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IV. TRADE POLICIES BY SECTOR
(1) INTRODUCTION
1. This chapter traces recent developments in selected sectors, and describes sectoral policies not
covered in earlier Trade Policy Reviews.  It covers agriculture, motor vehicles, textiles and clothing;
within the services sector, the focus is on financ ial services, telecommunications, audiovisual and, for
the first time, professional services.  Most of these activities were chosen because, for various policyreasons, they have historically been subject to interven tions that have tended to create barriers to trade
and investment.  Many of these, however, have come under increased scrutiny and changes have been
recently made or are under way.
2. Although some Canadian industries, such as agriculture, minerals and lumber, have been
affected by the low commodity prices and weaker foreign demand that followed the Asian financialcrisis, over the last two years most activities have continued to benefit from strong demand in the
United States, currency depreciation vis-à-vis  the U.S. dollar, and liberalization under the Agreement
on Internal Trade, the NAFTA and the WTO (Chapters I and II).
3. Bilateral tariff reductions under the NAFTA have intensified North American market
integration.  The resulting competitive pressures from U.S. producers have helped stimulate domesticreforms that have now touched virtually all sectors of the economy.  In areas such as banking and
insurance, the NAFTA was later "multilateralized" under Canada's WTO commitments.  However,
sensitive areas such as cultural industries and supply-managed agriculture have escaped international
reforms.  In agriculture, an increasingly market-based environment for grains and major livestock
products contrasts with the retention of supply-management regimes for dairy products, poultry and
eggs, which continue to be sheltered by prohibitive out-of-quota customs duties.  The removal of
transport subsidies on wheat seems to have fostered value added in Canada's agri-food exports.
(2) P
OLICY DEVELOPMENTS IN AGRICULTURE AND AGRI -FOOD INDUSTRIES
(i) Trends in agri-food production and trade
4. Both 1996 and 1997 were relatively good years for Canadian farmers as a result of favourable
grain prices in 1996 and significantly higher output in 1997.1  The contribution of agriculture and
agri-food industries to GDP was valued at Can$32 billion (or 4.4% of total GDP) in 1997, withagriculture accounting for  Can$15 billion and food and beverages for Can$17 billion.  Agri-food
exports, which comprise agriculture, food and be verage processing, were valued at Can$22 billion,
while imports reached nearly Can$15 billion.
2  Grains, red meats, oilseeds and live animals are the
main source of export revenues. The main imports are fruit and vegetables, alcoholic beverages,
plantation crops (e.g. coffee and tea) and sugar.
5. As can be seen from Table IV.1, there has been a shift towards value-added products in
Canada's agri-food exports since 1995.  Agri-food e xports increased on average by 13% per year over
1994-97, led by consumer-oriented and intermediate products. In contrast, imports of consumer-
oriented agricultural products declined as a share of total agri-food imports to the benefit of bulk and
intermediate products.  Total imports increased on average by 7.7% annually over 1994-97.
                                                     
1Agriculture and Agri-Food Canada (1998a).
2Agriculture and Agri-Food Canada (1998b).WT/TPR/S/53 Trade Policy Review
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Table IV.1
Agri-food trade by degree of processing, 1994-97
(Can$ billion and per cent)
Annual %
change1994 % of total 1995 % of total 1996 % of total 1997 % of total
1994-97
Exports
Bulk, of which: 6.42 41.5 7.14 40.7 7.80 39.0 8.68 38.9 10.6
     Grains 4.23 27.4 4.80 27.3 5.80 29.0 6.37 28.6 14.6
     Oilseeds 1.90 12.3 2.05 11.7 1.61 8.1 1.92 8.6 0.3
Intermediate, of which: 3.89 25.1 4.57 26.1 5.46 27.3 5.64 25.3 13.2
     Grain products 0.77 4.9 0.89 5.1 1.08 5.4 1.18 5.6 15.2
     Animal feeds 0.57 3.7 0.67 3.8 0.81 4.0 0.89 4.2 15.8
     Oilseed products 0.65 4.2 0.74 4.2 1.01 5.0 1.05 4.7 11.9
     Live animals 1.31 8.5 1.48 8.5 1.86 9.3 1.87 8.9 12.6
Consumer-oriented, of which: 5.17 33.4 5.82 33.2 6.76 33.8 7.98 35.8 15.6
     Red meats 1.48 9.6 1.68 9.6 2.00 10.0 2.46 11.7 18.1
     Alcoholic beverages 0.80 5.2 0.76 4.3 0.83 4.1 0.82 3.9 0.6
Total agri-food exports 15.47 100.0 17.54 100.0 20.02 100.0 22.3 100.0 13.0
Imports
Bulk 1.77 14.8 2.14 16.9 2.22 16.8 2.42 16.2 11.0
Intermediate, of which: 1.79 14.9 1.90 15.0 2.08 15.7 2.42 16.2 10.6
     Grain products 0.67 5.6 0.70 5.5 0.75 5.7 0.88 5.9 9.5
     Plantation crops 1.15 9.6 1.40 11.1 1.31 9.9 1.52 10.2 9.7
Consumer-oriented, of which: 8.39 70.2 8.64 68.2 8.95 67.6 10.05 67.4 6.1
     Red meats 0.98 8.2 0.92 7.2 0.86 6.5 0.97 6.5 -0.1
     Fruits and nuts 2.17 18.1 2.28 18.0 2.45 18.5 2.56 17.2 5.7
     Vegetables 1.25 10.4 1.39 11.0 1.31 9.9 1.48 10.0 6.0
     Alcoholic beverages 0.74 6.2 0.81 6.4 0.88 6.7 1.0 6.8 10.8
Total agri-food imports 11.94 100.0 12.68 100.0 13.25 100.0 14.90 100.0 7.7
Source: Agriculture and Agri-Food Canada (1998), "Quarterly Agri-Food Trade Highlights", No. 08.1, Ottawa, July.
6. After an expansion of 14% and 11% in 1996 and 1997, Canada's exports continued to grow
by over 10% in value terms in the first half of 1998 as demand remained strong in the United States.
However, Canada's total agri-food exports to Asia were down by 43% in the first half of 1998 as a
result of weaker demand and low commodity prices linked to record production of grains, oilseeds
and meat products.  Imports also continued to grow by over 10% in the first half of 1998, reflectingstrong domestic demand.  Approximately 51% and 61% of export and import trade was with the
United States in 1997;  the corresponding shares with Asia were 22% and 6.4%.
(ii) Evolution of domestic and export subsidies
7. During 1996-98, a sizeable decline occurred in government expenditure on the agri-food
sector (Chart IV .1).  Assistance in 1997/98 amounted to 28% of agricultural GDP, and 13% of
agri-food GDP.  Total estimated expenditure reached Can$4.1 billion in 1997/98, a decline of 21%
over the previous year mainly on account of the termination of payments made under various westerngrain transition programmes that had been created to cushion the elimination of grain transportationCanada WT/TPR/S/53
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subsidies.3  The decline in expenditure has exceeded fiscal restraint in other areas of the Canadian
economy: expenditure in favour of the agri-food sector declined from 1.9% of total government
outlays in 1996/97 to 1.4% in 1997/98.
01,0002,0003,0004,0005,0006,000
1994/95 1995/96 1996/97 1997/98051015202530354045Expenditure As a % of agricultural GDP As a % of agri-food GDPCan $ million
Source : Agriculture and Agri-Food Canada (1998), "Farm Inco me, Financial Conditions and Government Assistance", 
Data Book , Ottawa , Februar y.Chart IV.1
Government ex penditure in su pport of the a gri-food sector, 1994/95-1997/98
Per cent 
8. The decline in public expenditure on the agriculture sector is mirrored in the decline of
Canada's Producer Subsidy Equivalent (PSE), as es timated by the OECD (Table IV.2).  This mostly
reflected the fall in grain subsidies noted above.  In contrast, the Consumer Subsidy Equivalent (CSE)
increased in 1997 to 14%, because of lower world prices.  The dairy sector in 1997 accounted for 50%
of Canada's total support and 90% of all market price support.4  Both the PSE and the CSE, although
higher than in the United States (Canada's main trading partner) are considerably lower and havedeclined faster than the OECD average.
9. Canada has made export subsidy reduction commitments under the WTO Agreement on
Agriculture for various groups of products (Table IV.3). According to Canada's most recent WTO
notification, actual export subsidies (outlays and volumes) for 1996/97 were far below the ceiling for
that year and indeed for the final implementation year 2000/01, with only butter and skim milkpowder receiving modest assistance in 1996/97.
5  According to the authorities, following the decision
taken in the 1995/96 dairy year to remove these producer levies to support export sales, no such
                                                     
3Agriculture and Agri-Food Canada (1998a).
4OECD document COM/AGR/CA/TD/TC(98)35, 22 April 1998.
5WTO document G/AG/N/CAN/22, 23 September 1998.WT/TPR/S/53 Trade Policy Review
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subsidies were in fact collected in 1996/97.  Exports of 418,000 tonnes of wheat have been reported as
food aid, up from 288,000 tonnes the previous year.
Table IV.2
Transfers associated with agricultural policies in selected countries
1986-88 1996p1997e
Producer Subsidy Equivalents:
(% of production value)
Canada 42 22 20
United States 30 15 16
OECD average 45 35 35
Consumer Subsidy Equivalents:
(% of consumption value)
Canada -24 -12 -14
United States -13 -8 -8
OECD average -37 -24 -24
p Provisional.
e Estimates.
Source: OECD document COM/AGR/CA/TD/TC(98)34, 22 April 1998.
Table IV.3
Actual exports and export subsidies commitments
Actual outlays
on subsidized exportsOutlay
commitmentActual
subsidized exportsExport
commitment
1986/90 1996/97 2000/01 1986/88 1996/97 2000/01Product
(Can$ million) ('000 tonnes)
Wheat and products 311.0 0 199.1 11,205 0 8,852
Coarse grains 116.4 0 74.5 4,579 0 3,618
Oilseeds 59.7 0 38.2 2,214 0 1,749
Skim milk powder 48.7 2.6 31.1 56.9 1.5 44.9
Other milk products 35.2 0 22.5 38.3 0 30.3
Incorporated productsa31.7 0 20.3 … 0 …
Cheese 25.4 0 16.2 11.5 0 9.1
Butter 17.2 3.2 11.0 4.4 0.7 3.5
Oilcakes 7.5 0 4.8 274.4 0 217
Vegetable oils 3.5 0 2.2 117.4 0 92.8
Vegetables 3.1 0 2.0 101.4 0 80.1
Total 659.4 5.8 421.9 … … …
… Not available.
a Products containing skim milk powder, butter, cheese or other milk products.
Source: Government of Canada.
10. With regard to domestic support, Canada reported in November 1997 a current total
Aggregate Measurement of Support (AMS) of Can$777.4 million, well below its commitment level of
Can$5.2 billion for the period in question.6  In addition, Canada reported Can$1.3 billion in
                                                     
6WTO document G/AG/N/CAN/17, 6 November 1997.Canada WT/TPR/S/53
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de minimis  support.7  The lion's share of domestic support that is counted in current total AMS goes to
milk production (see below).
(iii) Canada's import regime for agricultural and agri-food products
11. In 1995, under the WTO Agreement on Agriculture, Canada's previous quantitative
restrictions and other non-tariff measures on imports of some 136 tariff items were replaced by bound
tariffs;  tariff quotas for 21 product groups were specified, including wheat, barley and their products;beef and veal, turkey, chicken, eggs and chicks;  dairy products, dry casein and caseinates.   For each
item subject to tariff quotas, two tariff rates have been bound under the WTO:  an "in-quota" rate
applies to imports up to a certain import quantity (the "market access commitment"), and an out-of-
quota rate applies to imports above the market access commitment.  There has been no significant
change since the last Trade Policy Review in the operation of these tariff quotas, which currently formone of the main instruments of Canada's agricultural trade policy.
12. The existence of tariff preferences within the tariff quotas provides incentives for importers to
purchase their imports from preferential suppliers (Table IV.4).  For example, in-quota imports of
frozen boneless turkey cuts are subject to an MFN tariff of 7.5% (but not less than 6.83¢/kg. or more
than 13.67¢/kg.); in contrast, in-quota imports from the Caribbean (CCCT) countries, Chile and theUnited States, but not Mexico, enter duty free.  On the other hand, the authorities have noted that
imports of poultry and eggs have originated in the United States for historical, geographic and
competitiveness reasons, and that sizeable imports took place even before the Canada-U.S. Free Trade
Agreement.
13. The Canada-Chile Free Trade Agreement, in particular, has provided substantial tariff
advantages to Chilean food exporters to Canada, who now compete at par or on better terms than
other preferential suppliers for many products (Table IV.4).  When imports from Chile are not grantedduty-free status, they enter at rates of duty approximately one half of the applicable MFN rates.  Tariff
preferences are also granted to New Zealand, Australia and, in the case of fresh cut flowers, Israel.
Table IV.4
Tariff quota rates applicable to selected imports according to origin, 1998a
MFN United States Mexico Chile New Zealand,
AustraliaHSdescription
(2) In-quota Out-of-
quotaIn-quota Out-of-
quotaIn-quota Out-of-
quotaIn-quota Out-of-
quotaIn-quota Out-of-
quota
B e e f 02 8 % 0 00 00002 8 %
Turkey 7.5% 264% 0 264% 7.5 264% 0 263.5% 7.5% 264%
Cheddar 4.8ç/kg 260% 0 260% 4.79ç/kg 260% 0 260% 0 260%
Butter 18.9ç/kg 325% 0 325% 18.9ç/kg 325% 0 325% 3.46ç/kg 325%
Barley $1.7/tonne 103% 0 103% 0 0 0 0 $1.7/tonne 103%
Wheat $3.2/tonne 53% 0 0 0 0 $3.2/tonne 53% $3.2/tonne 53%
a Ad valorem  components only in the case of compound duties.
Source: 1998 Customs Tariff.
14. Out-of-quota tariff treatment may also in some cases allow for sizeable tariff preferences
(Table IV.4).  In the case of bovine meat for example, duty-free rates on imports from the
                                                     
