 3.05. Inter alia , it states that 
where each Party has a trade agreement that establishes or leads to the establishment 
of a free trade area with the same non- Party, as contemplated by WTO rules, 
the territory of that non-Party is deemed to form part of the territory of the free trade 
area established by the Agreement , for the purpose of determining whether a good is 
an originating good under the Agreement. 
 T h i s  A g r e e m e n t  a l l o w s  C a n a d a  a n d  P a n a m a  t o  t a k e  a  g o o d  p r o d u c e d  
in the territory of the third-country, subjected to certain condition, into account of their 
originating good under the Agreement. Please specify: 
 
a. the reason and concept of this provision; 
Canada does not have harmonized rules of origin (RoO) across its free trade agreements 
(FTAs), nor does Canada intend to harmonize RoOs moving forward. Canada, like all countries 
involved in the negotiation of FTAs, seeks to negotiate consistent rules of origin across all of its agreements. Canada does not believe that the exact replication of product-specific rules of origin across different agreements is either desirable or achievable. To the extent practicable, Canada 
negotiates rules of origin that reflect specific Canadian interests and sensitivities with each of its 
FTA partners while also striving to accommodate our partners' interests and sensitivities.   WT/REG334/2 
- 2 - 
   As an alternative approach to harmonized RoOs, Canada is a proponent of full and reciprocal 
cross-cumulation, which builds linkages between FTAs that would otherwise operate independently. Cross-cumulation implies that materials sourced in third countries with which both Canada and its FTA partner have FTAs, may count  towards the originating status of a good. 
While the concept is similar to "diagonal cumulation", it is different by virtue of the fact that it does 
not require harmonized RoOs.  
 Accordingly, the free trade area of a current FTA could be expanded to include the territory 
of non-Parties with which both Parties have an FTA that includes a cross-cumulation provision. The main benefit of cross-cumulation is to provide producers with more options for sourcing input materials, thereby being more flexible in a ccommodating ever evolving patterns of trade. 
 
b. the monitoring system and criteria applied in order to prevent the free-rider 
of other countries; 
Given that the provision is open only to other countries with whom Canada and Panama 
each have an FTA with an equivalent provision, this  avoids the issue of free-riders as it effectively 
limits its potential application to Parties with whom Canada and Panama have opted to allow 
this provision to apply. 
  With this provision in place amongst the three Parties, the Parties must still come to an agreement on coverage prior to allowing cross-cumulation to happen. The Parties could 
hence opt to limit its application and coverage (e.g. reduce its applicability to only certain sectors 
or goods, or perhaps only allow cross-cumulation to apply once all tariffs have been phased-out between all three FTA).  
 
 It should be noted that the Customs/Origin Procedures found in the relevant FTAs apply in the context of cross-cumulation. As such, goods for which preference is being sought 
on the basis of the cross-cumulation provision are subject to the same verification and other 
procedures as all other goods, thereby ensuring that preference is only granted to qualifying goods.  
 Furthermore, the transhipment provision in each FTA still applies. For example, 
if no operation takes place in the final export country (i.e., the cross-cumulation partner where 
no operation takes place), this trade would be considered a trans-shipment with a "stop over" 
in the territory of a cross-cumulation partner. In  such a case, the traded good would be subject 
to the trans-shipment article contained in the agreement between the territory where the good 
was produced and the territory of final destinat ion, thereby curbing any chances of free-riding. 
 
