C a nada's I nt er n at ional M arket Ac ces s Rep ort 2007 · $523.7 billion,accounting for about 36.4% of Canadian GDP. All major categories of exports increased in 2006, led by

Canada’s International Market

Access Report2007

© Her Majesty the Queen in Right of Canada, as represented by the Minister for International Trade, 2007

Catalogue number: IT1-2/2007ISBN: 978-0-662-69861-6

About This DocumentCanada’s International Market Access Report – 2007 outlines market access information for Canadian traders andinvestors through a range of multilateral, regional and bilateral initiatives in 2007. It also presents significant market-opening results from 2006 that will benefit Canadian business. This document is available online at www.cimar.gc.ca.

Foreign Affairs and International Trade Canada coordinated the preparation of this report with the assistance of Canadian embassies and missions abroad, other federal government departments (especially Agriculture and Agri-Food Canada, Finance Canada, Industry Canada and Natural Resources Canada), provincial and territorial governments and, of course, Canadians doing business abroad. Its contents are current up to May 2007.

Please visit our online database of foreign trade barriers at www.cimar-database.gc.ca.

1Canada’s International Market Access Report – 2007

Table Of Contents

1. Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3

2. Canada’s Trade in Goods and Services . . . . . . . . . . . . . . . . . 6Improving Access for Trade in Goods . . . . . . . . . . . . . . . . . . . . . . . 6Softwood Lumber . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7Bovine Spongiform Encephalopathy (BSE) . . . . . . . . . . . . . . . . . . . . 8Improving Access for Trade in Services . . . . . . . . . . . . . . . . . . . . . . 9

3. Getting the International Rules Right . . . . . . . . . . . . . . . . . . 11Canada and the World Trade Organization . . . . . . . . . . . . . . . . . . . 11

4. Opening Doors to North America . . . . . . . . . . . . . . . . . . . . . . 14United States . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14The North American Free Trade Agreement . . . . . . . . . . . . . . . . . . 15Mexico . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16

5. Opening Doors to Asia . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18Asia-Pacific Economic Cooperation (APEC) . . . . . . . . . . . . . . . . . 18China . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18Hong Kong . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19India . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19Republic of Korea . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20Japan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20Chinese Taipei (Taiwan) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21Association of Southeast Asian Nations (ASEAN) . . . . . . . . . . . . . . . . . 22Singapore . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22Vietnam . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22

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2 Canada’s International Market Access Report – 2007

6. Opening Doors to Europe . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23European Union . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23European Free Trade Association . . . . . . . . . . . . . . . . . . . . . . . . . . 24

7. Opening Doors to Latin America and the Caribbean . . . . . . . 25Mercosur, Brazil and Venezuela . . . . . . . . . . . . . . . . . . . . . . . . . . . 25Chile . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25Andean Community . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26Central America and the Caribbean . . . . . . . . . . . . . . . . . . . . . . . . 26

8. Opening Doors in Other Key Markets . . . . . . . . . . . . . . . . . . . 28Australia . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28New Zealand . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28Russia . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28Kazakhstan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29Ukraine . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29Sub-Saharan Africa . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29Middle East and North Africa . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30

9. Investment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32Science and Technology (S&T) and Innovation . . . . . . . . . . . . . . . 33

10. Glossary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35

11. List of Acronyms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38


Today, commercial engagement with the world is about more than the traditional import andexport of goods and services. It is also aboutinvestment–both foreign and domestic, commercialcollaborations and technology partnerships. And itis about global value chains–or the development ofintricate international and regional networks offinance, production and distribution across borders.

In this new dynamic, goods, services and people–fuelled by foreign capital in both directions–areflowing across borders like never before. Globalcompetition for technology, talent and capital iselevating and intensifying dramatically.

As a trading nation, Canada’s prosperity hingeson helping Canadians build links to these globalbusiness opportunities.

Businesses and investors alike must be supportedby the right tools and business intelligence to helpthem understand and mitigate the risks of operatingin foreign markets. This includes timely, accurateinformation about trade and investment barriersin key global markets, and about what theGovernment of Canada is doing to bring downthese barriers.

This publication and database, Canada’sInternational Market Access Report (CIMAR), is akey part of the government’s ongoing efforts tohelp firms and investors understand what theycan expect in foreign markets, and what thegovernment is doing to provide the access theyneed to succeed on the world stage.

CIMAR outlines what Canada is doing to furtherimprove access to foreign markets in 2007, andhighlights the many successes achieved last year.It offers the most up-to-date information on

the kinds of trade barriers Canadian companiesencounter in key markets around the world.As such, it is an important tool for Canadianbusinesses and investors to use in planning global operations.

It also helps the Government of Canada build commercially relevant strategies to improveCanada’s access to markets and sectors around the world.

The accompanying Internet database (screen-shot samples below and on page 4) of specificinternational trade barriers can be found atwww.cimar-database.gc.ca. This website containsthe most up-to-date information on how the

Introduction

Search for trade barrier bykeyword sector, product codeor country.


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Government of Canada is helping Canadianbusinesses and investors capture global oppor-tunities and build on the wealth and prosperitythat is so fundamental to our national well-being.

The department welcomes direct input fromCanadian exporters and investors describing barriers they have encountered in foreign markets.Individual companies, industry associations andother interested organizations are encouraged tocontact us with specific information on tariffand non-tariff barriers, as well as other businessirritants. Businesses are invited to report anyproblems they are experiencing by communicatingin strictest confidence to:

“Foreign Trade and Investment Barriers Alert”Foreign Affairs and International Trade Canada (CSL)Lester B. Pearson Building125 Sussex DriveOttawa ON K1A 0G2Fax: (613) 944-7981Email: [email protected]

List of tradebarriers.

Provides a description of the trade barrier.


Canada’s strong economic performance continued in2006, with real gross domesticproduct (GDP) increasing by2.7%–driven primarily by consumer spending and non-residential investment.

The following trends in Canadiantrade and investment took placein 2006:

• Exports of goods and servicesincreased by 1.1% to top$523.7 billion, accountingfor about 36.4% of CanadianGDP. All major categories ofexports increased in 2006,led by industrial goods andmaterials (11.9%), with theexception of forestry prod-ucts, automotive productsand energy products, whichdeclined by 8.6%, 6.0% and0.4% respectively.

• Imports outpaced exports,increasing by 4.2% to reach$486.5 billion. As a result,the trade balance declinedby $13.9 billion, equivalentto about twice the reductionin the overall current accountbalance over the previous year.

• The annual surplus on goodsaccounted for most of thisdecline, falling by $10.6 billionto $54.3 billion. The goodssurplus with the United Statesdropped by about 11% to$96.9 billion but was stillresponsible for the entiretrade surplus. Canada’s goodstrade deficit with non-U.S.destinations decreased slightlyto $42.7 billion, down from$43.9 billion in 2005.

• Although services exportsincreased to $65.1 billion in2006, the services deficit roseto a record $17.1 billion, upfrom $13.7 billion in 2005, asimports topped $82.2 billion.The $3.4 billion increase inthe deficit was largely dueto higher travel costs (fares)and other trip expenses forCanadians travelling abroadand a widening in the deficitfor transport services.

• Direct investment outflowsreached $47.8 billion, withacquisitions accounting for$3.8 billion of this amount.More than three quarters ofCanadian direct investmentinto foreign economies in2006 went to the financeand insurance sectors ($37.6 billion). On a geographic basis, the United States attracted most of this investment.

• At $75.6 billion in 2006,foreign direct investment(FDI) flows into Canadawere the second highest on record and were largelydominated by acquisitions.The United Kingdom andthe United States were the main direct investors in Canada in 2006, withinvestments of $22.2 billionand $20.9 billion, respectively.

Trends in Canadian Trade and Investment


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Improving Access for Trade in Goods

Canada is committed to ensuring that its goodsproducers have competitive terms of access to international markets through a variety ofmeans, including both multilateral and bilateraltrade agreements.