7De minimis  in terms of the AMS includes product-specific support that does not exceed 5% of the
value of production of the product concerned and non-product-specific support that does not exceed 5% of thevalue of total agricultural production.WT/TPR/S/53 Trade Policy Review
Page 86
United States, Caribbean countries, Mexico and Chile compare with an MFN tariff of 28%.8  Mexico
and the United States also enjoy out-of-quota duty- free treatment for imports of wheat; out-of-quota
imports of margarine enter duty-free when originating in Mexico and Chile.
15. Despite these tariff preferences, however, the choice of where to source imports depends on
which importers the tariff quotas are allocated to, and on whether trading partners have been reserved
access.  In 1997, six of Canada's 21 tariff quotas included such reserved access, in favour of fourtrading partners.  A summary of the system is presented in Table IV.5, together with the fill rates
(share of the quota that is filled) in the three years to 1997.  In the case of butter, for example, 58% of
the tariff quota volume is reserved for New Zealand, and enters at the preferential in-quota rate.
Similarly in the case of cheese, 66% of the tariff quota can be imported from the European Union at
the MFN rate of 4.8 cents per kg.  Nearly 85% of th e beef tariff quota  is reserved for Australia and
New Zealand at the MFN rate.  In general, Canada's tariff quotas appear to have been fully utilized.
16. Canada made market-access commitments for a number of tariffied products, other than its
21 WTO tariff quotas, for which it specified in- and out-of-quota rates of duty but no quota volumes.
The products concerned are certain milk, cream and buttermilk products;  certain malt extract,
chocolate ice cream and mixes;  certain non-alcoholic beverages;  certain animal food preparations;and other food preparations.
9  Access could therefore be seriously limited by the absence of defined
quota volumes.  The authorities have noted that, in practice, the products affected may be imported at
the in-quota rate under supplementary import permits when temporary domestic shortages occur, or
when the imported products are destined for re-export.
17. The import arrangements in place appear to favour local processors.  In the case of chicken
and turkey, for example, a large share of the tariff quota volume is reserved for processors on the
basis of their import-competing production of chicken-based products.10  A similar system allocates
imports to processors of beef and veal.  Allocations of other milk products are made, in priority, to
"users of milk protein concentrate that can demonstrate a requirement for this product in their
manufacturing/product formulation".11  A similar system applies to butter.12
                                                     
8De minimis  in terms of the AMS includes product-specific support that does not exceed 5% of the
value of production of the product concerned and non-product-specific support that does not exceed 5% of thevalue of total agricultural production.
9The specific HS items affected are, for certain milk, cream and buttermilk products – 04021010,
04022111, 04022121, 04022911, 04022921, 04039091;  for certain malt extract, chocolate ice cream andmixes – 18062021, 18069011, 19012011, 19012021, 19019031, 19019051, 19019053;  and other food
preparations – 21069031, 21069033, 21069093;  certain non-alcoholic beverages – 2202904;  and certain animal
food preparations – 23099031.
10WTO document G/AG/N/CAN/6, 19 August 1996.
11WTO document G/AG/N/CAN/6, 19 August 1996.
12WTO document G/AG/CAN/10, 20 November 1996.Canada WT/TPR/S/53
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Table IV.5
Tariff quotas, fill rates and their respective administration methods, 1995-97
Product description Tariff quota 1998
(tonnes)Import arrangement 1995
fill rate %1996
fill rate %1997
fill rate %
Concentrated/condensed
milk/cream100 100 100
Yoghurt 332 72 86 88
Powdered buttermilk 908 (reserved for New
Zealand)100 100 100
Cheese 20,412 (13,472 reserved
for EU)100 100 100
Ice cream 429 89 99 100
Cream, condensated or
concentrated11.7 (reserved for
Australia)100 100 1001.  "Historical importers":
importers' shares are allocated, or
licences issued, principally inrelation to past imports of the
products concerned.
Beef and veal 76,409 (29,600 reserved
for New Zealand and
35,000 reserved for
Australia)100 97 100
Dry whey 3,198 2. Licences to downstream users 66 100 ..
Other products of milk
constituents4,345 46 67 100
Other dairy 70 100 100 100
Broiler hatching eggs and
chicks7,949 dozen 100 100 100
Wheat 190,582 18 74 …
Barley 335.160 5 7 …
Wheat products 123,557 100 100 …
Barley products 16,070 75 70 …
Margarine 6,349 2 1 23.  "First-come, first-served":  no
shares are allocated to importers.Imports are permitted entry at the
in-quota tariff rates until such
time as the tariff quota is filled;then the higher tariff
automatically applies.  The
physical importation of  the gooddetermines the order and hence
the applicable tariff
Fluid milk 64,500 (reserved for cross-
border purchases (U.S.))4. Personal imports only 100 100 …
Cream 394 5.  Licences to downstream users 77 80
Butter 2,750 (1,680 reserved for
New Zealand)6. Import shares allocated
entirely to one state trading entity100 100 …
Eggs and egg products 17,950 dozen 7. Combination of methods
described above98 95 100
Turkey, live, meat and
products5,140 100 99 100
Chicken, live, meat and
products39,844 100 100 100
… Not available.
Note: The tariff quotas for dry whey, butter, cream, wheat, barley, wheat products and barley products are administered on a mar keting
year basis.
Source: WTO Secretariat.WT/TPR/S/53 Trade Policy Review
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(iv) Developments in selected agricultural and agri-food sectors
(a) Grains and oilseeds
18. Canada is one of the world's largest exporters of grains and oilseeds.  The grains, crops and
products subject to export subsidy commitments under the WTO Agreement on Agriculture fall into
six product categories:  wheat and wheat products;  coarse grains;  oilseeds;  vegetable oil;  oilcakes
and meal;  and vegetables.  As can be seen from Table IV.3, Canada has reported that export subsidieswere not used on these products in 1996/97.
13  Some product-specific domestic subsidies have been
notified, but they do not exceed 5% of the value of production.14
19. The operations of the Canadian Wheat Board have been described in previous Trade Policy
Reviews. The Canadian Wheat Board Act, 1935, defines the object of the Board as the "marketing in an
orderly manner, in interprovincial and export trad e, of grain grown in Canada".  The CWB's total
revenue exceeded Can$6.1 billion in 1996/97, placing the CWB among the world's top exporters of
wheat.
20. The CWB, previously constituted as a federal public company, is being restructured as a mixed
enterprise.  Amendments to the Canadian Wheat Board Act, passed in June 1998, resulted in the
governance of the CWB "being shared with its stakeholders".15  In particular, the amendments provide
for the setting-up of a 15-member Board of Director s.   Two thirds of the Board members will be
elected by producers and one third appointed by the Government.  The amendments will also provide
farmers with more options on how they receive payment for their grain, and oblige the Government to
consult the Board of Directors before changing the marketing mandate of the CWB.
21. The CWB has the sole right to buy, take delivery of, store, transfer, sell, ship or otherwise
dispose of grain (i.e. wheat and barley) in a "designated area", which includes Alberta, the Peace
River area of British Columbia, Manitoba and Saskatchewan.  The CWB does not directly controlsupply, but acts as a single buyer for all grain grown in the designated area.  Initial producer prices are
set by the CWB.  The Government of Canada guarantees any CWB pool deficit, which may occur
when final returns to the pool account are less than the initial payment plus operating expenses and
administration costs.  Pool deficits have accounted for only 1.1% of the total sales value of grain since
the inception of the programme.
16  The export operations of the CWB, including its pooling activities,
did not change as a result of the WTO Agreement on Agriculture.  However, in the event that there
are pool deficits, they would be included in the calculations of the AMS.
22. The CWB operates as an export monopoly for wheat and barley. In its export operations, the
CWB will either make a sale directly or act through accredited exporters.  Exporters from non-CWB
regions must obtain an export licence issued by the CWB.
23. Traditionally, long-term supply agreements have been entered into with a number of
grain-importing countries.  In 1996/97, Iran was the top wheat customer, followed by China,
Indonesia and Japan.  Algeria was the largest purchaser of durum wheat, Saudi Arabia was the top
export destination for feed barley, and the United States and China were the largest buyers of malting
barley.  These transactions may involve CWB-to-government trade and CWB-to-agency, orsometimes credit arrangements, with the CWB playin g the major role in negotiating the contract.
                                                     
13The authorities noted that Canada has not used export subsidies on grains and oilseeds since
August 1995.
14WTO document G/AG/N/Can/17, 6 November 1997.
15President of the Treasury Board (1997).
16WTO document D/STR/W/24, 3 May 1996.Canada WT/TPR/S/53
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24. With regard to imports, access commitments for wheat, barley and their products were
established in the form of four tariff quotas;  the tariff quota was established at 3% of consumption,
rising to 5% over the six year implementation peri od.  In the case of wheat products, the tariff quota
reflects actual import levels during the base period since imports at that time were already in excess of
5% of domestic consumption.  WTO commitments are administered on a first-come, first-served
basis, and conducted privately at prevailing market prices.
(b) Dairy products
25. The Federal and provincial governments participate actively in the development and
implementation of dairy policies and programmes, whose main elements are production controls,
price support, and import controls through tariff quotas.  The milk-marketing system is made up of
producer marketing boards at provincial level which, through the Canadian Milk Supply ManagementCommittee (CMSMC), operate the national "supply -management system" (Box IV.1).  The Federal
Government funds subsidy payments to producers of industrial milk and cream for the domestic
market.  These payments have declined considerably, from Can$222 million in 1994/95 to
Can$150 million in 1996/97, reflecting the phasing out of the Federal Dairy Subsidy planned for
February 2002.  The Canadian Dairy Commission chairs the CMSMC and acts as coordinator.
26. The CDC directly exports dairy products and administers certain marketing and promotion
programmes.  In 1996/97 the CDC mostly exported skim milk powder and evaporated milk, as well as
butter and smaller quantities of other dairy products (cheese and whole milk powder made up an
additional 21%).  Actual spending reported on export subsidies was virtually nil in 1996/97
(Table IV.3).  According to the authorities, the CDC does not provide export assistance.
27. The CDC does not have exclusive authority for the export of any dairy product, and sales may
also be made privately.  However, all privately manufactured dairy exports must in practice be made
from milk purchased at a price agreed with the CDC under a special milk-pricing scheme operated by
the CDC (Box IV.1).   The price is set so as to "allow processors, exporters and further processors to
remain competitive on domestic and international markets".
17  In 1995/96, 10,416 tonnes of butter,
13,738 tonnes of cheese and 36,989 tonnes of other milk  products were reported as exported without
subsidy.  The issue of measures affecting the e xportation of dairy products has been raised against
Canada by several WTO Members and was the subject of a Panel investigation in 1998 (Table II.2)
28. The CDC is not currently involved in imports of dairy products other than butter, although it
has the authority to do so (Box IV.1). Since August 1995, Canada has implemented a tariff rate quota
for butter.18  Under the current butter import system, import permits to cover the access commitment
are granted, in practice, exclusively to the CDC.  Measures affecting the importation of milk intoCanada  were also the subject of a WTO dispute during 1998.
29. Imports of certain dairy blends are not covered by tariff quotas.  In December 1997, the
Canadian International Trade Tribunal was requested to review imports of one such blend, consisting
of butteroil and sugar, primarily used in the manufacture of ice cream.
19  The CITT report, issued in
June 1998, notes that imports quadrupled between 1995 and 1997 and are displacing significantamounts of domestic products.  The report identified a number of options that would lessen the
consequences of the imports on dairy farmers, including an appeal to the CITT regarding the
                                                     
