RESTRICTED  WORLD  TRADE  
ORGANIZATION  WT/TPR/S/179 
14 February 2007  
 
(07-0539) 
Trade Policy Review Body  
   
 
  
 
TRADE POLICY REVIEW 
 
Report by the Secretariat 
 
CANADA 
 
  
 
This report, prepared for the eighth Tr ade Policy Review of Canada, has been 
drawn up by the WTO Secretariat on its own responsibility.  The Secretariat has, 
as required by the Agreement establishing the Trade Policy Review Mechanism 
(Annex 3 of the Marrakesh Agreement Establishing the World Trade 
Organization), sought clarification from Canada on its trade policies and 
practices. 
 
Any technical questions arising from this  report may be addressed to Ms. Katie 
Waters (tel. 022 739 5067), Mr. Kars ten Steinfatt (tel. 022 739 6759), and 
Mr. Raymundo Valdés (tel. 022 739 5346). 
 
Document WT/TPR/G/179 contains the policy statement submitted by Canada. 
 
 
Note: This report is subject to restricted circ ulation and press embargo until the end of the first 
 session of the meeting of the Trade Policy Review Body on Canada. Canada WT/TPR/S/179 
 Page iii 
 
 
 CONTENTS 
  Page 
SUMMARY OBSERVATIONS vii 
 (1) E CONOMIC ENVIRONMENT  vii 
 (2) T RADE AND INVESTMENT POLICY FRAMEWORK  vii 
 (3) M ARKET ACCESS FOR GOODS  viii 
 (4) E XPORT MEASURES  ix 
 (5) O THER MEASURES AFFECTING TRADE  ix 
 (6) S ECTORAL POLICIES  ix 
I. ECONOMIC ENVIRONMENT 1 
 (1) O VERVIEW  1 
 (2) R ECENT ECONOMIC DEVELOPMENTS  1 
 (i) Output, productivity, and employment 1  (ii) Monetary policy, exch ange rates, and prices 4 
 (iii) Fiscal policy 5 
 (3) B
ALANCE OF PAYMENTS  7 
 (4) T RADE AND INVESTMENT PATTERNS  8 
 (i) Merchandise trade 8 
 (ii) Trade in services 9 
 (iii) Foreign investment 9 
 (5) O UTLOOK  10 
II. TRADE POLICY REGIME:  FRAMEWORK AND OBJECTIVES 11 
 (1) O VERVIEW  11 
 (2) G ENERAL LEGAL FRAMEWORK  11 
 (3) T RADE POLICY FORMULATION AND OBJECTIVES  12 
 (4) F OREIGN INVESTMENT REGIME  14 
 (5) I NTERNATIONAL RELATIONS  18 
 (i) World Trade Organization 18 
 (ii) Preferential tr ade agreements and other arrangements 19 
 (iii) Aid for trade 22 
III. TRADE POLICIES AND PRACTICES BY MEASURE 25 
 (1) O VERVIEW  25 
 (2) M EASURES DIRECTLY AFFECTING IMPORTS  26 
 (i) Procedures 26 
 (ii) Rules of origin 28 
 (iii) Customs valuation 30  (iv) Tariffs 31 
 (v) Other charges affecting imports 34 
 (vi) Quantitative restrictions and licensing 36 
 (vii) Contingency measures 38 
 (viii) Technical regulations, conformity assessment, and standards 44  (ix) Sanitary and phytosanitary measures 49 WT/TPR/S/179 Trade Policy Review 
Page iv 
 
 
  Page 
 (3) M EASURES DIRECTLY AFFECTING EXPORTS  53 
 (i) Procedures 53 
 (ii) Export taxes, charges, and levies 54  (iii) Export prohibitions, re strictions, and licensing 55 
 (iv) Export finance, insurance, and guarantees 58 
 (v) Export promotion and marketing assistance 62  (vi) Other measures affecting exports 63 
 (4) M
EASURES AFFECTING PRODUCTION AND TRADE  64 
 (i) Legal framework for business 64  (ii) Incentives and other assistance to business 66 
 (iii) Government procurement 70 
 (iv) State-trading, state-owne d companies, and privatization 76 
 (v) Competition policy and regulatory issues 77 
 (vi) Intellectual property rights 80 
IV. TRADE POLICIES BY SECTOR 87 
 (1) O
VERVIEW  87 
 (2) A GRICULTURE  88 
 (i) Introduction 88 
 (ii) Border and related measures 90 
 (iii) Domestic programmes 92  (iv) Export subsidies 96 
 (v) State-trading enterprises 97 
 (3) M
INING AND ENERGY  98 
 (i) Introduction 98 
 (ii) Institutional and legal framework 100 
 (4) M ANUFACTURING  103 
 (i) Aircraft 103 
 (ii) Textiles and clothing 104 
 (iii) Shipbuilding 106  (iv) Automotive industry 107 
 (5) T
ELECOMMUNICATION AND BROADCASTING SERVICES  107 
 (i) Introduction 107  (ii) Institutional and legal framework 108 
 (6) F
INANCIAL SERVICES  112 
 (i) Introduction 112  (ii) Banking services 114 
 (iii) Insurance services 118 
 (7) M
ARITIME TRANSPORT  119 
 (8) A IR TRANSPORT  122 
 (i) Introduction 122  (ii) Institutional and regulatory framework 124 
 (9) P
ROFESSIONAL SERVICES  127 
 (i) Legal services 127  (ii) Accounting services 129 
 (iii) Architectural and engineering services 130 
REFERENCES   133 
APPENDIX TABLES  139 Canada WT/TPR/S/179 
 Page v 
 