c. the names of such third -countries Canada and Panama agreed to include for 
determination of the origin of go ods under this Agreement ; 
Canada and Panama agreed to a cross-cumulation provision on the basis of its merit 
as a tool that could further facilitate trade by being reflective of ever evolving trade patterns 
in value-added goods. As such this provision was not designed with a pre-designated list of countries.  
d. the consistency of this application with the W TO provisions . 
By virtue of the fact that this provision effectively creates an expanded free trade area 
as per GATT Article XXIV, this permits prefer ential treatment for countries participating 
in the cross-cumulation scheme.  
1.3.  Paragraph 3.43: The Agreement establis hes a special agricultural safeguard 
mechanism for frozen pork, under Article 2.18.  This special safeguard mechanism is only 
applicable by Panama, and is limited to  frozen pork (HS 0203.22.10 and 0203.29 .1O), 
hams and shoulders thereof (HS 0203.22.90 and 0203 .29.20), and frozen pork other 
than hams and shoulders thereof (HS 0203.29.90). The safeguard takes the form of an additional customs duty. The total cu stoms duty, including the safeguard measure , 
may not exceed the lesser of the applied MF N rate of duty at the time the measure 
is adopted, or the base rate set out in  Panama's Schedule. The safeguard measure 
for frozen pork is moreover applicable prov ided the conditions contained in Article 2.18 WT/REG334/2 
- 3 - 
  are fulfilled and the trigger levels containe d in Annex 2.18 are exceeded. Panama may 
not adopt or maintain an agricultural safe guard measure and, at the same time, adopt 
or maintain, with respect to the same good, (i) an emergency (safeguard) action pursuant to Chapter 8 of the Agreement; or  (ii) a global safeguard measure pursuant 
to Article XIX of the 
GATT  and the WTO Agreement on Safeguards. In case Panama 
intends to apply an agricultural safeguar d measures for frozen pork, notification 
to and consultation with Canada shall take place . Such measure shall not be maintained 
beyond the end of a calendar year. Furthermore,  it may only be applied during transition 
periods stipulated in Article 2.18 and in no way after the expiration of the tariff 
elimination period set out in Panama's Schedule . Panama may not adopt or maintain 
an agricultural safeguard measure on an originating good that increases the duty 
on an in-quota good subject to a TRQ. 
 Did Panama submit any notification of an application of agricultural safeguard 
measure to Canada? If yes, please specif y the effective date of the agricultural 
safeguard measure and the date of such notification. Moreover, did Canada make 
any consultation request to Panama?  
 No, Panama has not submitted notification for an application of an agricultural safeguard 
measure to Canada. The Canada-Panama Free Trade Agreement (FTA) came into force on 1 April 2013. Trade statistics are not yet available to verify whether or not Panama's imports 
of frozen pork from Canada (tariff lines 0203.22.10, 0203.22.90, 0203.29.20 and tariff 
lines 0203.29.10, 0203.29.90) have triggered the 585 MT limit as agreed under the FTA.  
 
1.4.  Paragraph 4.8: Under Article 10 .04 on MFN treatment , each Party shall accord 
to a service provider of the other Party treatm ent no less favourable than that it accords 
in like circumstances to services  providers of a third-party. 
a. Under this Article, if Canada or Panama accords better MFN Treatment 
to the third-party in any case, sha ll Canada or Panama give the same 
Treatment to the other Party without condition?  
 
Under the Canada-Panama Free Trade Agreement (FTA), which uses a negative list approach 
to reserve against the obligations of the Cross-Border Trade in Services (CBTS) Chapter, neither Canada nor Panama has taken an MFN reservation for CBTS pursuant to current and future FTAs. 
Accordingly, Canada and Panama will benefit from any better CBTS treatment accorded to a third 
Party. This treatment is subject, however, to certain sectoral CBTS MFN reservations 
that are found in Canada's and Panama's Annex I and II Schedules.  
 
b. Will such MFN commitment be applied to  other Agreements enforced prior to 
the Canada -Panama free Trade Agreement? 
 
All of Canada's FTAs that contained provisions on Cross-Border Trade in Services 
and were ratified prior to the Canada-Panama FT A (i.e. the free trade agreements with Colombia, 
Peru, Chile, and the NAFTA) provide for the MFN treatment described above, subject to certain 
sectoral reservations.  
 1.5.  Paragraph 5.21 and 5.22: of the Report gives the brief information on the 
Canada-Panama En vironmental Agreement and the Canada-Panama Labor Agreement , 
two parallel agreements to the Canada-Panama FTA. Nevertheless , the report did not 
mention about mechanisms to address any matter affecting the operations of the Agreement on the Environment and the Agreement on Labor. 
 Could Canada and /or Panama provide the information on whether both 
Agreements have such mechanisms , and how are such mechanisms operated under 
each Agreement? 
 
The Canada-Panama Agreement on Labour Cooperation (LCA) provides for an open 
and robust complaints and dispute resolution proce ss. It enables members of the public to submit 
complaints to Canada and Panama concerning all of the obligations found in the LCA. It is also 
possible to file public complaints with regard to the compliance of either country's labour laws with 
the principles found in the International Labour Organization (ILO) Declaration, or a perceived WT/REG334/2 
- 4 - 
  failure to enforce domestic labour legislation. The full text of the LCA, including the dispute 
settlement mechanism, can be found at: http://www.labour.gc.ca/eng/relations/interna tional/agreements/lca _panama.shtml#cpalc 
 
The Canada-Panama Agreement on the Environment includes a number of mechanisms to 
ensure its effectiveness. The Agreement establishes a Committee on the Environment which is responsible for its implementation and sets out a complaints process to address residents' 
questions or concerns related to domestic environmental obligations or cooperative work under the 
Agreement.  It also includes a dispute resolution mechanism which provides a formal process for parties to pursue matters through the Committee on  the Environment, at the Ministerial-level, or 
by Review Panel (as required). Additional details on these mechanisms can be found at 
http://www.ec.gc.ca/caraib-carib/de fault.asp?lang=En&n=F32C0CA6-1  
 
__________