17Canadian Dairy Commission at http://www.ccl.ca/marketp.html.
18Under the import regime in place until 1 August 1995, the CDC had exclusive or special privileges in
the sense of GATT Article XVII (state trading) with respect to imports of butter.  Import permits were issued tothe CDC when it was determined that imports were necessary to relieve a temporary market shortage.
19Agriculture and Agri-Food Canada at http://aceis.agr.ca.WT/TPR/S/53 Trade Policy Review
Page 90
classification of  butteroil; a safeguard enquiry;  a special class price for butterfat for ice cream and
processed cheese;  a special class price for butterfat for domestic butteroil blends;  compensation for
losses;  or a new tariff item for butteroil blends with a different tariff treatment.  In August 1998, the
CITT was requested to review the tariff classification of butteroil blends.
Box IV.1:  Determination of milk prices to the dairy industry
The Canadian Dairy Commission (CDC) is a federal public company, established by the Canadian Dairy
Commission Act of 1966, accountable to Parliament through the Minister of Agriculture and Agri-Food.  The
CDC has the power to purchase, package, process, store, ship, insure, import, export or dispose of any dairyproduct that it purchases.
The CDC chairs the Canadian Milk  Supply Management Committee (CMSMC), which oversees the
application of the National Milk Marketing Plan, the federal-provincial agreement that governs milk supplymanagement in Canada.  The CMSMC has representation from the producers and governments of the
participating provinces.  The CMSMC meets every two months to review and consider the major economic
and marketing factors affecting the dairy sector.  These include trends in domestic consumption andproduction of milk and dairy products, the level of skim milk powde r and butter stocks held by the CDC and
the trade and export market activities.
Each year, the CMSMC sets the national industrial milk production target or Market Sharing Quota (MSQ),composed of estimated requirements for domestic consumption, a "sleeve" amount (which acts as a buffer to
meet unanticipated increases in dema nd), plus an amount for specific export activities, measured in terms of
butterfat.  The CMSMC applies the terms of the National Milk Marketing Plan to establish the provincialshares of the MSQ.  Each province allocates its share of the MSQ to its respective producers according to itsown policies.
A milk pricing classification system is used to determine prices for milk depending upon its end use.  Prices
for milk used for exported dairy products are negotiated on the basis of world market prices and established
for each individual transaction with processors.  A processor or a trader who has identified an exportopportunity and is seeking access to a s upply of milk approaches the CDC.  The CDC, acting on behalf of the
relevant provincial board, examines the proposal, using the criteria set out by the CMSMC (such as theinternational market conditions and the availability of surplus milk in  Canada) and enters into negotiations
with the potential exporter.  If the CDC believes that the proposal should be accepted, it provides a "permit"
to the exporter that is subject to acceptance by the relevant board.  This permit carries a recommendation to
the board that the required amount of milk should be supplied at the recommended price.  In practice, theboards usually accept the permit and the recommenda tion it conveys.  However, they are under no obligation
to do so.  Over the long term, the negotiating performance of the CDC must satisfy the boards and theproducers, if not, a re-evaluation of CDC practices may be undertaken through the CMSMC.  The boardsretain the ultimate authority over CDC actions as their bargaining agent.
Once the exporter has agreed on a milk price with the board it may export the resulting processed products.It keeps the export documentation av ailable for examination by the CD C auditors.  To allow the CDC to
maintain its monitoring programme on behalf of the CM SMC, the exporter is also required to file proof of
export with the CDC.
Source Government of Canada.
(3) MOTOR VEHICLES
(i) Structure and performance
30. With around 15% of light vehicle production in the NAFTA area, the motor vehicle industry
(assemblers and parts producers) is the largest manufacturing activity in Canada.  Together, light-duty
vehicle assembly, parts and accessories manufac turing generate 11.6% of manufacturing GDP
(around 2.2% of GDP).  In 1997 Canada produced 2.5 million light vehicle units valued at
Can$50 billion;  the value of shipments by the auto parts sector was over Can$22 billion. The industryCanada WT/TPR/S/53
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is strongly export oriented, exporting around 90% and 70% of shipments by the assembly and parts
sectors, respectively.
31. There have been relatively few changes in the structure of the industry and composition of
exports and imports since the previous Trade Policy Review.  The industry continues to be dominated
by three U.S.-based producers, Chrysler, Ford and General Motors, which accounted for around 84%
of total Canadian production in 1996, and provides direct employment to around 147,000 people,accounting for around 8.5% of Canadian manufacturing employment.  Although the assembly sector
is important in terms of the value of shipme nts, the automotive parts sector makes a larger
contribution to the economy in terms of employment (over 92,000 employees compared to around
54,000 for the assemblers) and to value added.
32. Canada's largest export markets remain its NAF TA partners (91% of automobile exports in
1997) with the United States accounting for around 90% of Canada's total automotive exports, much
of this being intra-firm trade. While exports have grown in the last few years, partly because of
growing access to the North American market, imports also boomed in 1997 because of strong
domestic consumer demand.  Imports of automotive products rose from Can$48 billion in 1995 to
Can$58 billion in 1997, while exports, boosted by strong demand in the United States, grew fromCan$61.2 billion to Can$67.3 billion in the same period.  Japan and the EU have relatively small
shares of the Canadian market, with Japan accoun ting for 6.7% of total automobile imports in 1997;
the share for the EU was 3.2%.
33. Industry Canada has estimated that labour productivity (units produced per hour) in the
Canadian automobile sector grew at 8.9% per year between 1993 and 1996, compared with 6.6% for
the United States during the same period.
20  Although Canada's motor vehicle industry represents only
around 7% (in sales) of the North American market, between 1986 and 1996 Canadian capitalexpenditures averaged 30% of total U.S. and Canadian capital expenditures;  reinvestment averaged
Can$1.8 billion between 1991 and 1996 for the motor vehicle industry and Can$848 million between
1987 and 1996 for the auto parts sector.  The industry's capital investment as a percentage of total
manufacturing investment, at 20%, is also high comp ared to its 11.6% share of output.  Higher rates
of capital investment and labour productivity combined with a labour cost advantage of 30% gave itan overall cost advantage of around 5% over the United States industry in 1996.
34. Because of its "branch factory" nature, however, the automobile industry, especially the
assembly sector, suffers from relatively low rates of R&D.  Expenditure on R&D by the automobile
sector is currently four times lower than the average of the Canadian manufacturing sector, having
declined by 22% since 1994, when the NAFTA was implemented.
21  This is despite attractive R&D
incentives such as income tax deductions and investment tax credits.  Automotive producers are also
eligible for funding under Technology Partnerships for Canada.22  The Canadian Government recently
identified innovation as one of four priority areas to be focused on in its comprehensive Automotive
Competitiveness Review (ACR), which was carried out in consultation with stakeholders.  The ACR
also concluded that although the Canadian automotive industry was successful and made a majorcontribution to the economy, further attention had to be given to human resources, standards and
regulations, and trade policy, especially market access for non-NAFTA markets.
                                                     
20Industry Canada (1998b).
21Industry Canada (1998b).
22See WTO (1996a).WT/TPR/S/53 Trade Policy Review
Page 92
(ii) Policy instruments
35. The contribution of the motor vehicles and parts industry, especially to overall employment
and capital investment, explains in part the special policy regime applicable to the industry since the
Auto Pact was signed with the United States in 1965.  As a result of phased reductions since 1965,
Canada's MFN tariff rates are currently 6.7% for light motor vehicles and aftermarket parts (due to
decline to 6.1% on 1 January 1999);  6.7% for light trucks;  and 0% for automotive originalequipment (OE).  Under the Generalized Preferen tial Tariff (GPT), most automotive goods enter
Canada at the slightly lower rate of 6%.  Tariffs between the NAFTA signatories on vehicles and
components were to be phased out by 1 January 1998 between the United States and Canada and by
1 January 2003 with Mexico.
23  Tariffs on automotive products under Canada's free-trade agreements
with Chile and with Israel have been phased out.
36. Imports of second-hand vehicles are only permitted from the United States;  imports of
second-hand vehicles from Mexico that are at least ten years old are to be phased in gradually
between 1 January 2009 and 1 January 2019.  According to the authorities the prohibition of imports
of second-hand vehicles from all countries except the United States is being maintained as an
instrument for any future trade negotiations.
37. Under the Motor Vehicle Tariff Order (MVTO), as amended in 1998, all imports by members
of the Auto Pact enter Canada duty-free irrespective of origin.  Member companies (the main
participants are Chrysler, Ford and General Motors)  may import duty-free those motor vehicles of the
class that they produce (e.g. lorries by lorry manufacturers) contingent on two requirements:  a
Canadian value-added content requirement (applicable to goods and services);  and a production to
sales requirement.24  The Auto Pact was originally restricted to manufacturers producing vehicles in
1963/64 that met these requirements.  An extension was later given by special Orders-in-Council forcompanies that met the requirements provided they  met similar conditions.  Further membership in
the Pact was not allowed after 1989, following the conclusion of the Canada-U.S. Free Trade
Agreement.
38. In 1998,  there were approximately 90 manufacturers covered by the Auto Pact, down from
nearly 200 in 1989.  Accordingly, in October 1998, some 90 company-specific performance-basedduty remission orders were in force in addition to the MVTO.  Although similar, the conditions
stipulated in each of the duty remission orders differ from those of the MVTO.
39. The two main Japanese car assembly plants operating in Canada (Toyota Motor Corp. and
Honda Motor Co.), which represent 11% of moto r vehicle sales in Canada, may not join the
Auto Pact.  The Agreement, thus, seems to disadvantage other producers in Canada who currentlymeet or will shortly meet the Pact's requirements.   Those non-Auto Pact producers are exposed to the
full MFN tariff rate when importing automotive products into Canada, unless importing from a
country with which Canada has a free-trade agreement.
                                                     
23Under NAFTA's rules of origin, automotive goods qualify for preferential tariffs if they meet
North American content ranging from 62% for passenger automobiles and light trucks, as well as engines andtransmissions for such vehicles, to 60% for other vehicles and automotive parts.  The value of imports are traced
through the production chain to improve the accuracy of content calculation .
24Specifically, (i) the ratio of the net sales value of the vehicles produced to the net sales value of all
vehicles of that class sold for consumption in Canada by the manufacturer must be higher or equal to the ratio
achieved in 1963/64 (the base year), and no lower than 75%;  and (ii) the Canadian value added in respect of thevehicles in that class must be higher than in the base year.Canada WT/TPR/S/53
Page 93
40. Duty remission orders that had been granted to several non-Auto Pact companies were
terminated in December 1997, but will remain in the statutes until all benefits accrued before that date
have been paid, at the latest at the end of 2000.25  The orders typically allowed the company to import
parts and components or vehicles either duty-free or at a percentage of the full customs duty, provided
that certain conditions were met.  For example, that the vehicles or parts imported were manufactured
by a subsidiary of the same company;  or that the goods imported, for which remission was claimed,did not exceed the Canadian value added of Canadian automotive components exported during the
period for which remission was claimed.
41. Following discussions with stakeholders, the Government of Canada announced in the ACR
in 1988, that it would not be undertaking further unilateral liberalization in the sector at the present
time.  However, it will continue to pursue further trade liberalization through the WTO, APEC and theFree Trade Agreement of the Americas.
26  The decision, which maintains MFN tariffs on imports by
non-Auto Pact companies at the present level of 6.7%, has been criticized by Japanese assemblers in
Canada.  Following the decision, Japan and the EU requested consultations in the WTO, alleging that
Canada's auto regime is inconsistent with its obligations under the WTO (Chapter II(4)).
(4) TEXTILES AND CLOTHING
(i) Structure and performance
42. Canada's textiles and clothing sector is mainly concentrated in the provinces of Quebec and
Ontario, although Manitoba and British Columbia are also significant clothing producers.  Although
the sector accounts for around 1% of GDP (1997), it is an important employer especially in rural and
small communities, employing over 150,000 people including part-time workers.  The textiles
industry is highly diversified, producing fibres, yarns, fabrics and a variety of textile products used in
industrial production. It has adjusted more rapidly than the clothing industry to increased competitionfrom low- and high-value-added imports, with productivity improvements over the last decade
outpacing those of the manufacturing sector as a whole.
27  The share of textile and clothing exports
grew from 1.2% of total merchandise exports to 1.6% between 1995 and 1997.
43. The main destination for Canadian exports remains the United States (87% and 93% of
Canada's textile and clothing exports, respectively).  Canadian exporters of textiles and clothing havebenefited substantially from the 1989 FTA with the United States, and subsequently from NAFTA.
The increase in exports to NAFTA countries has clearly outpaced exports to non-NAFTA countries:
Chart IV.2 shows that while Canada's textiles and clothing exports to NAFTA increased from 68% of
total textiles and clothing exports (US$625 mill ion) in 1989 to over 88 % (US$2.9 billion) by 1997;
exports to non-NAFTA countries moved from 32% (US$290 million) in 1989 to 12%(US$387 million) in 1997, representing a declining share of total exports of textiles and clothing.
44. Canada's imports of textiles (US$2 billion in 1997) are mainly from the United States (56.5%,
down from 61.9% in 1995), China (5.8%, up from 5.5% in 1995) and Hong Kong, China, which has
significantly increased exports to Canada, acc ounting for 4.5% in 1997.  Imports of clothing
(US$1.5 billion in 1997) are dominated by China, which increased its share from 18.7% in 1995 to27.9% in 1997, followed by the United States (16.2%), Hong Kong, China (8.7%) and India (5.1%).
The trade deficit in textiles and clothing has declined very slightly from 3.6% of total merchandise
                                                     