 
 CHARTS 
 
  Page 
II. TRADE POLICY REGIME:  FRAMEWORK AND OBJECTIVES  
II.1 Support for aid for trade, 2001-04        24 
 IV. TRADE POLICIES BY SECTOR 
 
IV.1 Government expenditure in support of agri-food, 1996-06     89 
 
 
TABLES 
 
I. ECONOMIC ENVIRONMENT 
 I.1 Selected macroeconomi c indicators, 2002-06 2 
I.2 Selected monetary and exchange rate indicators, 2002-06 5 
I.3 Selected fiscal indicators, 2001-06 6 
I.4 Canada's balance of international payments, 2002-06 7 
 II. TRADE POLICY REGIME:  FRAMEWORK AND OBJECTIVES 
 
II.1 Selected foreign ownership restrictions by sector, 2006 16
 
II.2 Bilateral Investment Agreements, 2006 17  
 III. TRADE POLICIES AND PRACTICES BY MEASURE  
III.1 Structure of the tariff schedule, 2002 and 2006 32 
III.2 Provincial sales taxes, November 2006 35 III.3 Products subject to import licensing requirements for non-economic reasons, 2006 37 
III.4 Anti-dumping investigation initiations, 1 January 2002 to 30 June 2006 40 
III.5 Countervailing duty measures in force, 30 June 2006 42 III.6 Safeguard investigations, 2003-06 44 
III.7 WTO notifications of SPS measures, July 2002-mid August 2006 50 
III.8 Export control list, 2006 57 III.9 EDC finance, insurance and guarantee programmes, 2006 59 
III.10 Main areas of EDC expo sure:  commercial loan and in surance portfolios, 2002-05 60 
III.11 Programmes notified to the WTO, FY 2003/04 67 
III.12 Tax credits and deductions from corporate income tax, 2001 and 2006 69 
III.13 Agreements covering  government procurement 73 
III.14 CITT procurement review activities (fiscal years 2003-06) 75 
III.15 Key features of st ate-trading enterprises 76 
III.16 National IPR legislation and international agreements 81 
 
IV. TRADE POLICIES BY SECTOR  
IV.1 Utilization rates of the NAFTA tari ff preference level for exports to the 
 United States, 2002-05 105 IV.2 Financial institutions operating in Canada, 2003 and 2006 113
 
IV.3 Domestic market share of the main Cana dian airlines (offered seat kilometres) 123 
 
 WT/TPR/S/179 Trade Policy Review 
Page vi 
 
 
APPENDIX TABLES 
    Page 
 
I. ECONOMIC ENVIRONMENT 
 
AI.1 Merchandise exports by group of products, 1999-05 141 
AI.2 Merchandise imports by group of products, 1999-05 143 
AI.3 Merchandise exports by trading partner, 1999-05 145 AI.4 Merchandise imports by trading partner, 1999-05 146 
AI.5 International transactions in services by category, 1999-05 147 
AI.6 Service exports by trading partner, 1999-04 148 
AI.7 Service imports by trading partner, 1999-04 149 
AI.8 Canada's international investment position, 2001-05 150  
II. TRADE POLICY REGIME:  FRAMEWORK AND OBJECTIVES 
 AII.1 AIT disputes initiated or resolved, 2003-06 151 
AII.2 Selected notifications to the WTO, 2003-06 153 
AII.3 Involvement in the WTO dispute settlement mechanism, 2003-06 155  
III. TRADE POLICIES AND PRACTICES BY MEASURE 
 AIII.1 Summary analysis of Canada's MFN tariff, 2006 159 
AIII.2 Summary analysis of tariffs accord ing to preferential agreements, 2006 161
 