The World Trade Organization (WTO) is theforum through which Canada negotiates tradeagreements multilaterally, and is the foundation ofour country’s trade policy. Currently, the WTO is inits ninth round of trade negotiations, known as theDoha Development Agenda. In these negotiations,Canada’s priorities for market access improvementsfor goods include:

• eliminating or significantly reducing tariffs ongoods of interest to Canadian exporters (whichincludes binding commitments on maximumtariffs that would be lower than the tariffscurrently being applied)

• levelling the international playing field for agri-cultural goods and agri-food products through:

– the elimination of export subsidies;

– substantial reductions to, and tighter disciplineson, trade-distorting domestic support; and

– significant market access improvementsthrough reductions in the tariffs faced byCanadian agricultural and agri-food exports.

• attaining improved disciplines on subsidies andgreater transparency and predictability in the useof trade remedies (e.g. anti-dumping measures)by our trading partners

• securing strong and binding rules on trade faci-litation by building on existing WTO obligationson transparency and customs procedures

As a complement to the multilateral system, Canadais also pursuing improved market access for tradein goods on a bilateral basis, including throughongoing bilateral and regional free trade negotia-tions. Current negotiations taking place include:

Effective consultations with Canadians are essential to the development andimplementation of all significantinternational trade policies andinitiatives. This is why ForeignAffairs and International TradeCanada has a long-standingframework for public consulta-tions and outreach aimed at

engaging Canadians in thedevelopment of trade policiesand initiatives. For example,the department manages arange of permanent and ad hocconsultative mechanisms toensure that the views, prioritiesand interests of Canadians at large, other levels of government, industry,

non-governmental organizationsand public interest groups are taken into account in the development of Canada’strade agenda. For further information, please visitwww.international.gc.ca/tna-nac/consult-en.asp.

Consultation and Outreach on Canada’s Trade Agenda

2. Canada’s Trade in Goods and Services


the Central America Four (CA4), the EuropeanFree Trade Association (EFTA), Korea andSingapore. In addition to these negotiationsalready in progress, Canada is exploring the possi-bility of free trade negotiations with the countriesof the Andean Community, the CaribbeanCommunity and Common Market (CARICOM),and the Dominican Republic. Free trade agree-ments with these trading partners would delivercommercial benefits across a wide range of goodssectors, notably in agriculture, fisheries, forestryand industrial products. For example, by leadingto tariff reductions and/or elimination, free tradeagreements would provide new opportunities forCanadian exporters of such products as beef, pork,grains, fruits, vegetables, prefabricated housing,chemical products, fertilizers, and electrical andpower-generating equipment. Trade negotiationsalso provide Canada with an opportunity to addressnon-tariff barriers–particularly in the area ofstandards-related measures–that affect a numberof Canada’s industrial sectors, such as the automotive sector.

As Canada vigorously negotiates market accessimprovements, it recognizes that existing foreigngovernment policies or practices can hurt Canadianexporters by limiting the right of entry to Canadianproducts and may, at times, be inconsistent withexisting trade agreements. As a result, Canada willcontinue to monitor the trade laws and practicesof key trading partners, make representations asrequired to foreign authorities and, when appro-priate, use the dispute settlement provisions oftrade agreements to protect and promoteCanadian interests.

Softwood Lumber

Following months of negotiations and with thesupport of all major softwood-producing provincesand an overwhelming majority of Canadiansoftwood lumber producers, the Canada-U.S.Softwood Lumber Agreement came into effecton October 12, 2006. Legislation to implementCanada’s obligations under the Agreement–the

Softwood Lumber Products Export ChargeAct–received Royal Assent on December 14,2006. The Agreement has resolved a long andcostly dispute and provides a stable bilateral tradeenvironment in which the Canadian lumberindustry can prosper over the seven- to nine-yearlife of the Agreement.

Under the Softwood Lumber Agreement, U.S.countervailing and anti-dumping duty orders,in place since May 2002, have been completelyrevoked. In addition, more than 80% of dutiescollected during the dispute have been returnedto Canadian softwood producers, with the remainderdistributed to U.S. interests. The return of thesefunds–worth more than US$4.5 billion–toCanadian producers marks a significant infusionof capital into the industry, and many companieshave already invested their refunds in futuregrowth opportunities.

The Agreement provides for the imposition of anexport charge when the price of lumber is at orbelow US$355 per thousand board feet. Theexport charge is levied according to the bordermeasure option selected by each region to addressits specific economic and commercial situation.Regions selecting Option A (B.C. coast, B.C. interiorand Alberta) are subject to a charge of 5%, 10% or15% depending on lumber prices. Those selectingOption B (Saskatchewan, Manitoba, Ontario andQuebec) are subject to a charge of 2.5%, 3% or 5%,depending on lumber prices, as well as volumeconstraints in the form of regional export quotas.The funds collected from the export charge willremain in Canada. The Agreement also provides forreduced export charges for Canadian exporters ifother lumber-producing countries significantlyincrease their exports to the United States atCanada’s expense. The export charges and volumeconstraints do not apply when the price of lumberis above US$355 per thousand board feet. TheMaritimes, the territories and 32 companies foundby U.S. authorities not to be subsidized are excludedfrom the application of the border measures.


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BSE

Following Canada’s announcement of its firstbovine spongiform encephalopathy (BSE) case in Alberta on May 20, 2003, most of our tradingpartners banned imports of Canadian cattle, beefand related products. Since then, Canada has beenworking with these trading partners toward aresumption of trade based on science and standardsestablished by the World Organisation for AnimalHealth (OIE). The OIE is the relevant standards-setting organization for animal health referencedin the WTO Agreement on the Application ofSanitary and Phytosanitary Measures.

At its May 2005 meeting in Paris, the OIEannounced new guidelines for BSE that reflect themost current internationally accepted scientificinformation on the disease. As part of the newguidelines, boneless beef from animals under 30 months of age is now included in the OIE listof commodities that should be eligible for safetrade, whether or not the exporting country hasconfirmed cases of BSE. Moreover, science-basedstandards have been elaborated for safe trade inother commodities including bone-in beef andbeef from animals over 30 months, as well as livecattle, with additional certification guarantees asto the effectiveness of control measures in place;Canada is able to meet these standards.

The following markets have resumed full orpartial trade with Canada:

Market Access provided for Canadian beef and cattle

Algeria Live cattle for breedingAntigua Beef from animals under

30 monthsBahrain All beefBarbados All beef and live cattle for breedingBermuda All beefCayman Islands Beef from animals under 30 monthsCuba All beef and all cattleEgypt Boneless beef from animals under

30 monthsLive cattle 24 months and less for breeding

El Salvador Boneless beef from animals under 30 months

Guatemala Boneless beef from animals under 30 months

Honduras Boneless beef from animals under 30 months

Hong Kong Boneless beef from animals under 30 months

Jamaica Boneless beef from animals under 30 months

Japan Beef from animals 20 months and under

Kazakhstan Live cattle for breedingLebanon Boneless beef from animals under

30 monthsLive cattle

Macau All beefMacedonia Boneless beef from animals under

30 monthsMexico Beef from animals under 30 monthsMorocco Live cattle for breedingNew Zealand All beefPhilippines Boneless beef from animals under

30 monthsSaint Kitts and Nevis Boneless beef from animals under

30 monthsThailand Boneless beef from animals under

30 monthsTrinidad and Tobago Boneless beef from animals under

30 monthsTunisia Live cattleUkraine Live cattle for breedingUnited Arab Emirates Beef from animals under 30 monthsUnited States Cattle under 30 months for slaughter

Beef from animals under 30 monthsVietnam Boneless beef from animals under

30 months


Improving Access for Trade in Services

Services industries and international trade inservices are important components of Canada’seconomy. There has been a broad structural shifttoward services over the past few decades. Serviceshave increased from just over half of Canada’sGDP in 1961 to more than two thirds today. Thisstructural shift is best shown by Canada’s changingemployment pattern over the decades: today thesector employs about three Canadians in four,compared with one in two in 1961. Moreover,services have accounted for approximately 80% ofnewly created jobs since 1992. Some of the highestpaying jobs in the country are in the knowledge-intensive services industries such as architecture,engineering, research and development, andfinancial services.