25The companies include Honda, Jaguar, Mazda, Mercedes Benz, Peugeot, Saab-Scania, Subaru,
Toyota and Volkswagen.
26Industry Canada (1998b).
27Industry Canada (1997b).WT/TPR/S/53 Trade Policy Review
Page 94
trade in 1995 to 3.5% in 1997 mainly because of increased exports and a decline in clothing imports
as a percentage of total imports.
0102030405060708090100
1989 90 91 92 93 94 95 96 1997Percentage share of total textiles and clothing exportsChart IV.2
Textiles and clothing exports to NA FTA and non-NAFTA countries, 1989-97
UNSD, Comtrade database (SITC Rev.1). Source :NAFTA 
Non-NAFTA countries
(ii) Tariff reforms
45. Canada's MFN and preferential tariffs have continued to decline since the previous Trade
Policy Review.  The average ad valorem  tariff for textiles declined from 15.3% in 1996 to 11.1% in
1998 (ISIC 321), and from 20.5% to 17.2% over the same period for clothing (ISIC 322).  The
corresponding GPT rates in July 1998 were 9.7% and 16.1% for textiles and clothing, respectively
(Table IV.6).  A few specific and compound rates apply mainly to imports of wool fabrics, fibres andhosiery.  Most MFN rates are ceilings, which ensures that the ad valorem  rate does not exceed a
specific rate per unit, although for Mexico and Chile most are compound rates with an ad valorem
component added to a specific rate per unit.  Tariff escalation in the sector remains significant,
ranging from 1.1% to 9.3% to 15.4% for unprocessed, semi-processed and fully processed textiles
items, respectively (Chart III.2);  tariffs on clothing products range from 0% to 25%.
46. The MFN tariff also remains significantly higher than preferential rates for trading partners
with which Canada has free-trade agreements (Table IV.6).  As tariff rates for these countries decline,
the gap between preferential tariffs and the MFN rate is likely to rise further.
47. Under NAFTA, virtually all tariffs on originating textiles and clothing are scheduled to be
eliminated by 1 January 2003;  those on trade between Canada and the United States were phased outon 1 January 1998.  For trade between Canada and Mexico, tariffs on textiles are expected to decline
by 10% of the base rate (1 January 1994) on 1 January of each year until 2001, and by 30% onCanada WT/TPR/S/53
Page 95
1 January 2001;  for clothing, tariffs are to be phased out by 1 January 2003.  Average Canadian
tariffs on imports from Mexico are currently 5.7% on textiles (down from 10.3% in 1996) and 8.9%
on clothing (13.9% in 1996).  Further, Canada and Mexico agreed in April 1998 to phase out tariffs
with Mexico on 103 textile and clothing items as of 1 August 1998 (Chapter III(2)(i)(b)).28
Table IV.6
Average tariff rates for textiles and clothing, 1996 and 1998
(Per cent)
Category MFN US Mexico GPT CIATaCTb
Textiles (321)
1996 15.3 3.3 10.3 13.4 15.3 13.4
1998 11.1 0.0 5.7 9.7 0.0 5.7
Clothing (322)
1996 20.5 4.3 13.9 18.9 20.5 18.9
1998 17.2 0.0 8.9 16.1 0.1 8.8
a Canada-Israel Agreement tariff.
b Chile tariff.
Source: WTO Secretariat based on data provided by the authorities.
48. Another free-trade agreement that provides substantial tariff concessions in textiles and
clothing is that with Israel.  Both signatories have agreed to immediate duty-free trade in all textileand clothing items with the exception, in the case of  Canada, of women's or girls' swimwear which are
to enter Canada duty free as of 1 July 1999.  Rules of origin are based on substantial transformation
(Chapter III(2)).  Under the Canada-Chile Free Trade Agreement, Canada has a six-year tariff phase-
out programme for textiles and clothing items, as well as a special safeguard provision to protect the
domestic industry from import surges during this period (Chapter II).
49. Duty remission programmes, which were conditional upon a manufacturer fulfilling specified
performance requirements including domestic production levels and sourcing, cannot be extendedunder WTO and NAFTA rules.  Instead, the Govern ment of Canada introduced six non-performance-
related remission orders in July 1997, due to expire 31 December 2004 (Table III.3);  the remission
orders are manufacturer specific and, according to the authorities, will not be renewed after this date.
These remission orders cover imports of children's blouses and shirts;  women's and girls' knitted
blouses and shirts;  women's and girls' blouses and shirts;  saris;  women's and girls' ensembles;babies' snowsuits, coats and jackets;  and rainwear.
29
(iii) Integration under the WTO Agreement on Textiles and Clothing (ATC)
50. Upon the entry into force of the ATC, Canada notified that under the Multi fibre Arrangement
(MFA), it had maintained bilate ral restraint agreements with 43 countries, comprising 205 import
quotas and 39 sub-limits;  three group limits with India, Macau and Swaziland; and two exportauthorizations with Hong Kong, China.
30  Quotas with WTO Members will be eliminated as the
                                                     
28International Trade Reporter (1998), p. 752.
29WTO document G/TMB/N/316, 30 January 1998.
30WTO documents G/TMB/N/62, 19 April 1995; G/TMB/N/62/Add.1, 27 June 1995;  and
G/TMB/N/62/Corr 1, 7 December 1995.  Th e countries are: Bangladesh;  Brazil;  Bulgaria;  Cambodia;  China;
Costa Rica;  Cuba;  the Czech Republic;  the Dominican Republic;  Hong Kong, China;  Hungary;  India;Indonesia;  Jamaica;  Laos;  Lebanon;  Lesotho;  Macau;  Malaysia;  Mauritius;  Myanmar;  Nepal;  Oman;Pakistan;  Democratic People's Republic of Korea;  th e Philippines;  Poland;  Qatar;  Republic of Korea;WT/TPR/S/53 Trade Policy Review
Page 96
products they cover are integrated into the GATT under the ATC in four stages over a ten year period
ending 31 December 2004.
51. In this regard, Canada has notified the products which it is integrating into the GATT in the
first two stages, implemented on 1 January 1995 and 1 January 1998.  At the beginning of the first
stage (1995-1997), Canada integrated 16.4% of the volume of its 1990 imports (under the ATC
Members were required to integrate a minimum of 16% of their 1990 imports during the first stage)with quotas on one product (work gloves) being re moved.  For the second stage, implemented in
January 1998, Canada integrated products representing 18.6% of the volume of its 1990 imports (the
minimum requirement for the second stage was 17%).  Two products (handbags of textile materials
and tailored-collar shirts) were included in the second stage and restrictions on these products,
affecting 22 WTO Members as well as other non-WTO Members, were eliminated on1 January 1998.
31  At the end of the implementation of stage 2 of the ATC, Canada would have
eliminated 28 quotas out of 205 (13.7%).
52. In the case of Canada, tops, yarns and fabric represented around 85% of the import volume
integrated in the first stage, the share of made-up textiles was 8% and of clothing 7%.  In the second
stage, the majority of products integrated were made up textiles (76%), with tops, yarns and fabrics at15% and clothing at 9%.  According to the authorities, imports of tailored-collar shirts have not
expanded more than other clothing imports following the removal of quotas.  The market share of
China, in contrast, has grown from 13% to 29% of total import volume, while all other suppliers
except India (from 12% to 18%) recorded losses in market share.
53. In addition Canada notified the WTO Secretariat in January 1998 that it would unilaterally
extend ex-quota treatment to a number of clothing items from all sources.
32  The products included in
this notification are not included in Canada's integration so far and remain subject to Canadian importpermit requirements for monitoring purposes.  Canada also increased the 1998 restraint levels on
winter outerwear for all WTO Members by 10% as of 1 January 1998 on a permanent one-time basis.
The growth provisions of the ATC will henceforth be applied on the basis of this higher quota.
54. Further notifications were made in June 1996 and December 1997 concerning improved
access for small suppliers (representing 1.2% or less of the total volume of Canada's restrictions),increasing the growth rates of quotas with these members by a factor of 25% for the first stage
(instead of 16%) and by a further 27% for the second stage (instead of 25%).  Thirteen developing
countries qualified for the first stage and 15 for the second stage.
33
                                                                                                                                                                    
Romania;  Russia;  Singapore;  Slovak Republic;  South Africa;  Sri Lanka;  Swaziland;  Syria;  Taiwan;
Thailand;  Turkey;  United Arab Emirates;  Uruguay;  and Viet Nam.
31Bangladesh;  Bulgaria;  Cuba;  Hong Kong, China;  India;  Indonesia;  Korea;  Macau;  Malaysia;
Mauritius;  Myanmar;  Pakistan;  the Philippines;  Poland;  Qatar;  Romania;  Singapore;  South Africa;
Sri Lanka;  Swaziland;  Thailand;  and the United Arab Emirates (WTO document, G/L/179, 31 July 1997).
Canada also informed the Textiles Monitoring Body that pending the integration of tailored-collar shirts intoGATT 1994 on 1 January 1998, existing import restrictions would not be enforced as of 1 July 1997(WTO document G/TMB/N/214/ Add.2, 27 June 1997).
32The categories are: children's blouses and shirts (categories 7.3 and 8.1);  women's and girls' knitted
blouses and shirts (category 8.1);  women's and girls' blouses and shirts of silk;  women's and girls' ensembles
(category 4.1);  babies' snowsuits, coats and jack ets (category 14.1);  and rainwear (category 1.3)
(WTO document, G/TMB/N/316, 30 January 1998).
33This is provided for by ATC Article 2.18.  The 13 Members in the first stage were Costa Rica;  Cuba;
the Czech Republic;  Hungary;  Jamaica;  Macau;  Mauritius;  Poland;  the Slovak Republic;  South Africa;Sri Lanka;  Swaziland;  and Uruguay.  For the second st age, the 15 Members included the above as well as theCanada WT/TPR/S/53
Page 97
55. Thus, Canada has met the requirements of the ATC in its product integration programme for
the first two stages and it has included some restrained products among those integrated.  In addition,
it has effectively dropped some quotas and increased others as a unilateral liberalizing effort.
(5) SERVICES
(i) Financial services
(a) Introduction
56. In 1997, the financial services sector contributed 5.2% of GDP and 4.5% of employment to
the Canadian economy.  According to data for 1997 on international transactions of financial services
from Statistics Canada,  Canada is a net importer of financial services:  receipts from insurance
services amounted to Can$3.8 billion and those of banking and securities services to Can$1.2 billion;
payments for insurance services amounted to Can$4.9 billion and banking and securities services toCan$1.6 billion.  The United States is the largest trading partner, accounting for over half of both
exports and imports.
57. Financial institutions in Canada are regulated at either the federal or provincial level.  While
banking falls exclusively under federal jurisdiction, securities companies, credit unions and  caisses
populaires  are regulated by provincial governments.  Other financial institutions - such as insurance
companies, trust and loan companies and mortgage  companies - are free to incorporate either under
federal or provincial law.
34  All insurance companies, whether fe derally or provincially incorporated,
must be licensed in the provinces in which they conduct business.  Moreover, each provincial
government has jurisdiction over market conduct and consumer issues (i.e. setting of rates, sales
practices, and conduct of brokers).
58. Since the 1996 Trade Policy Review, Canada has made a series of amendments to the
legislation governing the financial services sector, through Bill C-82.  The amendments, which cameinto force on 15 June 1997 with certain exceptions, are part of the periodic review provided for in a
"sunset clause" of the financial legislation (including the Bank Act, the Trust and Loan Companies
Act, the Insurance Companies Act and the Cooperative Credit Associations Act).
35  Canada actively
participated in and revised its offer in the GATS Financial Services negotiations, which were
concluded in December 1997.
59. Key provisions of the 1997 amendments included changes to strengthen consumer protection
by requiring the Federal Government to introduce safeguards on privacy, especially concerning the
collection, retention, use and disclosure of customer information, and to adopt a policy on tied selling
of financial products.  The legislation lifted some regulatory and financial burdens by introducing a
regime to permit financial institutions not taking retail deposits to opt out of Canadian DepositInsurance Corporation (CDIC) coverage and thus, no longer fulfill the reporting requirements
associated with CDIC membership.  Subsidiary re quirements, which under the previous legislation
required that certain types of business must be conducted through subsidiaries, have been lifted both
on information processing and specialized financial activities, which are now permitted to be carried
on in house.
                                                                                                                                                                    