AIII.3 Canadian participation in conformity assessment agreements, 2006 164 
AIII.4 Federal Government assistance programmes:  research, technology, and innovation, 2006 165 
AIII.5 Main Provincial and territori al tax credit programmes, 2006 166 
AIII.6 Treasury Board Contracts Directive ba sic procurement contracting limits, 2006 
 through PWGSC and other ministries 168 
AIII.7 Crown corporations in Canada, 2006 169  
 IV. TRADE POLICIES BY SECTOR 
 AIV.1 Tariff quotas, fill rates, and thei r respective administration methods, 2006 170 
 
 Canada WT/TPR/S/179 
 Page vii 
 
 
 SUMMARY OBSERVATIONS 
1. Canada's trade regime has not 
changed significantly since its last Review in 2003.  The outward-looking orientation of the 
regime has facilitated the economy's 
successful adjustment to a number of external shocks, and helps explain Canada's good economic performance during the period under review.  However, productivity growth 
has been relatively slow, significant trade 
barriers still protect certain agricultural activities, and foreign investment restrictions remain in areas such as telecommunications, audiovisual, and air and maritime transport.  Reform in these sectors could lower costs to 
Canadian taxpayers and consumers while 
increasing productivity and competition in the domestic market.  Ultimately, addressing remaining policy-induced distortions would help ensure that Canadians continue to enjoy 
one the highest living standards in the world. 
(1) E
CONOMIC ENVIRONMENT  
2. Annual average GDP growth between 
2002 and 2005 was just below the economy's potential of 3%.  This overall positive performance was underpinned by sound 
macroeconomic policies.  On the fiscal front, 
Canada has posted federal surpluses since its last Review.  The provinces have also practiced fiscal discipline, resulting in a combined provincial surplus of 1% of GDP in 
fiscal year 2005/06.  Canada has made 
progress in reducing its federal debt burden, with the debt-to-GDP ratio falling to 35% in 2005/06, from almost 44% in 2002/03. 
3. Canada continues to apply the 
inflation targeting regim e introduced in 1991, 
and inflation has remained within the target of 1-3%.  The Canadian dollar appreciated by about 40% in nominal terms against the U.S. dollar between 2002 and the third quarter of 2006.  There was real effective appreciation of 
the Canadian dollar of some 36% during the 
same period.  During the fourth quarter of 2006, the Canadian dollar depreciated somewhat, both in real and nominal terms. 4. Trade and foreign investment are 
particularly important for Canada, which is 
the world's fifth largest merchandise trader.  
Goods and services trade was the equivalent 
of close to 72% of Canada's GDP in 2005.  
Although most of Canada's trade continues to take place with the United States (71% of merchandise trade in 2005), imports have diversified away from this source, reflecting 
primarily the growing importance of China as 
a supplier.  The composition of merchandise trade has also changed considerably, with the share of fuels in total exports rising from 14% in 2001 to 20% in 2005.  During the same period, the outward FDI stock increased by 
16.5% (to Can$465 billion), while inward FDI 
grew by 22.1% (to Can$416 billion). 
5. Canada's good performance in recent 
years is both indicative of and partly attributable to the economy's flexibility, as 
growth has taken place against the backdrop 
of significant shocks, including soaring energy prices, booming oil a nd gas production, and 
exchange rate appreciation.  On the other hand, relatively slow productivity growth is a feature of the economy, possibly as a result of 
a lack of capital deepening during the 1990s.  
Productivity growth could be accelerated by, among other things, eliminating barriers to agricultural imports, removing restrictions on foreign investment, minimizing subsidies that 
distort competition, and dismantling obstacles 
to internal trade. 
(2) T
RADE AND INVESTMENT POLICY 
FRAMEWORK  
6. Canada's framework for trade and 
investment policy has not changed 
significantly since 2003.  This framework is based on shared federal-provincial competencies, and involves regular consultations between the Federal Government, provinces, industry, non-
governmental and public interest groups, and 
the public at large.  It also includes an agreement to identify and reduce interprovincial barriers to trade and investment.  Canada has stated that its growth WT/TPR/S/179 Trade Policy Review 
Page viii 
 