While the volume of Canada’s services trade islower than that of merchandise trade, servicestrade continues to grow more rapidly than goodstrade and significantly faster than the Canadianeconomy. With the European Community countedas one trading entity, in 2005, Canada rankedseventh and fifth in the world in commercialservices exports and imports, respectively. However,at 11% in 2006, Canada’s trade in services, as aproportion of its total trade, was less than theworld average of 18.4%. That year, Canadaexported $65.1 billion in services, over half ofwhich were commercial services. On the importside, services totalled $82.2 billion, of whichcommercial services accounted for 47%, travelservices for 29% and transport services for 23%.Canada’s two-way trade demonstrates that commercial services are the most important and fastest growing services sector.

Although the United States remains Canada’sdominant export destination, Canadian servicesexports to Europe, Latin America, Asia andAfrica are increasing, accounting for upwards of45% of Canada’s total services exports. Moreover,

services trade with emerging markets plays anincreasingly important role in keeping Canadacompetitive on the international stage.

Facilitating increased Canadian services trade(cross-border transactions, FDI-related foreignaffiliate sales and the services transactions ofindependent professionals and contractors workingin other countries) yields direct benefits to Canadain job creation, improved productivity and greaterbusiness activity. In addition, increased internationaltrade can provide access to a greater range ofenabling services (e.g., transportation and distri-bution, information and communications, financialand professional), which in turn are critical to theefficiency of exports in Canada’s manufacturingand primary sectors.

Services production and consumption are subjectto a wide range of regulatory measures. Somemeasures, designed as policy responses to domesticconcerns (e.g., consumer protection, quality ofservice, accreditation), can sometimes also act asimpediments to international services trade. Othersmay involve more direct and explicit discriminationagainst foreign services providers. As services tradeincreases in importance in the global economy,countries have engaged in multilateral and bilateralnegotiations to reduce or eliminate these marketaccess barriers.

As a country with a strong interest in expandingservices exports and investments, Canada relieson bilateral, regional and multilateral, legallyenforceable rules on trade in services. Theserules help ensure that Canadian exporters receivefair and equitable treatment in foreign markets.Canada pursues market access for services in avariety of international forums, including theWorld Trade Organization and in various freetrade agreement negotiations.


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Canada’s priorities in 2007 include obtainingimproved market access for:

• professional services;

• computer and related services;

• research and development services;

• other business services (especially managementconsulting services, oil and gas services, andmining services);

• courier services;

• telecommunications services;

• construction and related engineering services;

• distribution services;

• environmental services;

• financial services;

• tourism and travel-related services; and

• transport services.

Recent DevelopmentsEfforts to enhance air services access are animportant part of Canada’s overall work to faci-litate trade in services. In line with the recentlyannounced Blue Sky policy, Canada will pursueopportunities to negotiate open bilateral air

agreements for international scheduled air transportwhen this is deemed to be in the national interest. Inparticular, we will seek to maximize opportunitiesto add passenger and all-cargo services in responseto market demand. (For further information see theTransport Canada publication, www.tc.gc.ca/pol/en/ace/consultations/blueSkyPolicy.htm).

Canada’s continued efforts to enhance market accessfor services are receiving additional support throughthe Canadian Services Coalition. This membership-based organization designed to provide a strong andcohesive voice on behalf of the Canadian servicesindustry. Its main objective is to seek the liberali-zation of services markets throughout the worldand to remove trade and investment barriers for the Canadian services sector. The CanadianChamber of Commerce acts as secretariat forthe Coalition. Further information is available at,www.canadianservicescoalition.com/aboutus.htm.


Canada and the World Trade Organization

Membership in the World Trade Organizationunderpins Canadian trade policy. The WTO rulesgovern the trade relations of the organization’s150 members, which include Canada’s maintrading partners (e.g., the United States, theEuropean Union, Japan, China and Mexico), aswell as other industrialized countries, emergingmarkets and smaller developing countries.

The building blocks of the multilateral tradingsystem are the WTO agreements, which arenegotiated and signed by all members. The twobasic principles of the WTO are the following:

• equal treatment for all WTO members (most-favoured-nation, or MFN clause), under whichcountries cannot normally discriminate betweentheir trading partners; and

• national treatment, under which imported andlocally produced goods and foreign and domesticservices are to be treated equally.

The WTO remains the locus of the multilateraltrading system. It not only provides a venue fornegotiating market access and other trade rules,but it also represents the best forum for monitoringthe implementation of obligations and commitmentsunder various agreements, reviewing members’trade policies and practices, and discussing trade-related issues to enable trade to flow freely, fairlyand predictably. The WTO also offers a state-to-state dispute settlement system, whereby tradedisputes are settled based on commonly agreedrules, rather than political or economic power.Only the WTO has the critical mass of countriesneeded to address the most harmful distortionsin the international trading system, particularlytrade-distorting agricultural subsidies.

The Doha Round and Canada’s Objectives The Fourth WTO Ministerial Conference in Doha,Qatar, in November 2001 launched a new roundof trade negotiations (the Doha Round). Thesenegotiations include such issues as agriculturaltrade reform, market access for non-agriculturalgoods and for services, rules for subsidies, anti-dumping and countervailing duty actions, tradefacilitation, dispute settlement, and certain aspectsof trade and the environment. In addition to thisbroad range of topics, there was agreement to focuson the needs and interests of particular concern todeveloping countries, such as special and differentialtreatment. Given the focus on development issuesand their overarching nature in the negotiations,the Doha Round is also referred to as the “DohaDevelopment Agenda.”

Following the Sixth Ministerial Conference in HongKong, China (in December 2005), trade ministersand other senior officials responsible for the WTOengaged in intensive regular meetings throughoutthe first half of 2006. Their goal was to bridge thegaps in negotiating positions and conclude anagreement by the end of the year (as set out in theHong Kong Declaration). Despite their efforts, thegaps remained too wide to bridge and the nego-tiations were subsequently suspended in July 2006,in all negotiating areas.

Members used the suspension to engage in quietdiplomacy and technical discussions, as well as toreflect on ways to push through the impasse and getthe negotiations back on track. By November, how-ever, it had become clear that the suspension hadnot achieved its desired effect and that WTO mem-bers wished to see a re-launch of the talks. At theAsia-Pacific Economic Cooperation forum (APEC)meeting in Hanoi, Vietnam (November 12 to 19,2006), APEC trade ministers indicated their support

3. Getting the International Rules Right


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for re-starting negotiations in the Doha Round.Subsequently, WTO Director-General Pascal Lamyrecommended that discussions at the technicallevel resume.

As informal bilateral and group meetings intensi-fied, a renewed sense of commitment emergedfrom the first ministerial meeting held since thesuspension of the round. Held on the margins ofthe World Economic Forum in Davos, Switzerland,on January 26, 2007, ministers attending themeeting stated their support for a full-scale relaunch of the Doha Round negotiations. OnJanuary 31, Pascal Lamy received the support ofall WTO members for a full resumption of thenegotiations. Members have continued to engagethrough technical groups and at the ministeriallevel, working to span the differences in the diversenegotiating positions. It will take the efforts of allmembers to reach a broad and ambitious deal.

The Doha Development Agenda negotiations arethe most comprehensive round ever undertaken bythe WTO or its predecessor, the General Agreementon Tariffs and Trade (GATT). The diverse rangeof issues, combined with the consensus-basedapproach of the WTO, has meant that thesenegotiations have not been easy; however, WTOnegotiations have never been simple or quick–thelast round (the Uruguay Round) took seven and ahalf years to complete–and the potential benefitsof such a broad agreement are wide ranging.

Canada is seeking a broad and ambitious outcometo the Doha Development Agenda. We welcomethe resumption of the negotiations and willcontinue to engage other members to advanceprogress in the round and to secure a good deal forour producers, manufacturers and services providers.An ambitious outcome to the negotiations wouldprovide a more level playing field for Canadianexporters competing in global markets, whileincreasing Canadian and global economic growth,prosperity and development.1

In the WTO agriculture negotiations, Canadacontinues to seek the elimination of all forms of export subsidies; substantial reductions intrade-distorting domestic support; and real andsignificant market access improvements. In non-agricultural market access negotiations, Canada isseeking improved access to markets of interest toour exporters, including through reduced customstariffs for all non-agricultural goods and tariffelimination in some sectors. Key sectors of interestto Canada include fish products, forest products,environmental goods, chemicals and raw materials.