Dominican Republic, Lesotho and Myanmar, minus Cuba (WTO documents G/TMB/N/183, 2 August 1996 and
G/TMB/N/312, 18 December 1997).
34See WTO (1996a), Chapter IV(5)(ii)
35The "sunset" clause requires a periodic reassessment and updating of laws governing financial
institutions.  Previous amendments include those in 1954, 1967, 1980 and 1992.  The next review is scheduledfor 2002.WT/TPR/S/53 Trade Policy Review
Page 98
60. The 1997 amendments included a number of changes to the self-dealing regime introduced in
1992 to control transactions among related parties.  These changes involve streamlining the operations
of the Conduct Review Committee, which must be established by the board of each financial
institution for approval of all related-party transactions;  narrowing the range of related parties;  and
excluding the transactions between subsidiaries of a federally regulated financial institution from the
scope of the self-dealing regime.  The amendments also included provisions to facilitate foreign bankentry.  One such provision allows regulated foreign banks to hold other financial institutions directly,
as opposed to holding other subsidiaries through its Canadian banking subsidiaries.  Finally, Bill C-82
provided more flexibility to financial institutions  entering into joint-venture arrangements and
enhanced access to capital for mutual insurance companies.
61. With a view to keeping up with changes in the financial services sector, the Task Force on the
Future of the Canadian Financial Services Sector was established in December 1996 to advise the
government on public policy issues, including job creation and economic growth, competition and
efficiency, globalization, technology, consumer interests, and regulation.  The Task Force was also
asked to comment on the issues of mergers and acquisitions in the financial sector.  The
recommendations of the Task Force were released in September 1998 (Box IV.2).
Box IV.2:  Recommendations of the Task Force on th e Future of the Canadian Financial Services Sector
The Task Force made 124 recommendations to the Minister of Finance, addressing four main themes:
enhancing competition and competitiven ess, empowering consumers, Canadi ans' expectations and corporate
conduct, and improving the regulatory framework.
To enhance competition, the Task  Force recommended removing ba rriers to entry for new domestic
competitors and facilitating the operation of foreign financial institutions  in Canada, while strengthening the
ability to compete of existing financial institutions.  It recommended new ownership rules based on the size offinancial institution:  institutions with shareholders' equity over Can$5 billion w ould be subject to the 10%
widely-held rule, with ministerial discretion to permit shareholdings of up to 20%; those with equity between
Can$1 billion and Can$5 billion would be  required to have 35% of their voting shares widely held and
publicly traded; those with equity below Can$1 billion would not be subject to the widely-held rule.  The TaskForce also called for the rapid adoption of legislation for foreign bank branching, and for the removal of thewithholding tax for interest on arm's-length borrowings, in order to encourage foreign firms to lend toCanadian businesses.
Other competition-related recommendations included a llowing life insurance companies, mutual funds and
investment dealers to have direct acce ss to the payments system so that they may provide transactions services
to their customers; granting credit unions the power to become or form banks; and permitting banks and trust
companies to offer insurance and motor vehicle leasing to their customers through branches.  With respect tomergers, the Task Force recommended that all proposed mergers should be assessed on their merits, but inparticular whether they are in the public interest.
The Task Force called on the Government to ensure consumer protection by legislating privacy standards and
banning coercive tied selling.  For financial institutions to better meet community needs, the Task Force
addressed the need for a comprehensive information collection and analysis programme to improve thefinancing of small business and knowledge-based industries.  Finally, a stronger prudential regulatory systemwas proposed, including strengthening  the governance structure of the Office of the Superintendent of
Financial Institutions (OSFI) and reducing regulatory overlap by transferring th e regulatory responsibilities
of the Canada Deposit Insurance Corporation to OSFI.  Also proposed was the establishment of a framework
for the provision of financial services by providers without physical presence in Canada.
Source: Task Force on the Future of the Canadian Financial Services Sector (1998).Canada WT/TPR/S/53
Page 99
(b) Banking
62. The Bank Act provides for two classes of bank in Canada: Schedule I banks, which must be
widely held, with individu al ownership, whether domestic or foreign, limited to 10% of shares;  and
Schedule II banks, which may be closely held, and do not have the 10% limitation.36  A foreign bank
wishing to operate in Canada must establish a Schedule II subsidiary.  As of August 1998, there were
eight Schedule I banks, three domestic Schedule II banks and 41 Schedule II foreign bank subsidiariesoperating in Canada. The total number of bank branches, as of April 1998, was 8,387.
63. The country's six largest banks control 74% of deposit-taking institution-sector assets.  The
largest foreign bank, Hongkong Bank of Canada, is the seventh largest bank in Canada.  Since the
beginning of 1998, the country's largest and third largest banks, and the second and fifth largest banks
have announced their intention to merge their operations, subject to receiving necessary approvals;these mergers are now under review by the Departme nt of Finance, the Competition Bureau and the
Office of the Superintendent of Financial Institutions (OSFI) (see also Chapter III(4)(iv)).
37
64. Restrictions on branching have allegedly discouraged some foreign banks from entering the
Canadian banking market.  Canada has not, up to now, allowed direct branching of foreign banks and
requires them to set up local subsidiaries with their own capital base.  Foreign banks may therefore beprecluded from competing for large-scale corporate lending that requires access to the parent bank's
capital base.  Once established, foreign banks, except for U.S.-controlled foreign banks, are also
required to obtain approval for the opening of each branch in Canada.
65. In the wake of arguments by foreign banks for changes in the foreign bank entry regime, the
Canadian Government announced in February 1997 a new regime that would allow foreign banks to
branch directly into the country.  This decision was incorporated in Canada's Schedule of
Commitments as a result of the GATS Financial Services negotiations concluded in December 1997.Although the enabling legislation to introduce the new branching regime has been delayed, the
authorities have reiterated their full commitment to  respecting their GATS engagements.  They noted
that the delay would allow proper consideration to be given to the recommendations of the Task Force
on financial services released in September 1998 (Box IV.2).  In late 1998, a specific timetable for
adopting new branching legislation had not been defined.
66. Details of the new branching regime have yet to be developed, but the criteria and application
procedures would be similar to those for foreign banks wishing to incorporate a foreign bank
subsidiary in Canada.
38  Foreign banks wishing to branch in Canada would need to have international
banking experience and at least Can$25 billion in assets worldwide. They would be regulated as a
bank and supervised on a consolidated basis in their home jurisdictions, in line with internationallyrecognized regulatory standards and in a manner acceptable to the OSFI, Canada's federal regulatory
authority.  Branches would be subject to a capital equivalency requirement:  a minimum of either
Can$10 million or 5% of branch liabilities would need to be maintained at all times with a recognized
financial institution.
                                                     
36For details of the banking regulation, see WTO (1996a), Chapter IV(5)(ii)(b).
37The merger of Royal Bank of Canada and Bank of Montreal, the first and third largest banks, would
create the biggest bank in Canada and the ninth biggest bank in the world with combined assets of around
US$337 billion.  The merger of Canadian Imperial Ba nk of Commerce and Toronto Dominion Bank would be
the second largest bank in Canada and the eleventh largest in the world.  The two new banks would controlabout 68% of domestic banking assets and deposits in Canada, which include a universe of other deposit-takinginstitutions (i.e. banks, trust and loan companies, credit unions, and caisses populaires ).
38 In September 1997, the Government issued a consultation paper on foreign bank entry policy.WT/TPR/S/53 Trade Policy Review
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67. With the implementation of the new branching regime, foreign bank branches would have the
same banking rights and be subject to the same rules and restrictions as Canadian banks, except for
the rights to take retail deposits.  Retail deposits are defined as deposits under Can$150,000, the same
threshold used to allow banks taking wholesale deposits to opt out of CDIC coverage; hence, while
foreign bank subsidiaries are CDIC-insured, foreign bank branches are not.  A foreign bank may
operate both a branch and a foreign bank subsidiary in Canada, with the latter permitted to take retaildeposits.  Self-dealing rules would apply to transac tions between a foreign bank branch and a foreign
bank subsidiary.  Because of the difference in the CDIC insurance coverage, a foreign bank with both
kinds of operations would be required to maintain se parate premises in places where business with the
public is conducted and to which the public has access.
39  The OSFI will supervise foreign branches,
which would be subject to Canadian reporting, auditing and taxation requirements.
68. Canada improved other aspects of its previous offers in the latest WTO Financial Services
negotiations.  It has offered to grant non-NAFTA fore ign subsidiaries the same rights as those enjoyed
by NAFTA foreign bank subsidiaries by eliminating the requirement to seek authorization from the
Ministry of Finance to open more than one branch.40
(c) Insurance
69. At the end of 1997, there were 132 life and health insurance companies in Canada and 232
property and casualty insurance companies, employing approximately 200,000 people.41  Insurance
companies may incorporate under either federal or provincial law, but over 80% of Canada's life and
general insurance companies are federally incorpor ated, representing 90% of total premium income.
The number of health and life insurance companies has decreased from 140 to 132 since the last Trade
Policy Review, as a result of the ongoing consolidation of the industry.  There is a strong foreign
presence in the insurance sector:  in the health and life insurance industry, foreign firms collected 27%of total premiums, and in the property and casualty insurance industry, foreign firms collected 65% of
total premiums.  Out of 132 life and health insurance companies, 55 are branches of foreign
companies.  In the property and casualty insurance industry, out of 196 federally incorporated
companies (85% of all companies), 122 are branches of foreign companies.
70. There have been no major legislative changes at the federal level affecting the insurance
industry since the last Review.  Nor did Canada make new offers in the GATS Financial Services
negotiations in the area of insurance.
42  The most recent legislative change affecting the insurance
industry took the form of the 1992 Bank Act Amendment allowing banks to own insurance companies
as well as trust companies.  The related 1992 financial legislation also allowed insurance companies
to operate in other financial services markets.  Since then Canada's six largest banks have set up orbought insurance operations, focusing their activities on term-life policies and on property, travel and
car insurance.  The resulting competitive pressures are largely responsible for the ongoing
consolidation of the industry.  Although banks are permitted to operate insurance subsidiaries, they
are prohibited from selling insurance policies in their branches or using bank-gathered data to identify
insurance prospects.
                                                     
39A branch and a subsidiary would be permitted to share certain services, including "back-office"
operations.  Adjacent premises would be permitted but the subsidiary and the branch would have to disclose tothe public that the businesses and premises were separate and distinct.
40At the end of the 1995 Financial Services negotiations, the only difference in treatment between
NAFTA banks and non-NAFTA banks with regard to commercial presence concerned the requirement that
foreign bank subsidiaries controlled by non-NAFTA residents seek Ministerial approval prior to opening newbranches; those controlled by NAFTA country residents were exempted from this requirement.
41Insurance Canada, http://www.insurance-canada.ca.
42For the analysis of Canada's GATS commitments in insurance services, see WTO (1996a), Box IV.2.Canada WT/TPR/S/53
Page 101
(ii) Telecommunications
(a) Introduction
71. In 1997 the telecommunication services industry contributed Can$17.6 billion (1992 dollars),
or 2.6% of GDP, and employed some 103,000 persons. Trade data for 1997 from Statistics Canada
shows that exports of communications services, wh ich include telecommunication services as well as
postal and courier services, amounted to Can$1,917 million, imports reached Can$1,815 million,yielding a trade surplus of Can$103 million. The penetration of basic telephone services is near
complete: 98.6% of all Canadian households had telephone services in 1997.
43
72. Member companies of the Stentor alliance accounted for about 70% of telecommunications
revenues in 1997 (Table IV.7).  The group comprises nine regionally based telephone companies, two
associate members (Québec Téléphone and Northwest Tel) and Telesat Canada, the sole domesticfixed satellite services firm (Telesat's monopoly will end on 1 March 2000). In 1997, there were some
50 independent companies, which were not members of Stentor but provided local telephone services
to certain rural communities.
44
Table IV.7
Estimated operating revenues by telecommunication services providers, 1995-97
(Can$ million)
1995 1996 1997 Ave. annual
change (%)
Wireline services providers
Stentor alliancea14,630 15,532 16,374 5.8
Independent operators 500 500 500 0.0
Alternative service providersb1,616 2,267 2,721 30.2
Overseas carrier (Teleglobe) 478 543 633 15.1
Wireless services providers 2,250 2,830 3,349 22.1
Total telecommunications services industry 19,474 21,672 23,577 10.0
a Includes nine regionally based full members, two associate members (Québec Téléphone and Northwest Tel) and Telesat
Canada.
b Alternative service providers include facilities-based carriers and resellers of telecommunications services.
Note: Due to rounding, numbers may not sum to totals.Source: Industry Canada.
73. Alternative service providers include facilities-based carriers such as AT&T Long Distance
Service Company and Call-Net Enterprises (parent company of Sprint Canada), as well as some
400 registered resellers of long-distance telecommunications services.45  Facilities-based overseas
telecommunications services are provided solely by Teleglobe Canada;  however, its statutorymonopoly ended on 1 October 1998.  Important providers of wireless telecommunications services
include Rogers Cantel and Mobility Canada, which together accounted for 93% of the market for
wireless telecommunications services in 1997.  Cantel is a subsidiary of the conglomerate,
Rogers Communications Inc., and Mobility Canada is an association of regional companies affiliated
with the Stentor companies. In addition to the analog services, there are two new digital cellular
                                                     
43Statistics Canada (1998).
44Of these, nine were municipally owned and the rest were privately owned.
45fONOROLA, previously the third-largest alternative service provider, was acquired by Call-Net in
June 1998.WT/TPR/S/53 Trade Policy Review
Page 102
service providers in operation:  Microcell Connexions Inc. and Clearnet PCS Inc., accounting for 3%
and 4% of the market.
74. Recent revenue growth in the telecommunication services industry, estimated at an average of
10% per annum in 1995-97, comes from the growth of alternative service providers and wireless
carriers.  Their revenues grew at an estimated average rate of 25.5% in the same period, while those of
Stentor companies, the main telecommunications se rvice segment, grew at 5.8%.  Stentor has lost
market share in the long-distance service, which was opened to competition in 1992, relative to
alternative service providers.  Stentor is estimated to have approximately 70% of the long-distance
market.  The number of cellular mobile subscribers, including analog cellular, PCS and enhanced
specialized mobile radio subscribers, has increased steadily from 2.6 million in 1995 to 4.6 million by
mid-1998.
75. Canada has pledged to make the country the most connected nation in the world by the year
2000, as part of its strategy to capitalize the economic, social and cultural opportunities in the
knowledge-based economy.   Its "connectedness" agenda is a six-part programme, working in
partnership with the private sector, to develop an information highway infrastructure and networking
applications for lifelong learning, telehealth, electronic commerce and multimedia.  It includesinitiatives to provide connection to rural and remote communities, schools, libraries, and volunteer
and charitable organizations;  to refurbish computers for the classroom;  to increase the availability of
Canadian content;  to accelerate the adoption of electronic commerce;  and to connect Canadians to
businesses, to their governments, and to each other.
(b) Regulatory development
76. All facilities-based telecommunications carriers except resellers are subject to the
Telecommunications Act, administered by the Canadian Radio-television and Telecommunications
Commission (CRTC), the federal regulatory authority.  By federal-provincial agreement, SaskTel, a
member of Stentor, is regulated by the provincial authorities of Saskatchewan.  The CRTC also
regulates and supervises all aspects of the Canadian broadcasting system (section (iii)).
77. Since the last Trade Policy Review in 1996, Canada has continued the liberalization efforts in
the telecommunications industry started in 1992.
46  At the time of the last Review, statutory
monopolies were maintained in overseas communications, domestics fixed satellite services and local
payphone services.47  By late 1998, these services had been opened to competition.  Local telephone
markets were in principle open to competition at the time of the last Review, although no entries had
yet occurred.  According to the authorities, the re gulatory changes since 1992 have resulted in a more
competitive telecommunications market, which has generated steep price reductions for long-distanceservices and at the same time has given consumers a wider array of choices in terms of services
offered.  In many parts of the country, residentia l customers can obtain long-distance rates as low as
Can$0.10 per minute with unlimited off-peak calling minutes for Can$20 per month.
78. The Telecom Decision “Review of the Regulatory Framework” (CRTC 94-19) of
December 1994 introduced a number of regulatory changes.  The CRTC has subsequently issuedseveral decisions dealing with the implementation of the 94-19 decision.  The Telecom Decision
“Implementation of Regulatory Framework – Splitting of the Rate Base and Related Issues”
(CRTC 95-21) of May 1995 defined the methodology for splitting the rate bases of telephone
companies into utility and competitive segments in a manner that would be fair to telephone
                                                     