 
 prospects depend on open world markets and 
a stable, predictable, and transparent trading environment. 
7. Canada participates actively in the 
WTO, which it considers as the central 
element of its trade policy and the best forum for broad-ranging market access improvements in many areas of interest to Canada.  Canada has made numerous 
proposals in the context of the current round 
of WTO negotiations.  In addition to the multilateral track, Canada pursues preferential trade and investment initiatives, although no new preferential trade agreements have been concluded since 2003.  Canada 
gives paramount importance to managing its 
trade relationship with the United States, and achieves this largely through the NAFTA and the WTO. 
8. Canada maintains a general policy of 
national treatment for foreign direct 
investment;  however there are sector-specific restrictions related to fishing, mining and energy, air transport, telecommunications, and cultural activities.  Moreover, a foreign acquisition above a given threshold is subject 
to review to ensure that it results in a "net 
benefit" to Canada. 
(3) M
ARKET ACCESS FOR GOODS  
9. Canada's trade regime has undergone 
only minor changes since 2003.  Canada 
grants at least MFN tariff treatment to all 
WTO Members.  The simple average applied MFN tariff declined slightly, from 6.8% in 2002 to 6.5% in 2006.  Around 53% of all tariff items entered Canad a duty free in 2006.  
This same year, the average applied tariff on 
agricultural products (WTO definition) was 
22.4%, compared with 3.8% on other products.  Supply-managed agricultural products receive the highest tariff protection.  There is tariff escalation between semi-
processed and fully processed products.  
Under remission orders, tariff reductions are granted on specific goods used for certain purposes. 10. Canada grants tariff preferences 
unilaterally, according duty-free and quota-free treatment to virtually all imports from least developed countries except Myanmar.  
Canada also grants tariff preferences in the 
context of free-trade agreements with Chile, Costa Rica, Israel, and Mexico and the United States, as well as to Australia and New Zealand on a handful of products.  As for 
many other WTO Members, Canada's 
participation in preferential trade agreements and negotiations raises concerns about resources being distracted away from the multilateral trading system. 
11. Internal taxes are applied equally to 
imported and domestic products except for 
wine produced from Canadian-grown grapes, which is exempt from federal excise duties, and for initial production volumes of beer made by domestic brewer s, which are subject 
to lower excise duties than imported beer. 
12. There has been a sharp reduction in 
Canada's use of contingency measures during the period under review.  It had 48 anti-dumping (AD) measures in force at the end of June 2006, compared with 91 measures in 
2003, as well as five countervailing measures.  
None of the three safeguard investigations initiated since 2003 resulted in safeguard measures being imposed.  Canada operates a prospective anti-dumping enforcement system 
in which exporters are informed of normal 
values for the products they export to Canada.  If future sales are made at prices equal to or higher than the normal value of the product, no duties are assessed.  Goods may be subject 
to anti-dumping, countervailing, and 
safeguard measures simultaneously. 
13. Canada's quantitative import 
restrictions and licensing requirements are mostly in place for security, safety, environmental, health, and sanitary reasons.  
The importation of used motor vehicles is 
prohibited, except when they originate in the United States.  Under Canada's federal regime the Federal Government as well as provincial and territorial governments have the authority Canada WT/TPR/S/179 
 Page ix 
 
 
 to promulgate technical regulations and 
sanitary and phytosanitary measures.  Canada notified numerous regulations and measures to the WTO during the period under review, 
including one technical regulation at the  
provincial/territorial level.  Canada is examining alternatives to facilitate notification of appropriate sub-national technical regulations in a timely manner. 
(4) E
XPORT MEASURES  
14. Canada has in place a variety of 
programmes to assist exports.  Export Development Canada (EDC), which is Canada's main export credit agency, offers a range of export finance and insurance 
programmes.  EDC financing has been the 
subject of two WTO dispute panels, both of which found some aspects inconsistent with multilateral rules.  Export guarantees are provided by the Canadian Commercial 
Corporation.  There is  coordination between 
all levels of government in Canada to assist companies in promoting their exports.  Tax and duty relief schemes also exist for exported goods. 
15. Export taxes are applied on softwood 
lumber exported to the United States when the 
agreed reference price fo r lumber falls below 
a certain threshold.  This is the result of an agreement between the United States and Canada ending a long-running trade dispute 
regarding U.S. anti-dumping and 
countervailing duties on imports of Canadian softwood lumber.  Export duties are also imposed on Canadian-manufactured tobacco products with the aim of reducing smuggling.  
(5) O
THER MEASURES AFFECTING TRADE  
16. Canada seeks to stimulate economic 
activity and the competitiveness of its economy through tax measures.  Another focus of support is stimulating innovation.  Federal corporation tax was reduced from 28% in 
2000 to 21% in 2004.  Various tax credits are 
offered at both the federal and provincial/territorial levels. 17. Canada is a party to the WTO 
Agreement on Government Procurement.  This, however, excludes procurement at the sub-federal level, which represents a 
significant proportion of total procurement.  
Canada has stated that it would only table an offer at the sub-central level if other parties are prepared to include sectors of priority to 
Canadian suppliers, and to circumscribe the 
use of set-asides. 
18. The list of Canada's state-trading 
enterprises has remained unchanged during the period under review.  It includes the Canadian Wheat Board, the Canadian Dairy Commission, the Freshwater Fish Marketing 
Corporation, the ten provincial and territorial 
liquor boards, and the Ontario Bean Marketing Board. 
19. With respect to intellectual property, 
changes were made to the Patent Act to 
implement the 30 August decision on TRIPS 
and public health.  In addition, the Patented Medicines (Notice of Compliance) Regulations and the data protection provisions in the Food and Drug Regulations were amended in October 2006 to provide a guaranteed 
minimum period of market exclusivity of eight 
years for new and innovative drugs and to address concerns regarding the timing of generic drugs' market entry once the relevant patents expire.  The Trademarks Act was also 
amended to provide for the phased elimination 
of the use of European wine and spirit names on Canadian labels. 
(6) S
ECTORAL POLICIES  
20. Canada is a highly competitive 
producer of many agricultural commodities, 
and among the world's largest exporters of agri-food products.  As measured by the OECD, overall government support to agriculture has increased since Canada's last Review in 2003, mainly due to increased ad 
hoc payments linked to sanitary and weather 
problems.  However, according to the OECD, support remains below its members' average, and is relatively less trade distorting.  Canada WT/TPR/S/179 Trade Policy Review 
Page x 
 