In services negotiations, Canada is seekingincreased access to foreign services markets invarious sectors. These include architecture,engineering and integrated engineering, computerand related services, construction and relatedengineering, energy, environment, finance, law,maritime transport and telecommunications. Weare also looking for an easing of restrictions onthe temporary movement of “natural persons”supplying services, as well as more transparentand predictable regulatory environments abroad. Inthe rules negotiations, Canada supports improvinganti-dumping and/or countervail disciplines toreduce the scope for abuse; strengthening subsidydisciplines, particularly to ensure fair competitionfor Canadian exporters in foreign markets; andclarifying rules on regional trade agreements.

In trade facilitation negotiations, Canada’s priorityis to secure strong, binding rules governing tradefacilitation in a manner that is both practical andmeaningful to traders – the goal is to build onexisting WTO obligations in a way that maximizestransparency and streamlines customs procedures.

With respect to the overarching developmentdimension of the Doha Round, Canada is seekingan outcome to the round that strikes a balancebetween development objectives, developingcountries’ concerns and Canadian commercialinterests. Canada supports an outcome that will

1 A 2005 World Bank Study estimates the global welfare gains from liberalization in merchandise trade and reduction in agricultural subsidies at nearly $363.5 billion a year by 2015.


make a significant contribution to the developmentprospects of WTO members and lead to betterintegration of developing countries into the worldtrading system. For this reason, Canada supportseffective special and differential treatment fordeveloping countries, the provision of trade-relatedtechnical assistance and capacity building, andgreater institutional and policy coherence betweenthe WTO and other international institutions. Formore information on Canada and the WTO, pleasevisit www.international.gc.ca/tna-nac/wto-en.asp.

WTO Agreement on Government ProcurementRepresenting a market worth hundreds of billionsof dollars annually, foreign government procure-ment holds significant potential for Canadianexporters. Consequently, Canada is working at theWTO to increase sectoral coverage and reducediscriminatory barriers in the United States andother key markets. A key mechanism in thisrespect is the WTO Agreement on GovernmentProcurement (AGP), which provides the basis forguaranteed access for Canadian suppliers to theUnited States, the European Union, Japan andother key markets. Canada continues to pursuegreater and more secure market access throughthe AGP. Moreover, the ongoing review of the AGP,with its mandate to expand coverage, eliminatediscriminatory provisions and simplify theAgreement, remains a priority. The parties to theAGP–Canada and 37 other countries–have provisionally agreed to a new text that representsan important step forward in the WTO negotiationson government procurement. Negotiations aretargeted for completion in 2007.

Accessions of New Members to the WTOWith the accession of Vietnam in January 2007,the WTO now has 150 members. Canada is activein the accession negotiations of all applicants. Todate, the following 29 applicants are at variousstages of the accession process: Afghanistan,Algeria, Andorra, Azerbaijan, Bahamas, Belarus,Bhutan, Bosnia and Herzegovina, Cape Verde,Ethiopia, Iran, Iraq, Kazakhstan, Laos, Lebanon,Libya, Montenegro, Russia, Samoa, Sao Tome andPrincipe, Serbia, Seychelles, Sudan, Tajikistan,Tonga, Ukraine, Uzbekistan, Vanuatu and Yemen.

Of the 29 applicants currently awaiting accession tothe WTO, 10 are least developed countries (LDCs):Afghanistan, Bhutan, Cape Verde, Ethiopia, Laos,Samoa, Sao Tome and Principe, Sudan, Vanuatuand Yemen. Canada works with other WTOmembers to facilitate the accession of LDCs,recognizing that WTO accession will help themin their development efforts and their transition tofully participating members of the world tradingsystem. Canada endorses the guidelines for facili-tating and accelerating negotiations with accedingLDCs, approved by the WTO General Councilin December 2002.

Further information on the WTO accessionprocess can be obtained at www.wto.org/english/thewto_e/acc_e/acc_e.htm.


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United States

Canada and the United State enjoy an economicpartnership that is unique in today’s world.We share one of the world’s largest and mostcomprehensive trading relationships. Since theimplementation of the Canada-U.S. Free TradeAgreement in 1989, two-way trade has tripled. Inaddition to joint oversight of the world’s longest,non-militarized border, the two countries arelinked by similar business practices, legal systems,language, history and culture.

The United States purchased 79% of our goodsexports and contributed 65% of our goodsimports last year, when two-way goods trade wasworth more than $626 billion. In 2006, goodsexports to the United States fell by 1.9% to reach$361.7 billion, largely because of weakness in autoand forestry products, while merchandise importsfrom the United States rose by 1.9% to $264.8billion. At the same time, Canada exported $35.9billion in services to the United States, whichremains the top market for our services exports.

Canada continues to be the most important marketfor the United States most important market,taking 22.5% of U.S. goods exports and about9% of U.S. services exports last year. It is theleading export market for 36 of the 50 U.S. statesand ranked in the top three for another 10 states,making it a larger market for U.S. goods than theEuropean Union.

Current IssuesWhile our bilateral trade and investment relation-ship is generally free of irritants, some challengesremain. For example, costs and uncertaintiesstemming from U.S. export controls in bilateraldefence and aerospace trade are deterring U.S.firms from working with Canadian partners,

subcontractors and even subsidiaries, as well asimpeding the ability of Canadian firms to competefor U.S. business. Security-cleared dual nationals inCanada, whether in the public or private sector,also face difficulties due to the U.S. definition andtreatment of “dual nationals,” especially within theInternational Traffic in Arms Regulations (ITAR).This, in turn, makes job-related access to controlledtechnologies and data difficult. Canada continuesto engage the United States in efforts to resolvethe ITAR impediments to the satisfaction ofboth governments.

Additionally, administrative procedures and reviewson the part of U.S. patent authorities, combinedwith the presumed validity of patents in the U.S.judicial system, create a situation conducive toabuses through extensive patent litigation in U.S.courts. Investors who rely on patents for theirbusiness operations must devote resources tolitigation, which negatively affects productivityand creates a disincentive to innovation.

A key concern for Canada is the need to addressissues related to the U.S. Western HemisphereTravel Initiative (WHTI). While the governmentappreciates the security goals underlying the WHTI,it is concerned about the “how” and “when” ofWHTI implementation, particularly at the landborder. With more than $1.9 billion in goodsand services crossing our border daily, and over160 million visits in both directions in 2006, neithercountry can risk uncertainty and border congestion.The Government of Canada believes that adequatepreparation and infrastructure, as well as atransparent plan for WHTI implementation arenecessary. Priorities would include exploringalternative identification documents, and institutinga transition period during which existing documentscould continue to be used. The government hasengaged the U.S. Administration on these issues

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and is pleased with the passport exemptionsproposed on January 22, 2007 (for minors, youthsports teams, and cultural and social groups)and with the cooperative efforts to pilot anenhanced driver’s licence in British Columbiaand Washington State.

As well, the U.S. Department of Agriculture’sAnimal and Plant Health Inspection Service published an interim rule on August 25, 2006,subjecting Canadian-produced fruits and vegeta-bles to agricultural quarantine inspections at U.S.ports of entry. The interim rule requires fees to becollected on all commercial shipments (agriculturaland non-agricultural) and from airline passengerscoming from Canada, with the stated purpose ofrecovering the costs of these inspections. The feesare calculated to cost Canadian border users (rail,trucking, air and marine) an estimated $78 millionin the first year they are implemented. Canadahas requested withdrawal of the interim rule andis working to develop cost-effective alternativesthat meet U.S. technical requirements.

Canada will also continue to work with both the United States and Mexico on a coordinatedNorth American approach to the regulatory and trade aspects of BSE.