46For the development of telecommunications industry prior to 1996, see WTO (1996a),
Chapter IV(5)(iii).
47Overseas telecommunications traffic does not include traffic between Canada and the United States.Canada WT/TPR/S/53
Page 103
companies, competitors and subscribers.  The CRTC chose a method based on return on equity (ROE)
of the utility segment only, rather than company- wide ROE of the utility segments.  Under the ROE
regime, the prices of services provided by telephone companies in monopoly markets are set so that
the telephone company can earn a predetermined return on its shareholders' equity.  This methodology
was to be used until a regime of price caps was introduced in 1998 (see below).  With respect to rate
balancing, the CRTC approved rate increases of Can$2 per month for 1996 and 1997, withcorresponding decreases in basic long-distance services.  The final rebalancing, starting from
1 January 1998, was limited to an increase of up to Can$3.00, accompanied by a price cap regime
limiting future increases.
79. In May 1997, the CRTC issued Telecom Decision “Price Cap Regulation and Related Issues”
(CRTC 97-9).  Viewed as a way to manage the transition to a fully competitive local serviceenvironment, the Commission introduced a price cap regime designed to protect the consumer from
excessive rate increases by limiting the rate charged for local telephone services.  The regime is also
designed to provide telephone companies with the incentive to reduce costs and improve services,
while allowing greater competition in local telephone  service.  The regulations came into effect on
1 January 1998, applying only to the Stentor telephone companies' local service segment.  From thispoint on, any further rate increases will generally be tied to the rate of inflation.  The CRTC is
responsible for monitoring the price cap regime over the next four years, and will undertake a
complete review before the end of this period.
80. New rules for local service competition were also introduced in May 1997.  Telecom
Decision “Local Competition” (CRTC 97-4) intro duced a framework for the entry of new service
providers into the residential and business local telephone service, which had been supplied
principally on a monopoly basis by the Stentor telephone companies.  The decision provides forinter-connection and co-location and requires the incumbent telephone companies to unbundle
components of their local networks so that new entrants have access to these components at
reasonable rates and therefore compete on a similar basis with the incumbent telephone companies.
The decision also made the existing subsidy regime for local services portable so that new entrants
can access the subsidy on the same terms as the incumbents.  The CRTC also requires the incumbenttelephone companies to allow for the unrestricted resale by competitors of local services, but did not
mandate discount.  The authorities noted that Canada's framework for competition in the local service
market already induced the entry of competitors.  As of September 1998, 14 companies were
registered with the CRTC as competitive local exchange carriers (CLECs).  By 30 June 1998, one of
Canada's largest CLECs, MetroNet Communicat ions Corp., had sold over 35,000 access lines.
81. In June 1998, the CRTC announced the liberalization of the local pay-phone service.  Until
that point, the Stentor telephone companies held a monopoly in this market.  While the rates charged
by new entrants will  not be regulated, the CRTC will continue to regulate the rates of existing pay
telephone providers until competition is sustainable.  The CRTC will hold a review within three years
to investigate the impact of competition in the local pay-telephone market.
(c) GATS Negotiations on Basic Telecommunications
82. As part of the WTO Basic Telecommunications negotiations, concluded in February 1997,
Canada made commitments to end the monopolies in the remaining areas closed to competition and to
remove foreign ownership restrictions in some areas.  Canada made commitments to end Teleglobe's
monopoly on overseas facilities-based telecommunications services and Telesat's monopoly on fixed
satellite services.  These become effective on 1 October 1998 and 1 March 2000, respectively.  Traffic
routing restrictions are also to be removed for all satellite services by 1 March 2000, and for allinternational services, except for traffic routed to or from Canada through the United States, byWT/TPR/S/53 Trade Policy Review
Page 104
31 December 1999.  The routing restriction through the United States was eliminated on
1 October 1998.
83. Canada also engaged to eliminate restrictions  on foreign ownership in some areas: starting
from 1 October 1998, 100% foreign ownership is allowed for international submarine cable landings
and mobile satellite services.  Teleglobe's special ownership restrictions, which prohibited investment
by foreign carriers, were also removed as of 1 October 1998.  Otherwise, existing foreign investmentrestrictions on facilities-based telecommunications service suppliers listed in Canada's schedule of
commitments still apply: a cumulative total of 46.7% voting shares, based on 20% direct investment
and 33
1/3% indirect investment.48  There are no similar restrictions on resellers.  Canada also allowed
the use of any foreign satellite to provide serv ices, other than direct to home (DHT) and direct
broadcast satellite (DBS), to its citizens, effective 1 March 2000.  Moreover, Canada agreed to abide,as an additional commitment under GATS Article XVIII (Additional Commitments), to all the
regulatory principles described in the Reference Paper.
49
84. The CRTC is responsible for implementation th e changes to the Telecommunications Act and
the Teleglobe Canada Reorganization and Divestiture Act required by Canada's commitments under
the WTO Agreement on Basic Telecommunications Services.  Bill C-17, an Act to Amend theTelecommunications Act and the Teleglobe Canada Reorganization and Divestiture Act, was passed
by Parliament on 12 May 1998.
(iii) Audiovisual services
(a) Introduction
85. As noted by the Secretariat in the 1996 Trade Policy Review, Canada maintains an array of
policies to foster and promote its cultural industries.  Canada has few policy bindings in this area
under the NAFTA or GATS.  While the previous Review covered broadly defined cultural activities,this section focuses on audiovisual services. As defined under the United Nations "Provisional Central
Product Classification", audiovisual services include six sub-categories: motion picture and video tape
production and distribution services;  motion picture projection service;  radio and television service;
radio and television transmission services;  sound recording;  and other services.
86. In 1996, non-Canadian products accounted for a large share in the Canadian audiovisual
market: 62% of television programming;  98% of box office receipts in theatres;  and 85% of sound
recording sales.  Foreign content, mainly American, accounts for 68% of English-Canadian television
programming and 35% of French-Canadian television programming.  Foreign film distributors
(predominantly based in the United States) account for 85% of the Canadian film market.  The
Canadian sound recording industry is dominated by six multinational firms (BMG, EMI, Universal,PolyGram, Sony, and Warner).
50  The United States also accounts for the lion's share of Canada's
                                                     
48GTE's 51% holdings in BC Tel and Québec-Téléphone were grandfathered under current ownership
and control policies.
49The Reference Paper outlines a set of pro-competitive regulatory principles such as competition
safeguards, interconnection guarantees, transparent licensing processes, and the independence of regulators.
Any Member may commit to the Reference Paper, in whole or with modifications, as additional commitments in
schedules (GATS Article XVIII) as a way of safeguarding the value of the market access commitmentsundertaken.
50Two of which (Universal and PolyGram) are Canadian controlled.  This number will shrink once the
purchase by Seagram (parent company of Universal) of PolyGram is finalized.Canada WT/TPR/S/53
Page 105
cross-border transactions of audiovisual services;  in 1995,it accounted for over 80% of the
Can$899 million worth of imports  and Can$588 million exports.51
(b) Policy instruments
87. Assistance is provided to the audiovisual sector through direct subsidies, tax incentives,
copyright remuneration, local-content requirements (mainly in the form of broadcasting quotas) and
foreign-ownership restrictions (for copyright remuneration, see also Chapter III(5)(ii)).52  Table IV.8
gives an overview of main support measures in the sector.  Spending on the audiovisual sector by all
levels of government (federal, provincial, territorial and municipal) totalled Can$2 billion in 1996.
The Federal Government contributed Can$1.8 billion, of which Can$0.84 billion was spent on the
Canadian Broadcasting Corporation, the national broadcaster.  Federal government direct support also
includes contributions to the National Film Board and Telefilm, two governmental cultural agenciesestablished to promote production and distribution of Canadian films, and to the Sound Recording
Development Program.  In 1997, funding for the Program was doubled to Can$9.5 million.  The
Canadian Television Fund (formerly the Canada Television and Cable Production Fund) was created
in 1996 to help ensure the Canadian content of television programmes.  The Fund is a private-
public-sector partnership with an annual budget of Can$200 million.
53  In the first two years of
operation, the Fund generated more than 4,200 production hours of Canadian programming and
leveraged more than Can$1.2 billion in TV and film production activity.
88. The Canadian Film or Video Production Tax Credit, introduced in 1995, provides a
refundable tax credit for film producers meeting Canadian-content requirements.  Canadian content is
determined according to three criteria: producers must be Canadian citizens; a certain numbers of key
creative people must be Canadian; and a certain pe rcentage of both production and post-production
cost must be paid to Canadians.54  The tax credit amounts to up to 12% of eligible production costs or
25% of eligible labour costs, providing an estimated Can$60 million a year to the film and video
industry.  The Government introduced in 1997 the Film or Video Production Services Tax Credit,
which consists of a refundable tax credit to film production services corporations of up to 11% of
eligible labour expenses.  This tax credit is intended to allow film producers, both domestic and
foreign, employing Canadians for production services performed in Canada, to qualify for assistance.The scheme is expected to provide approximately Can$55 million per year in direct benefits to the
film industry.  In 1997, foreign film production in Canada exceeded Can$800 million.
89. Canadian broadcasting is subject to Canadian-content quotas established by the Canadian
Radio-television and Telecommunications Commission (CRTC), the federal broadcasting regulator.
For conventional over-the-air television, licensees must devote at least 60% of the broadcast year toshowing Canadian programmes.
55  For radio, at least 30% of popular music selections played each
                                                     
51Statistics Canada (1997b), p. 102.  Audiovisual services as defined here by Statistics Canada here also
include performing arts and organized sports.
52For details, see WTO (1996a), Chapter IV(5)(v).
53The Government provides 75% of the budget while the industry provides the remaining 25%.
54"Canadian", as defined under the Citizenship Act, includes Canadians by birth and naturalized
Canadians.  In case of international co-productions, some content from a country with which Canada has a co-production agreement may count as Canadian content.
55In the evening period (6 p.m. to midnight), private licensees must devote at least 50% of the time to
showing Canadian programmes, while public broadcasters must devote 60%.  Additional requirements for the
airing of Canadian programmes in the categories of dram a, music and dance, and variety, are applied to most
private English-language conventional television broadcasters earning more than $10 million per year inadvertising revenue.  They may choose between a condition of licence requiring a minimum level of expenditureon Canadian programmes in these categories (level tied to these broadcasters' advertising revenue), or aWT/TPR/S/53 Trade Policy Review
Page 106
week, must be Canadian;  starting in January 1999, this requirement will rise to 35%.  For
French-language radio stations, at least 65% of vo cal popular music selections played each week must
be in French;  starting in January 1999, this will be re-enforced by a further specification that in the
6 a.m. to 6 p.m. period from Monday to Friday, at least 55% of the vocal popular music selections be
in French.  Pay-TV, speciality and pay-per-view services have varying Canadian-content requirements
set by a condition of licence.
Table IV.8
Main federal support measures for audiovisual services, 1997-98
Sector Direct financial
assistance (incl. grants,
funds to agencies, etc.)Tax measures Local-content requirements Foreign investment
provisions
Broadcasting Canadian Television Fund
CTF):  Can$200 million
(including Can$50 millioncontribution from Telefilm
Canada and
Can$50 millioncontribution from private
sector).
CBC radio/TV
appropriation:
Can$858 million.Income Tax Act
disallows an eligible
business deductionexpenses for
advertising placed on
non-Canadian stations.60% of Canadian content for
conventional TV (private
licensees must show 50%Canadian content in prime time;
public licensees must show 60%
Canadian content in prime time).
Pay, speciality TV and pay-per-
view services have varying
Canadian-content requirements.
30% Canadian content for radio
broadcasts (music)
a;
French-language radio:  65% of
vocal popular music must be in
French.
Cable TV:  majority of channels
received by the subscriber must
be Canadian.Ownership limitations of
20% of the licensee
company and 33.3% ofthe holding company.
Film and
videoTelecom budget:
Can$210 million (includes
government appropriation,
returns on investment, and
Can$50 million
contribution to CTF).
National Film Board
appropriation:
Can$57.3 million.Canadian Film or
Video Production Tax
Credit;  and Film or
Video Production
Services Tax Credit.Investments must meet
"net benefit to Canada"
requirement of the
Investment Canada Act
both for new business and
acquisition of existingbusinesses.
Sound
RecordingSound Recording
Development Program:
Can$9.45 millionMusic productions must fulfil
specified criteria to qualify as
Canadian works.Investments must meet
"net benefit to Canada"
requirement of theInvestment Canada Act
both for new businesses
and acquisition ofexisting businesses.
a This requirement will be raised to 35% in 1999.
Source: Heritage Canada.
90. In 1996, the Government introduced the Convergence Policy Framework, which allowed
cable and telephone companies to compete in each others' core businesses while ensuring better
access and strong Canadian content.  The Framework has resulted in the following services as
alternatives to cable television:  two competing direct-to-home satellite broadcasting distribution
undertakings (Express Vu and Star Choice);  a num ber of regional multi-point distribution systems
                                                                                                                                                                    