 
 provides significant assistance to supply-
managed products (which cover dairy products, chicken, turkey, eggs, and broiler hatching eggs), including through the use of 
high out-of-quota tariffs (frequently exceeding 
200%).  In-quota volumes are, in some cases, small, reserved to certain countries, or available to preferential partners at reduced tariff rates. 
21. In some provinces, agricultural 
producer boards regulate the marketing of certain agricultural products, including by setting prices.  The Canadian Wheat Board (CWB) has a monopoly on sales for export and for domestic human consumption of wheat and 
barley produced in Western Canada.  A task 
force established by the Minister responsible for the CWB has recommended a staged elimination of the CWB's monopoly.  During the review period, Canada adopted legislative 
amendments to comply with a WTO panel 
decision on the WTO compatibility of two measures affecting grain imports.  Canada also reached a mutually agreed solution with two WTO Members in disputes relating to Canada's export subsidies for dairy products. 
22. Canada is a major exporter of 
minerals, metals, and energy, with the United States as its main export market.  Several provinces and territories offer tax incentives for the processing of minerals 
originating in mines located within the 
respective province or territory.  With respect to oil and gas, official approval for investment 
may, in some cases, be linked to local content 
requirements.  In the electricity sector, 
competition and state involvement varies 
between provinces. 
23. Ontario and Quebec are the main 
centres of manufacturing activity in Canada.  Both the Federal Government and some provinces have continued to provide or have 
introduced strategies or incentives to assist 
certain sectors.  These include assistance to the aircraft, textiles, shipbuilding, and automotives sectors.  However, the manufacturing sector has continued to lose importance in terms of its relative contribution 
to value added and employment, as factors of production have been attracted into primary activities and the services sector, with  
manufacturing's contribution to GDP at 16.5% 
in 2005, compared with 17.5% in 2002. 
24. There have been no major regulatory 
changes to Canada's telecommunication, broadcasting, financia l or transportation 
services.  In telecommunications, facilities-
based common carriers providing telecommunications services in Canada must be Canadian-owned and controlled.  Canadian broadcasting legislation limits foreign content in a number of areas to ensure Canadians 
have minimum levels of access to Canadian 
cultural content.  Canada's financial sector is well developed and diversified, and has performed well.  The banking sector is open to foreign competition, but ownership restrictions 
apply on domestic and foreign banks.  
Insurance companies must be licensed in each province where they do business, which may complicate market access for foreign suppliers. 
25. In maritime transport, cabotage 
remains reserved for Canadian-flag ships, 
although access to foreign ships is allowed when suitable Canadian-registered ships are not available.  In the air transport sector, competition has increased with the growth of 
low-cost airlines.  However, foreign-owned 
airlines may not provide cabotage services and foreign ownership of Canadian airlines is limited to 25% of voting shares, supplemented by a flexible de-facto control examination. 
26. Virtually all professions are regulated 
at the provincial/territorial level and increasing efforts are being made to facilitate the mobility of professions among provinces and territories.  While citizenship and residency requirements continue to apply in 
some cases, certain barriers have been 
removed in recent years.