For more information on bilateral trade andinvestment issues, please consult this document’sassociated database at www.cimar-database.gc.ca.

Security and Prosperity Partnership Canada participates with the United States and Mexico in the Security and ProsperityPartnership (SPP) of North America. This trilateralinitiative expresses a commitment to work togetherto improve the security, prosperity and qualityof life of all North Americans. The SPP includes aseries of practical measures designed to facilitatetrade and enhance regulatory cooperation. It ishelping to move legitimate goods and people acrossNorth American borders faster and at a lower cost.Working together in this way will help enhanceNorth American competitiveness globally. For further details, please visit www.spp-psp.gc.ca.

Canada will continue to impress upon its SPP part-ners its commitment to enhancing security withinNorth America and abroad. U.S. defence arrange-ments with Canada are more extensive than thosewith any other country. For further information,please visit www.canadianally.com/ca.

North American Free Trade Agreement

The North American Free Trade Agreement–now inits 14th year–has contributed to significant increasesin trade and investment flows between Canada andits NAFTA partners. The more significant trends anddevelopments are summarized below.

• Merchandise trade has increased 122% since1993, reaching $597.2 billion in 2006.

• Merchandise exports to the United Statesgrew at an annual compounded rate of 5.8%between 1994 and 2006.

• Bilateral trade between Mexico and Canadareached $20.4 billion, a 349% increase frompre-NAFTA levels (1993).

• NAFTA partners account for 82.6% of ourtotal merchandise exports.

• Trade in services with the United Statesreached $82.4 billion in 2006, up from $42.3 billion in 1993.

• Approximately 57% of Canada’s servicesexports go to our NAFTA partners.

NAFTA has established a strong foundation foreconomic growth. However, the emergence of neweconomic players, coupled with the increasinglyintegrated network of global value and supplychains, has transformed the dynamics of worldtrade and brought new challenges to NorthAmerica’s continued prosperity. In this context,Canada remains committed to NAFTA as the cornerstone of North American competitiveness,and continues to pursue a NAFTA work planthat will enhance Canada’s trade and investmentwith the United States and Mexico.


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To respond to the new challenges, trade ministersagreed at the 2006 meeting of the NAFTA FreeTrade Commission (FTC) to:

• identify sectors and the specific work thatcould be undertaken within them to removenon-tariff impediments to trade;

• launch a thorough review of the operation ofthe NAFTA working groups and committees inorder to identify potential improvements to theirexisting work programs and ways in which theycould support the new sectoral initiatives; and

• examine how the three countries might colla-borate in negotiating trade agreements withother countries, as well as how elements oftrade agreements negotiated by each countrycould be used to improve NAFTA practicessuch as those relating to transparency andtrade facilitation.

The NAFTA partners are also working to furtherliberalize the NAFTA rules of origin. This work ison an established track, producing improvementsto the NAFTA rules of origin each year over thelast four years. In addition, the NAFTA partnerscontinue to pursue services liberalization in bila-teral and multilateral agreements in an increasinglycompetitive international environment.

Other areas of current work are directed toward, forexample, further regulatory cooperation, improve-ments to temporary entry provisions (NAFTAChapter 16) and increased transparency. Ontransparency, and further to the 2004 release ofthe negotiating history of NAFTA’s investmentprovisions (Chapter 11), work is under way torelease the negotiating history of the institutionalarrangements and dispute settlement provisions(Chapter 20), as directed by ministers at the2006 FTC meeting.

Settling Disputes Under NAFTAIn 2006, three requests were filed for a Chapter 19panel review of U.S. anti-dumping and/or counter-vailing duty determinations concerning softwood

lumber. Another two were filed regarding steel wirerod and grain corn. During the 2006 calendar year,11 panel reviews were ongoing on products includ-ing softwood lumber, magnesium, steel wire rodand grain corn. As well, three panel decisionswere released; two in magnesium and one in soft-wood lumber. For more information on NAFTApanel decisions and reports, please visitwww.nafta-sec-alena.org/DefaultSite/index_e.aspx?DetailID=76.

There are several active Chapter 11 investor-statedispute cases involving the United States andCanada. In five cases, a U.S. investor has made aclaim against the Canadian state: UPS, GL Farms,V.G. Gallo, Merrill & Ring and Crompton. A finalaward is expected in the UPS case in 2007, whilethe other cases may be ongoing throughout theyear. There are four active cases involving Canadianinvestors and the U.S. state: Cattlemen for FairTrade, Glamis Gold, Grand River and Domtar. Ahearing in the Glamis Gold case was scheduledfor May 2007. For more information aboutChapter 11 disputes, please visit www.international.gc.ca/tna-nac/nafta-en.asp.

Mexico

The implementation of NAFTA has propelled theCanada-Mexico relationship to unprecedentedlevels of trade, investment and cooperation. Thereare now more than 1,700 subsidiaries of Canadiancompanies in Mexico, and over 3,100 Canadiancompanies are working on their first sales inthat market.

This success can be attributed largely to relativelyirritant-free access to the Mexican market. Basedon import statistics from both countries, bilateraltrade has increased by close to 350% since NAFTAentered into force in 1994, and Mexico is nowCanada’s fifth most important export marketand third most important supplier. There isgood potential to be realized in sectors such asmanufacturing technologies, building products,information and communications technologies


(ICT), agri-food, and environmental industries, inaddition to more traditional areas such as energy,forestry and mining. With a GDP of $953 billionin 2006, sound macro-economic indicators, anexpanding middle class and a population of over100 million, there is scope for even greatergrowth in commercial exchanges.

According to Mexican statistics, Canada is nowMexico’s fifth–largest investor, in such sectors asbanking, mining, automotive, urban transportation,printing, energy and aerospace. Mexico’s FDIabroad is also increasing as Mexican companiesexpand in search of new markets. This presentsopportunities to promote Canada as a destinationfor those Mexican investors.

Canada and Mexico work closely together as NAFTA partners, and they also use everyopportunity to deepen the dialogue in order toexpand the relationship, for example throughthe trilateral SPP of North America and thebilateral Canada-Mexico Partnership.

In 2006, there were few trade irritants betweenCanada and Mexico. Agriculture is one area inparticular where protectionist sentiment mayexist. The Government of Canada will continueto monitor the implementation of the NAFTAprovisions, which include removal of the remainingtrade restrictions on imports of corn and beansin January 2008.

Opportunities to expand the commercialrelationship will be influenced by the MexicanAdministration’s ability to build consensus andenact crucial structural reforms, namely in theenergy sector, but also with regard to taxation,labour, and anti-monopoly policy in key serviceareas such as telecommunications.

In October 2004, the Canada-Mexico Partnership (CMP)was launched. This high-levelpublic-private forum seeks tostrengthen bilateral economicand policy cooperation and topromote discussion among theprivate and public sectors atthe highest levels. The partner-ship helps focus additionalefforts to further cooperationin S&T and labour mobility.The CMP’s mandate includesidentifying obstacles to trade and investment andmaking recommendations for their removal. Theexpanding partnership now includes six workinggroups: trade, investment and S&T; agri-business;urban sustainability; housing; human capital; andenergy. The CMP working groups last met inMexico City on March 7, 2007, to develop andadvance workplans. Among the highlights: thesigning of an extension for five years of a letterof understanding between the Canadian Mortgageand Housing Corporation and its Mexican counter-part for cooperation in housing; the signing of aMemorandum of Understanding (MOU) betweenthe Association of Canadian Community Colleges(ACCC) and the National Association of Universitiesand Institutes of Higher Learning on joint collabo-ration. For the first time, provincial representativesattended some of the working groups’ sessions.

The Canada-Mexico Partnership


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Asia-Pacific Economic Cooperation

APEC is an intergovernmental forum dedicatedto the promotion of free trade and investment,economic growth and development, and coopera-tion in the Asia-Pacific region. Since its inceptionin 1989, trade in goods and services between its21 member economies–which account for close to50% of the world’s population, trade andGDP–has more than tripled. APEC’s work hasalso expanded to address other issues that arekey to the living standards of its members,including security, health and agriculture.