condition of licence requiring a minimum level of exhibition of Canadian programmes of this type in the
evening period.Canada WT/TPR/S/53
Page 107
(Manitoba, Saskatchewan, Ontario and Quebec);  and New Brunswick Telephone Co. Ltd. was
licenced to offer broadcasting services in parts of New Brunswick.
91. Foreign ownership in the broadcasting sector is limited to 20% of the licensee and 33.3% of
the holding company.  Foreign investment in other audiovisual businesses must comply with the
policies related to each sub-category and must satisfy the "net benefit to Canada" requirement
specified in the Investment Canada Act (see also Chapter II(2)(ii)).  Like other cultural industries,foreign direct investment in audiovisual service companies in excess of Can$5 million is reviewable
under the Act.  Investments of less than Can$5 million may be ordered for review at the discretion of
the Government.  No investments have been form ally disallowed since the adoption of the current
foreign investment legislation in 1985.  This may refl ect the confidential nature of the review process;
when the authorities and the investor cannot agree on the conditions attached to the investment(usually confidential), the proposal is withdrawn or the investor modifies the investment proposal in
such a way to satisfy the "net benefit to Canada" re quirement.  According to the authorities, the rules
and regulations governing the application of the Investment Canada Act are public documents,
although the specific details regarding each review are of a confidential nature in order to protect the
commercial interests of the applicant;  the applicant can, however, release these details of its ownaccord.  This could, nevertheless, have a dampening effect on foreign acquisitions in the sector.
92. Canada's audiovisual policies have come under pressure from the global efforts on trade and
investment liberalization, and technological change, leading to some trade disputes involving these
policies.  In 1998, the European Union requested c onsultations with Canada  under the WTO Dispute
Settlement Mechanism, alleging that Canada's film distribution policy was inconsistent with Canada's
obligations under the GATS.
56  The consultations concern restrictions on the right of companies
investing in Canada to distribute foreign films under the 1988 foreign investment policy guidelines setfor the film and video sector.  The guidelines require any new foreign distributor coming to Canada
after 1998, such as PolyGram (the investor subject to the EU complaint), to distribute only films to
which it holds worldwide distribution rights or in which it has invested more than 50% of the
production costs.  Nine foreign distribution firms operating in Canada before the introduction of the
new policy guidelines, all but one U.S.-based were allowed to continue their existing businessoperations.  Consultations between Canada and the EU were held on 12 February 1998 and
24 April 1998.  The case is now on hold following the purchase of PolyGram by Seagram, a Canadian
company.
(iv) Professional services
(a) Introduction
93. Professional services cover a wide range of activities, making it difficult to estimate their
actual contribution to the economy.
57  Statistics Canada provides estimates for two professional
service groups, "accounting and legal services" and "architectural, engineering, scientific and
technical services."  In 1997, value added by the two groups combined accounted for Can$16.5,
equivalent to about 2.4% of total GDP.  In compar ison to other sectors, the group of workers engaged
in supplying professional services is small, but highly qualified.  Relative to merchandise trade,
foreign trade in professional services appears modest but it is, nevertheless, of critical importance for
                                                     
56WT/DS117/1, 22 January 1998.
57The Central Product Classification defines ten professional service categories:  legal;  accounting,
auditing and book keeping;  taxation;  architectural;  engi neering;  integrated engineering;  urban planning and
landscape architectural;  medical and dental;  veterinary;  and services provided by midwives, nurses,physiotherapists and para-medical personnel.WT/TPR/S/53 Trade Policy Review
Page 108
the economy.  Canada seems to have a comparative advantage in the supply of a number of
professional services, enjoying a trade surplus in several.
94. Given the specialized education and practical training required by individuals engaged in the
supply of professional services, these activities tend to be highly regulated.  Regulation of
professionals in Canada is undertaken by provincial and territorial bodies, while incorporation of
professional service firms may fall under either provinci al or federal authorities.  In international trade
relations, the Federal Government negotiates commitments to be taken by Canada, but
implementation is the responsibility of sub-national entities.58  Various mechanisms exist to facilitate
consultations, and coordination between federal and sub-national bodies (Chapter II(2)).
Nevertheless, Canada's decentralized regulatory system has created a number of barriers to trade in
professional services, including to interprovincial labour mobility.  In order to address some of thesebarriers, the Agreement on Internal Trade is seeking the maximum possible reconciliation of
differences in occupational standards for over 100 regulated professions and trades.
59  In this context,
guidelines have already been prepared laying out a process for mutual recognition and reconciliation
of occupational standards across provinces.  In international fora, Canada has made commitments on
professional services under both the NAFTA and WTO.
(b) Canada's international commitments
95. During the professional services nego tiations in the Uruguay Round, Canada made
commitments on foreign legal consultants (advisory services on foreign and public international law
only); accounting, auditing and book-keeping services; taxation services (excluding legal services);
architectural services; engineering services; integrated engineering services; and urban planning and
landscape architectural services.  Canada imposes no country-wide limitations on the provision of
professional services with respect to cross-border, consumption abroad or commercial presence, butprovince-specific measures apply.
60  Canada did not make any commitments on the remaining
subsectors, namely, medical and dental services, veterinary services, and services provided by
midwives, nurses, physiotherapists and para-medical personnel.
96. The most commonly applied market access limitations specific to the professional services
sector affect the type of legal entry allowed for commercial presence of service suppliers;incorporation is prohibited in many provinces, and only sole proprietorship or partnership is allowed
(e.g. legal, accountancy and architectural services).  Even when incorporation is permitted
(e.g. engineering), there are requirements to maintain a minimum percentage of local directors: in
Alberta, British Columbia, Manitoba, Newfoundla nd and Labrador, Ontario and Saskatchewan, a
majority or at least 50% of the directors of a company incorporated under provincial law must beCanadian residents.
61  This also applies to federally incorpor ated firms.  The participation of foreign
capital varies by profession and by province;  in most provinces, professional firms must be majority
owned and controlled by locally based licensed professionals.
97. With regard to national treatment limitations, all professionals who wish to practice must be
licensed or accredited by provincial professional bodies.  Each professional body sets its own rules,regulations, and standards for professional practice.  At the national level, umbrella organizations
oversee these provincial bodies to minimize regulatory gaps in areas such as licensing, professional
                                                     
58The description of professional services in this section does not necessarily reflect Canada's
commitments under the GATS.
59Industry Canada (1997).  See also Chapter II(2).
60Compared to other service sectors, the presence of natural persons (mode 4) is particularly important
for professional services.
61In British Columbia and Saskatchewan, at least one director must be resident in the province.Canada WT/TPR/S/53
Page 109
practice and education.62  While Canadian nationality is not required for membership in a professional
body, some provinces maintain residency requirements.63  Residency obligations may prevent serving
a market on a cross-border basis or through the temporary entry of personnel even by providers who
possess valid professional titles from their home country.
98. Canadian restrictions regarding the presence of natural persons are generally unbound except
as indicated in the horizontal section.  Its horizontal commitments admit intra-corporate transferees(executives, managers and specialists) for a maximum period of three years without a labour market
test, provided the foreign firm maintains a co mmercial presence in Canada.  Restrictions on
ownership or incorporation applicable to professional firms would not necessarily restrict intra-
corporate transferees as long as a foreign applicant is employed with the same juridicial person who
owns, controls or is affiliated with business operations in Canada and abroad.  Canada's commitmentsalso provide for the temporary entry and stay of a number of licensed foreign professionals, including
engineers, agrologists, architects, forestry professionals, geomatics professionals, land surveyors,
foreign legal consultants, urban planners and senior computer specialists.  Their qualifications must be
recognized by the appropriate professional associations in Canada.  They are allowed to stay for a
period of up to 90 days or the time necessary to complete the services contract, whichever is less.There are renewal procedures available following the 90-day period.
99. In the context of the NAFTA, disciplines governing professional services can be found in the
Agreement's Chapter 12 (Cross-Border Trade in Services) and Chapter 16 (Temporary Entry for
Business People).  Article 1210 (Licensing and Certif ication) of Chapter 12 reaffirms that licensing
and certification should not constitute an unnecessary barrier to trade and calls for reciprocal
elimination of citizenship and permanent residency requirements for the practice of professions.  An
Annex to the Article also encourages the relevant professional bodies to develop mutually acceptablestandards and criteria for licensing and certification of professional service providers, and to design
regimes for foreign legal consultants and for temporar y licensing for engineers.  In this context, a
mutual recognition agreement for temporary and permanent licensing of engineers was signed in
June 1995 between the professional representatives of the NAFTA parties.
64  Similarly, professional
associations from the NAFTA countries signed a Foreign Legal Consultant Accord in July 1998,
allowing lawyers from any NAFTA country to act as foreign legal consultant in the region.  This
agreement is currently being reviewed by the NAFTA parties, pursuant to the term of the NAFTA.
Chapter 16 aims to guarantee, on a reciprocal basis, the temporary entry of certain categories of
business persons, nationals of a NAFTA member, including professionals, by eliminating the
requirement for a job validation, labour certification or other forms of labour market tests. 65  At the
same time, recognition is given to the need to  protect the domestic labour force, permanent
employment in each member country, and border security.
(c) Legal Services
100. At the end of 1997, there were some 68,000 registered lawyers in private practice in Canada.
In 1996, Canada's cross-border trade (mode 1) in legal services was estimated at Can$263 million forexports and Can$208 million for imports.  Approximately 80% of exports involved legal fees while
                                                     
62See Chapter II(2)(iii).
63In 1996, Quebec amended the Professional Code, which governs all professions, with the effect that
professional associations can no longer require Canadian  citizenship to issue a licence.  However, in certain
circumstances, these associations may require permanent residency before issuing a licence (S/C/N/9,
31 January 1996).
64WTO (1996b).   
65The category includes business visitors, professionals listed in Appendix 1603.D.1, intra-company
transferees, traders and investors.WT/TPR/S/53 Trade Policy Review
Page 110
the remaining 20% derived from intellectual property transactions such as the registration of trade
marks and patents.  On the import side, about 60% involved the purchase of legal services, and 40%
patent and trade mark fees.  About two thirds of exports involved transactions with the United States;
the remaining one third was distributed among several other countries, with the United Kingdom and
Hong Kong, China the second and third largest dest inations.  On the import side, about two-thirds of
the total payments were made to the United States.
101. Legal services in Canada are provided by lawyers, notaries and foreign legal consultants.
Activities performed by lawyers include advice and representation in all provinces and territories; in
Quebec these activities are shared with notaries.  In Quebec, advice on domestic and international law
is mainly given by lawyers, while real estate, wills and marriage contracts are mostly exercised by
notaries.  This reflects the differences between Quebec's civil law tradition and the common lawsystem followed by all other provinces and territories.  Foreign legal consultants, persons qualified to
practice law in a country other than Canada, may give legal advice on the laws of the country in
which the persons are qualified.
102. The legal profession in Canada is regulated by provincial/territorial professional bodies or law
societies governed by provincial legislation.
66  Requirements to practice law in Canada include
registration in one of the 13 law societies, each setting its own rules, ethical standards and codes of
conducts.  The Federation of Law Societies of Canada is an umbrella organization for these societies,
though it is not a regulatory body itself.  The Federation coordinates issues associated with the legal
profession such as the evaluation of foreign credentials, inter-jurisdictional practice of law and the
foreign legal consultant regime.
103. Admission to a law society generally requires completing a minimum of seven-years
education (a four-year bachelor degree plus a three-year LL.B. degree) and practical training, and
passing a professional  examination.67  In some provinces, such as Alberta, Newfoundland, Ontario
and Prince Edward Island, members of a law society are required to be permanent residents in
Canada.  Lawyers from other provinces or countries may transfer across provinces provided they meet
the local qualifications.  Foreign lawyers may have their licences or qualifications evaluated by the
National Committee on Accreditation, a standing committee of the Federation of Law Societies ofCanada, or equivalent provincial accreditation bodies in Alberta and Quebec.  The Committee also
evaluates qualifications from Quebec for the purpose of entry into the bars of the common law
provinces.  The Committee issues recommendations submitted to a law society on whether the
applicant needs to pass local examinations, or to have local training or education.
104. Foreign lawyers may engage in certain legal practices in Canada as foreign legal consultants.
Foreign lawyers, members of the legal professional body in their home country, may apply for a
permit to offer advice on their home country law.  Currently six law societies have rules and
regulations governing the recognition of foreign legal consultants, and another five law societies are
in the process of implementing theirs.
68  Under the GATS framework,  Canada made commitments to
bind regimes in existence as of December 1994 for legal services provided by foreign legal
                                                     