Canada participates in APEC in support of itsregional trade and investment promotion objec-tives. The forum’s work on trade facilitation,transparency, anti-corruption and intellectualproperty rights (IPR) helps make the Asia-Pacificregion more accessible to Canadian businesses. Formore information, please visit www.apec.gc.ca.

APEC’s year-round activities culminate in theannual APEC Economic Leaders’ Meeting, thelargest of its kind in the region. At the November2006 meeting in Hanoi, Vietnam, world leadersreiterated APEC’s commitment to greater eco-nomic integration in the Asia-Pacific region andinstructed officials to undertake further studiesin 2007 on how to achieve this, including lookingat the possibility of a Free Trade Area of the AsiaPacific as a long-term prospect.

China

China (excluding the Hong Kong Special Adminis-trative Region) continues to be one of the mostimportant players in the world economy and a grow-ing market for the world’s goods and services.China also continues to be Canada’s second-largesttrading partner and its fourth-largest export market.

According to the United Nations Conference onTrade and Development’s World Investment Report,in 2005, China was the third most importantdestination in the world for foreign investment,after the United States and the United Kingdom.

Highlights of the trade and investment relationshipwith China are summarized below:

• Canada’s total merchandise exports to Chinaamounted to $7.7 billion in 2006, an increaseof 7.9% over 2005.

• Total merchandise imports from Chinaincreased to $34.5 billion, up 16.8% over the previous year.

• Current two-way investment, though modest, isgrowing rapidly and holds substantial potential.

While Canadians continue to invest in Chinesefinancial services ICT, information technologiesand transportation markets, Chinese direct invest-ment in Canada is predominantly in the energyand mining sectors.

Canada and China are collaborating to enhancetwo-way flows of investment for the mutual benefitof both economies. To this end, China and Canadaare in ongoing negotiations on a Foreign InvestmentPromotion Agreement (FIPA). A FIPA will helpto promote a deeper, more prosperous trade andinvestment relationship by protecting internationalinvestors while preserving the rights of governmentsto regulate in the public interest.

On September 9, 2006, Canada and China signedan MOU on cooperation in two-way investmentpromotion. This MOU recognizes the desire ofboth countries to strengthen their bilateral invest-ment relationship. Also, on January 16, 2007,Canada and China signed a Science and

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Technology (S&T) Cooperation Agreement thatwill promote greater collaboration in research anddevelopment between Chinese and Canadianacademics, as well as researchers and innovatorsfrom and both the private and public sectors.The work conducted under the Agreement willinitially focus on four priority areas: energy, envi-ronment, health and life sciences, and agriculturalfoods and bioproducts.

A number of problems and practices continue toimpede Canadian access to the Chinese marketsuch as import requirements for agricultural andfood products. As well, some elements of theformer planned economy remain.

Since its WTO accession in 2001, China has madegreat efforts to reform its IPR regime to complywith obligations in the Agreement on Trade-Related Aspects of Intellectual Property Rights(TRIPS). Canada will continue to urge China tomeet the terms of TRIPS by encouraging furtherefforts to uphold IPR. These efforts are essential toaddress the growing global problem of counter-feiting and piracy. We will continue to engageChina in dialogue in multiple international forums,to provide support to Canadian companies withspecific concerns, and to urge China to partici-pate in initiatives to address this common problem.In addition, Canada filed a request with Chinaon April 25, 2007, to join consultations, initiatedby the United States, at the WTO concerningcertain aspects of China’s legal framework forthe protection of IPR.

A number of Canadian industries have raisedconcerns regarding Chinese government supportand subsidies for Chinese manufacturing sectorssuch as the steel sector. Canada, along with otherWTO members such as the United States andthe European Union, has raised its concerns andsought clarification regarding Chinese programsin the WTO and, in the case of steel, theOrganisation for Economic Co-operation andDevelopment (OECD). In addition, Canada has engaged in direct dialogue with China on these programs.

As a member of the WTO with a significant portion of world trade, China is an importantparticipant in the Doha Round of multilateraltrade negotiations. Canada will continue to cooperate with China in supporting an early conclusion to these negotiations.

Hong Kong (China)

The Hong Kong Special Administrative Region,which maintains autonomy in economic, trade,cultural and political affairs, continues to developits own economic, fiscal and budgetary policies,reflecting its own interests and dependence ontrade. It continues to be an aggressively free marketeconomy, with virtually no barriers to entry ordoing business. Canada exported $1.6 billion inmerchandise to Hong Kong in 2006 and importedmerchandise worth $513 million.

India

India remains on track to becoming a world eco-nomic power through acquiring foreign technologyand expanding investment abroad. Opportunitiesfor Canadian services exports to India abound dueto India’s highly skilled, English-speaking workforce.Growth in two-way trade is expected to continue,and significant commercial opportunities in Indiawill continue to emerge with rising consumerismand infrastructure development in India. TotalCanada-India merchandise trade in 2006 was$3.6 billion.

Two-way cumulative direct investment is modest,but growing – up from almost $349 million in2005 to $528 million in 2006 – and is likely toincrease further once a FIPA, currently undernegotiation, comes into force. The conclusion ofa FIPA would boost investment opportunities byproviding added security and predictability to thelegal framework pertaining to foreign investment.


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While India’s share of cumulative FDI intoCanada remains relatively small–representing just0.04% of total FDI in Canada in 2006–the Indiangovernment’s easing of restrictions on outwardinvestment provides opportunities for increasedFDI into Canada. The opening of several softwaredevelopment centres in Canada by India-basedICT firms, as well as investments by Indian banks,points to the attractiveness of Canada as aninvestment destination.

In the other direction, the total of Canada’scumulative direct investment in India amountedto $327 million in 2006. One factor limitingCanadian direct investment in India is restrictionson foreign ownership in key sectors in whichCanada is an international leader, including banking.With respect to financial services more generally,India has indicated that it is considering liberalizingreforms that would be welcomed by Canadianfinancial institutions. India’s recent liberalization offoreign investment restrictions, combined with itsstrong economic performance, presents significantopportunities for Canadian investors, including insuch sectors as infrastructure, ICT, life sciencesand natural resources.

Canada’s commercial relationship with India hasbeen enhanced through various mechanisms: thesigning of an S&T Cooperation Agreement, thenegotiation of a FIPA, and the resolution of anumber of sanitary and phytosanitary issuesrelating to plant products. In 2006, Canada andIndia also signed MOUs on biotechnology–onerelated to research and the other to agriculture.As well, Canada and India concluded a planthealth MOU and agreed to extend an interimarrangement for pulse imports for an additionalyear. India also agreed to temporary accessimprovements on wheat and accepted Canada’scertificates for the export of pine wood lumberand horses.

Republic of Korea

Already ranking among the 12 largest globaltraders, Korea is a leading investor in China andis prominent in North Asian supply chains. Korea is Canada’s seventh-largest merchandise tradingpartner overall and our third-largest partner inAsia. Bilateral trade totalled $9 billion in 2006,with exports to Korea increasing to $3.3 billionand imports from that country to $5.8 billion.Korea is an important partner for Canada withrespect to innovation acquisition and knowledge-based applied technology.

Negotiations toward a Canada-Korea Free TradeAgreement, launched in July 2005, present animportant opportunity to address key irritantsfacing Canadian exporters who are attemptingto access the Korean market. A bilateral tradeagreement could deliver significant commercialbenefits across many sectors of the Canadianeconomy, while benefiting Canadian consumers.It would better enable Canadian companies to tapinto the value chains of Korean corporations, sellraw materials and key technologies and products,and employ Korea as a strategic base for buildingan export and manufacturing presence inNortheast Asia.

A number of access-related issues affect Canadianexports to Korea, one of the most problematic beingKorea’s complete ban on Canadian beef exports.

Japan

The Japanese economy, which remains the world’ssecond largest, has witnessed its longest periodof sustained real growth in several decades. InDecember 2006, the WTO Secretariat reportedthat Japan had made progress in the financial andcorporate sectors, notably in the disposal of non-performing loans, the decision to privatize JapanPost, the strengthening of competition policy,and deregulation in the energy, financial servicesand legal services sectors.