66Each province and territory has a Law Society ex cept Nova Scotia where the legal profession is
represented by the Barrister's Society, and Quebec where there are two professional bodies: the  Barreau du
Québec,  which represents lawyers;  and the Chambre de notaires du Québec,  which represents notaries.
67In Quebec, an applicant is not required to hold a bachelor degree but a three-year civil law degree.
68The Law Societies of Alberta, British Columbia, Prince Edward Island, Saskatchewan and
Upper Canada (Ontario), and the Nova Scotia Barristers' Society already have the foreign legal consultantregime in place;.  the Law Societies of Manitoba, New Brunswick and Newfoundland, the Barreau du Québec
and the Chambre des notaires du Québec  have yet to implement it;  and the Law Societies of the
Northwest Territories and Yukon have not yet decided whether to introduce such a regime.Canada WT/TPR/S/53
Page 111
consultants in British Columbia, Ontario and Saskatchewan.  While local presence is not required in
British Columbia and Saskatchewan, Ontario imposes residency requirements to practice under a
foreign legal consultant permit.  According to the authorities, Canada has yet to develop a position
with respect to future GATS negotiations and future commitments in the foreign legal consultant
regimes of the remaining Canadian provinces.  Moreover, as indicated in its horizontal commitments,
foreign legal consultants may temporarily enter Canada and stay up to 90 days or the time necessaryto complete the services contract, whichever is less.  In the NAFTA context, as mentioned above, the
three parties signed a Foreign Legal Consultant Accord in July 1998, allowing lawyers from any
NAFTA country to act as foreign legal consultant in the region.
105. Foreign law firms may establish in Canada only in the form of proprietorship or partnership
except in Alberta, British Columbia, New Brunswick, Nova Scotia and Ontario where incorporation ispermitted.  In these provinces, as indicated in Canada's horizontal commitments, there are
requirements for incorporated companies to maintain a minimum number of Canadian-resident
directors.  The participation of foreign capital in a law firm is also restricted: only locally qualified
lawyers can own or invest in such firms.
(d) Accountancy
106. There are three major professional accountancy titles in Canada: Chartered Accountant (CA),
Certified Management Accountant (CMA) and Certif ied General Accountant (CGA).  There are some
60,000 CAs, 29,000 CMAs and 25,000 CGAs.  Each title is protected by provincial legislation and is
represented at the national level by the following professional bodies: the Canadian Institute of
Chartered Accountants (CICA), the Society of Mana gement Accountants of Canada (SMAC) and the
Certified General Accountants Association of Canada (CGA Canada).  To practice accountancy it is
necessary to be registered in or licensed by one of the professional bodies in the province where thepractice is to take place.
107. Accounting services cover several activities, each regulated in a different manner at the
provincial level and under different professional titles.
69  For instance, audit and review services,
known as public accounting, is a regulated activity and may be performed by CAs only in
Nova Scotia, Ontario, Prince Edward Island and Quebec; by CAs and CGAs in British Columbia; andCAs, CGAs and CMAs in Alberta.  In Manitoba, New Brunswick and Saskatchewan, there are no
regulations on the provision of public accounting.
108. No conditions of nationality or citizenship are imposed with respect to membership and
licensing for all provinces.
70  Residency is required to be accredited as a public accountant in Alberta,
Newfoundland and Ontario.71  All three accountancy designations generally require a four-year
university education, two years practical experience and passing professional examinations.  Foreign
accountants holding designations from certain foreign accounting bodies may be exempted from some
or all of the requirements after review by a professional association.  All three accountancy
designations have procedures for review of qualification standards by provincial  professional bodies.
With respect to CA membership, the International Qualifications Appraisal Board (IQAB) of the
                                                     
69Activities regularly practiced by accountants include statutory audit, audit of mergers, audit of
contribution in kind, public sector audit, other au dit, accounting, insolvency service, tax advice, tax
representation, investment advice, consulting, expert witness in accounting, and others.  As the core activities of
accountants are accounting and auditing, discussion here is based on these two services.
70Manitoba's request for citizenship for Chartered Acc ounts, as listed in Canada's GATS Schedule, was
eliminated in 1995;  notification to the Council on Trade in Services is pending.
71British Columbia eliminated the residency requirement in January 1997.WT/TPR/S/53 Trade Policy Review
Page 112
CICA reviews the qualification standards and processes of foreign accounting bodies and makes
recommendations.
109. According to Canada's schedule of commitments, commercial presence is required in
Manitoba, Newfoundland, Nova Scotia, Ontario and Sa skatchewan for the practice of auditing, and
establishment must generally take the form of a sole proprietorship or partnership.  In Alberta,
British Columbia, New Brunswick and Nova Scot ia (for public accounting), incorporation is
permitted, however, in Alberta and New Brunswick only locally qualified professionals are allowed to
incorporate.  All firms must be fully owned by locally qualified professionals.  Canada left the
presence of natural persons unbound except as indicated in the horizontal section; the temporary entry
and stay rules for professionals do not apply to the accountancy profession.
110. Canada supported the development of guidelines  for mutual recognition agreements in the
accountancy sector in the WTO Working Party on Professional Services.  The guidelines, adopted by
the Council for Trade in Services in May 1997, are non-binding and intended to be used by WTO
Members on a voluntary basis to facilitate negotiating agreements on the mutual recognition of
professional qualifications for accountants.  Canada has indicated that in principle it is prepared to
commit itself to the disciplines established in the guidelines.72  The Canadian authorities have noted
that the current guidelines would not require any m odifications to existing domestic legislation or any
changes in the manner in which professional licensing bodies treat foreigners;  in their view, the
Canadian accountancy licensing regime currently provides better treatment to foreigners than would
be required under the draft international regime.73
111. A bilateral agreement on the mutual recognition of qualifications was reached in the context
of the Canada-U.S. Free Trade Agreement.74  The agreement is a recommendation to U.S. state and
Canadian provincial authorities to allow U.S. certified public accountants (CPAs) seeking the CA titlein Canada and CAs seeking the CPA title in the United Sates to qualify by passing an abbreviated
examination rather than by taking the entire uniform accountancy examination in the other country.
The agreement applies to provinces and states that have ratified it; as of June 1996,  nine Canadian
provinces and 36 U.S. states had done so.
(e) Architectural services
112. In 1997, imports of architectural services, together with engineering services, urban planning,
landscape architectural services, and services associated with management of project after completion,
amounted to Can$362 million and exports of these services to Can$1,976 million, recording a trade
surplus of Can$1,614 million.  In 1995, of total payments of Can$363 million, 48% was made to the
United States, 6.9% to the European Union and 44.4% to the rest of the world.  Of total receipts ofCan$1,512 million, 22.3% came from the United States, 3.4% from the European Union and another
74.3% from the rest of the world.
113. The architectural services industry in Canada comprises approximately 3,500 private firms
and employs 11,500 workers.  There are 7,700 provincially registered architects.
75  Activities in the
industry include feasibility studies; topographic al determination, demarcation and land surveying;
planning; request for construction permits; preparation and monitoring of construction projects;
                                                     
72 Sub-committee on International Trade, Trade Disputes and Investment of the Standing Committee on
Foreign Affairs and International Trade, 9 June 1998 (http://interparl.parl.gc.ca).
73 Sub-committee on International Trade, Trade Disputes and Investment of the Standing Committee on
Foreign Affairs and International Trade, 9 June 1998 (http://interparl.parl.gc.ca).
74 Canada has not yet notified this agreement under Article VII:4 to the Council on Trade in Services.
75Industry Canada, http://www.strategis.ic.go.ca.Canada WT/TPR/S/53
Page 113
technical control and certification; construction cost management; urban and landscape planning; and
interior design.  While some activities are exclusively performed by licensed professional architects,
the exercise of some activities is shared with other professions, such as land surveyors, landscape
architects and interior designers, which are regulated by different legislation.  Discussion here focuses
on professional architects, and excludes land surveyors, landscape architects and interior designers.
114. The profession of architect is regulated at the provincial level, and persons wishing to practice
must obtain a licence from an association of architects in one of the provinces or territories.
Licensing requirements vary from province to province; the Committee of Canadian Architectural
Councils (CCAC) helps coordinate the provincial  associations on regulatory matters including
licensing.  Applicants must first obtain the certification of their academic qualifications from the
national architecture accrediting body, the Canadian Architectural Certification Board (CACB).Residency is required in New Brunswick, Newf oundland and Nova Scotia to practice under a
permanent licence.  Procedures for the permanent accreditation of foreign qualifications exist in each
province.  An architect may also apply for member ship in the national voluntary organization, the
Royal Architectural Institute of Canada (RAIC), which entitles the member to use the designation
MRAIC (Member of the Royal Architectural Institute of Canada).  The RAIC currently has more than3,000 members.
115. Foreign architects may also engage in architectural services under one-year, project-based
temporary licences.  All provinces, with the exception of Manitoba, have procedures for temporary
licensing based on home-country qualifications and experience, and do not impose any form of
residency or local presence requirement.  A temporary licence is renewable; the only difference
between a permanent and a temporary licence is that the former affords the holder the right to
participate in the governance of the profession.
116. According to its GATS Schedule, Canada requires commercial presence to take the form of a
sole proprietorship or partnership.  In Prince Ed ward Island, non-resident firms wishing to establish a
commercial presence through a partnership are required to maintain a higher percentage of
locally licensed architects in the partnership.  Investment and ownership of an architectural firm is
limited to locally licensed professionals.  The presence of natural persons is left unbound except asindicated in the horizontal section, which allows licensed foreign architects to enter and stay for a
maximum 90 days or the time necessary to complete the services contract, whichever is shorter.
117. In the framework of the Canada-U.S. Free Trade Agreement, an Inter-Recognition Agreement
was reached in June 1994 between the CCAC and the (U.S.) National Council of Architectural
Registration Boards.
76  The agreement is implemented only in those states and provinces that ratified
the agreement.  The agreement establishes a series of requirements for certification applicable to U.S.
and Canadian architects.  So far, nine Canadian provinces and 38 U.S. states have adopted the
agreement.
(f) Engineering services
118. Engineering is a regulated profession in Canada and a licence is required for the provision of
engineering services.  Licences are issued and administered by 12 provincial and territorial
associations that set their own standards and regulate the profession.  Licensed  engineers are known
as professional engineers and are eligible to use the designation "P.Eng." ("ing." in Quebec) after their
name.  The Canadian Council of Professional Engineers (CCPE) is the national federation of the
12 provincial and territorial associations, coordinating their activities in such areas as licensing,
                                                     
76The National Council of Architectural Registration Boards is a non-governmental, national federation
of the official registration boards in 55 U.S. jurisdictions.WT/TPR/S/53 Trade Policy Review
Page 114
professional practice, education, and the establishment of minimum qualifications for practising
engineers.  The CCPE currently represents more than 160,000 professional engineers nationwide.
119. Professional registration is based on requirements with respect to academic qualifications
(usually a bachelor's degree in engineering from  an accredited Canadian university), language
competence, satisfactory experience (two to four years of engineering work experience), and
knowledge of professional practice and ethics.  To practice under a permanent licence, residence isrequired in Alberta, British Columbia, New Brunswick, Newfoundland, Nova Scotia, Ontario, Quebec
and Saskatchewan.  Foreign engineers wishing to obtain a licence may have their qualifications
evaluated by the Canadian Engineering Accreditation Board (CEAB) of the CCPE.  Like architects,
foreign engineers may also apply for one-year renewable licences, which do not impose residence or
local presence requirements.
120. Canada made commitments in engineering services  and integrated engineering services in the
GATS framework.
77  While there is no cross-country limitation on the provision of services, Manitoba
requires commercial presence for the services provided by consulting engineers.  Canada imposes no
limitations on the legal form of establishment, ownership, or investment in an engineering firm by
foreigners. The presence of natural persons is left unbound except as indicated in the horizontalsection, which allows foreign licensed engineers to enter and stay for a maximum 90 days or the time
necessary to complete the services contract, whichever is shorter.
121. Several mutual recognition agreements cover the engineering profession.  The CEAB signed a
mutual recognition agreement, known as the "Washington Accord", with six foreign professional
bodies.
78  Signatories to the agreement recognize the substantial equivalency or comparability of the
respective accreditation process.  In the context of NAFTA, the CEAB signed a mutual agreement for
temporary and permanent licensing of engineers with the professional representatives of the two otherNAFTA parties in June 1995, recognizing equivalent qualifications.
                                                     
77Manitoba made the distinction between engineer and consultant engineer in Canada's Schedule.
Consulting engineer, as defined by the Association of Consulting Engineers of Canada, are professionals who
provide independent advice and a wide range of services normally associated with the development andimplementation of capital projects.  Services provided by those engineers reflect advisory and consultative
engineering services (CPC 86721) and engineering design services (CPC 86723) in the Central ProductClassification.
78These include the Institution of Engineers of Australia, the Institution of Engineers of Ireland, The
Institution of Professional Engineers of New Zealand, the Engineering Council (United Kingdom), the
Engineering Accreditation Commission of the Accreditatio n Board for Engineering and Technology (U.S.), the
Hong Kong Institution of Engineers, and the Engineering Council of South Africa.Canada WT/TPR/S/53
Page 115
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