Japan is Canada’s largest export market in Asiaand third largest export market overall behind theUnited States and the United Kingdom. Highlightsof the trade relationship in 2006 are as follows:

• Two-way trade in goods between Canada andJapan stood at approximately $22.6 billion,with exports totalling $10.8 billion (up 2.8%from 2005) and imports reaching $11.9 billion(up 5.9% from 2005).

• In services, Canada exported $1.6 billion andimported $3.2 billion.

The Canada-Japan Economic Framework, launchedin November 2005, has been instrumental inaddressing certain market access issues of interest toCanada. A key element of the Framework is a jointstudy on the costs and benefits of further promotingand liberalizing bilateral trade and investment. Thejoint study is well advanced, and Canada and Japanare working toward its completion.

Cooperation between Canada and Japan under theEconomic Framework has produced a number ofsuccesses. These include:

• an MOU, signed in May 2005, to identify keyareas of cooperation in our investment promo-tion efforts;

• a cooperation agreement on anti-competitiveactivities that came into effect on October 6,2005;

• a social security agreement, signed by bothparties in February 2006, that is expected togo into effect in late 2007;

• an agreement in July 2006 (negotiated by theCanadian Food Inspection Agency, HealthCanada and Japan’s Food Safety Commission)to develop an informal framework documenton food safety cooperation; and

• Canada-Japan air services negotiations, held in January 2007, which expanded rights forCanadian carriers under the bilateral air services agreement and produced significantenhancements in capacity provisions and related entitlements.

In 2007, Canada will work to improve marketaccess for Canadian exporters by continuing topress for:

• access for all beef products deemed eligiblefor export in accordance with the science-based standards of the World Organisation forAnimal Health;

• a reduction of duties applied to vegetable oils(particularly canola), processed foods, red meats,fish, forest products (spruce-pine-fir lumber,softwood plywood, laminated veneer lumber,oriented strand board and laminated beams),non-ferrous metals and leather footwear.(Canada will seek the maximum negotiablereduction in these ariffs in the WTO negotiations); and

• the elimination of specific technical and regu-latory barriers in Japan. These barriers includeregulations and standards that depart frominternational norms (e.g., wood species equiva-lency, and practices regarding the use of foreignclinical data when approving pharmaceuticalproducts and medical devices). We will alsomonitor reforms in financial services andinsurance services, including the privatizationof Japan Post, to ensure that Canadian firms’access to the market is consistent with Japan’sobligations in the WTO.

Chinese Taipei (Taiwan)

Chinese Taipei continues to grow in importanceas a regional importer. It is also a large exporterto China and Southeast Asia and a major sourceof investment. This has provided an impetus fortrade and market liberalization, though therecontinues to be domestic pressure toward protec-tionism and non-transparent decision making,particularly with respect to certain agriculturaland agri-food products.

Chinese Taipei has undertaken significant reformsand liberalization in order to bring its economicand trade regime into line with the WTO frame-work. A key outcome has been the disappearanceof preferential market access previously accorded


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to U.S. suppliers in a number of product areas,consistent with Chinese Taipei’s obligations underthe WTO principle of non-discrimination.

Canadian goods exports to Chinese Taipei in2006 totalled $1.4 billion, while goods importsamounted to $3.9 billion.

Association of Southeast Asian Nations

As a group, the Association of Southeast AsianNations (ASEAN) member countries (BruneiDarussalam, Burma, Cambodia, Indonesia, Laos,Malaysia, the Philippines, Singapore, Thailandand Vietnam) represent a major trade andinvestment partner for Canada. Two-waymerchandise trade in 2006 totalled over $12 billion. Canada has FIPAs with Thailandand the Philippines, and will hold exploratorydiscussions with Indonesia and Vietnam in mid-2007. This year marks the 30th anniversary ofCanada-ASEAN relations, and Canada is con-tinuing to undertake initiatives to engage withASEAN countries. Commercial opportunitiesare expanding amid increased political stability,economic growth and trade liberalization in theregion. ASEAN countries will continue to playan important role in global value chains.

Singapore

Given its high level of economic development and political stability, Singapore presentsopportunities for Canadian companies not justwithin its borders but as a gateway to otherAsian markets. Recognizing the importance ofenhancing trade and investment relations, theGovernment of Canada is negotiating a free tradeagreement with Singapore. An agreement wouldnot only raise Canada’s profile in Singapore, butwould also facilitate goods and services trade andimprove Canada’s ability to participate in globalvalue chains.

In 2006, two-way trade between the countriestotalled $1.7 billion, and Singapore was the thirdlargest destination for Canadian investment in Asiaafter Japan and Hong Kong. In addition, Singaporeis a world leader in research and development andhas excellent intellectual property protection.Opportunities for Canadian companies exist insuch sectors such as ICT, aerospace and defence,life sciences and biotechnology, agri-food andthe environment.

Vietnam

Two way merchandise trade between Canadaand Vietnam reached $864 million in 2006. TheVietnamese economy is growing quickly thanks tothe implementation of business-friendly economicreforms. One indication of Vietnam’s progress camein January 2007, when the country officially becamethe 150th member of the WTO. Additionally,Canada and Vietnam held exploratory discussionsin April 2007 targeting the launch of formal FIPAnegotiations. Vietnam has a number of fast-growing sectors in which Canadian companiesare proving competitive, including mining, energy,ICT, and agri-food. Commercial opportunities forCanadian companies will continue to emerge asVietnam becomes a regional strategic hub fortrade and investment.


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European Union

The European Union is now the world’s largestsingle market. In January 2007, the EU welcomedtwo new member states (Bulgaria and Romania),bringing its total membership to 27 and itspopulation to 493 million.

As a whole, the 27 member states of the EUrepresent Canada’s second largest trading partnerafter the United States, its second most importantsource of FDI and its second most important destination for CDIA. The EU is also Canada’ssecond most important source of new technologiesand a key partner in S&T partnerships.

Highlights of the trade and investment relationshipin 2006 are as follows:

• The EU imports close to 35% of Canada’s goodsexports (excluding those destined for theUnited States).

• Canadian goods exports amounted to $33.6 billion (up 16.2% from 2005),while imports stood at $42.0 billion.

• Canadian exports to the EU are diverse andinclude a significant share of value-addedproducts in addition to traditional exports ofresource-based products and commodities.Machinery and transport equipment, chemicals,pharmaceutical products, mineral fuels anddiamonds are among our leading merchandisetrade items.

• Trade in services is significant, with Canadaexporting $12.4 billion in commercial, transportand travel services to the EU in 2006–anincrease of 4.8% from 2005–while importsfrom the EU are valued at $13.8 billion.

• Key growth sectors of interest to Canada includeICT, telecommunications, aerospace and defence,energy technologies, and environmental prod-ucts and services.

The EU also represents the second most importantsource of new technologies to assist Canada indeveloping its knowledge-based economy. The EUproduces over a third of the world’s scientificpublications and some 20% of patents. It is the topproducer of technology in the OECD. S&T coop-eration is enabled by government-level agreementsas well as agreements between Canadian andEuropean S&T-oriented institutions and businesses.

Although the large EU market offers importantcommercial opportunities for Canada, it alsopresents certain challenges. Among these arerestrictions by some member states on mergersand acquisitions, market distortions in agriculture,uneven harmonization of regulations for a singlemarket, and a number of EU-imposed bans andrestrictions related to health, environmental andconsumer protection concerns.

Negotiations for a trade and investment enhancingagreement (TIEA) were launched in May 2005.The TIEA, which was designed to complementimproved market access achieved at the WTO,addresses non-tariff trade issues such as invest-ment, trade facilitation, regulatory cooperationand services, as well as government procurementand IPR.

In May 2006, Canada and the EU jointly decidedthat, given the extensive linkages to the WTOtalks, it would be best to pause the TIEA negoti-ations until the results of the WTO Doha Round ofnegotiations are known. In the meantime, Canada

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and the EU continue to work bilaterally on otherways to enhance our trade and investment relations.For example, discussions on regulatory cooperation–one of Canada’s priority areas of interest in theTIEA negotiations–have continued.

European Free Trade Association

Canada’s commercial ties with the EFTA states(Iceland, Liechtenstein, Norway and Switzerland)continue to grow. The EFTA states rank amongthe wealthiest, most innovative and sophisticatedmarkets in the world, and offer attractive poten-tial markets for competitive Canadian exporters.If the combined EFTA nations were treated as one, this group would place as Canada’seighth-largest merchandise export destination.In 2006, two-way merchandise trade with EFTAreached $10.7 billion, while in 2005, two-wayinvestment stocks were roughly $22.2 billion.

Negotiations for a free trade agreement with theEFTA states were launched on October 9, 1998.The last negotiating session was held in Genevafrom January 15 to 18, 2007. Both sides have madesignificant progress. As Canada’s first transatlanticfree trade agreement, an agreement with the EFTAcountries would provide a strategic platform forexpanding commercial ties with Europe. It wouldlock in competitive advantages in these dynamicEuropean markets and put Canada on an equalfooting with competitors who already have freetrade agreements with EFTA, including Chile,Korea, Mexico and the EU.



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Canada’s relationship with emerging economies inLatin America and the Caribbean remains strongand continues to grow. In 2006, Canada’s exportsof goods to Latin America and the Caribbeanstood at $5.8 billion, down 31.5% from a recordhigh of $8.4 billion in 2005. Canadian exports tothe region are a mix of commodities (40%) andsemi-finished and fully finished products (60%),including high-technology items.

Mercosur, Brazil and Venezuela

MercosurCanada and Mercosur (Argentina, Brazil, Paraguayand Uruguay) are interested in further enhancingtheir trade and investment ties, and continue toexplore which policy tools and instruments arebest suited to promoting this objective. Bilateraltrade between Canada and the Mercosur bloctotalled $5.6 billion in 2006. That year, Canada’smerchandise exports to Mercosur amounted to$1.6 billion while imports stood at $4.0 billion.

Brazil Brazil, a rapidly developing and stable economy,is an economic powerhouse by any measure. TheInternational Monetary Fund ranks Brazil as the11th-largest economy globally. Brazil’s highlydiversified and industrialized economy is thelargest in Latin America. It has extensive naturalresources and is a world leader in agro-industry.

Brazil represents nearly 80% of Mercosur’seconomy, making it the bloc’s most influentialmember and leader. Brazil has South America’slargest GDP ($1,211 billion in 2006), and annualeconomic growth is expected to average 3.5%over the period to 2010.3

In 2006, Canada’s merchandise exports to Brazilstood at $1.3 billion while bilateral trade totalled$4.7 billion, making Brazil our second largesttrading partner (after Mexico) in Latin America.

VenezuelaOn December 9, 2005, Mercosur initiated theprocess for the accession of Venezuela as a stateparty to the bloc (negotiations are ongoing).Venezuela served notice of its intention to with-draw from the Andean Community on April 22,2006, but it will continue to enjoy some advantagesunder the sub-region’s liberalization program forfive years following withdrawal.

In 2006, Canada’s exports to Venezuela stoodat $788.6 million while bilateral trade totaled$2.0 billion. Services exports to Venezuelaamounted to $182 million (2004 data). One ofCanada’s priorities for Venezuela will be tocontinue representations aimed at eliminatingdiscretionary import licensing. In Venezuela, thelack of transparency in the issuance of importpermits for certain food products such as potatoesand pork remains a major barrier to trade. Canadahas signed a FIPA and a Double Taxation Agreementwith Venezuela, which have been in effect since1998 and 2005, respectively.

Chile

The Canada-Chile Free Trade Agreement (CCFTA),the cornerstone of our important bilateral relationswith Chile, marks its 10th anniversary in 2007.Two-way merchandise trade increased from$718 million in 1997 to $2.3 billion in 2006,with Canadian merchandise exports accountingfor $472.9 million that year.

7. Opening Doors to Latin America and the Caribbean

2 Percentages based on preliminary analysis.3 Data from Goldman Sachs, Global Economic Paper No. 99, October 2003.


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Chile has one of the most open and stableeconomies in Latin America, and many Canadiancompanies consider it to be a gateway to regionaland neighbouring markets. Negotiations on a government procurement chapter for the CCFTAwere completed in 2006, and similar talks onfinancial services disciplines are well advanced.

Andean Community

Representatives of Canada and the AndeanCommunity countries (Bolivia, Columbia,Ecuador and Peru) met in December 2006 toexplore the possibility of free trade negotiations.The discussions were positive and allowed for afrank exchange of views on a wide range of issuesthat could be raised in future free trade nego-tiations. Canada expects to be in a position tolaunch negotiations with interested and preparedAndean countries in 2007.

A free trade agreement with the AndeanCommunity countries would help to ensure alevel playing field and secure new commercialopportunities for Canadian exporters, servicesproviders and investors, particularly in light of therecently concluded U.S.-Colombia and U.S.-Perufree trade agreements. These agreements will, uponimplementation, grant U.S. exporters immediateduty-free access for over 80% of consumer andindustrial products, including those in many sectorsof interest to Canada (e.g., wheat, pulses, high-quality beef, processed food products).

A Canada-Andean Community free trade agree-ment would also further advance Canada’s foreignpolicy objectives in the region and promotedevelopment through economic integration.Consultations with Canadian stakeholders in2002-2003 revealed broad support for a Canada-Andean Community agreement.

In addition to pursuing a free trade agreement,Canada’s priorities for the Andean Communitycountries in 2007 will be to continue represen-tations for the resumption of trade in beef, cattle,and poultry from Canada. Canada will also

continue to seek market access to the countries of the Andean region under the General Agreementon Trade in Services (GATS) at the WTO. Duringthe past four years, Colombia has undertaken aseries of major reforms to develop a competitivelegal framework and investment regime as well asa good business climate. Colombia also continuesto reduce the role of government in its economyand to encourage private-sector participation,particularly in oil and gas and in mining. Similarly,the Peruvian government’s intervention in itseconomy has been minimal, with particularemphasis being placed on attracting investmentinto the agricultural sector of the highlands.Thanks to a smooth political transition followingthe 2006 presidential elections, Peru’s stable andopen economy is expected to enjoy strong growthover the coming years.

In 2006, bilateral merchandise trade with theAndean Community countries totalled $3.9 billion.The Canadian stock of direct investment in theAndean Community amounted to $3.5 billionin 2006.

Central America and the Caribbean

In 2006, Canadian exports to the Central Americanregion (El Salvador, Guatemala, Honduras,Nicaragua, Costa Rica and Panama) amountedto $442.8 million, and bilateral trade totalledmore than $1.3 billion. Guatemala has thebroadest economic base and largest economy in Central America: in 2006, close to 42% oftotal Canadian exports to this region were toGuatemala. Panama’s services-based economygrew by more than 8% in 2006, and free tradenegotiations with the United States have beencompleted and are awaiting congressional approval.

The Canada-Costa Rica Free Trade Agreement(CCRFTA) entered into force on November 1,2002, providing the two countries with a compe-titive advantage vis-à-vis foreign competitors ineach other’s markets. Canada has now benefitedfrom over four years of duty-free access for over


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94% of its agricultural and agri-food exports andfor 67% of all goods exports to Costa Rica.Between 2002 and 2006, two-way merchandisetrade increased 40.3% (from $324 million to$454 million). The CCRFTA provides for pro-gressive and asymmetrical elimination of tariffs,demonstrating that it is possible to take intoaccount differences in the levels of developmentand size of free trade partners.

In order to strengthen our trade and investmentties, Canada remains committed to concluding afree trade agreement with the Central AmericaFour (CA4). The CA4 countries (El Salvador,Guatemala, Honduras and Nicaragua), along withthe Dominican Republic and Costa Rica, con-cluded the U.S.-Central America-DominicanRepublic Free Trade Agreement (U.S.-CAFTA-DR)in 2005. This agreement has been implemented inall countries, except Costa Rica. The Governmentof Canada is closely monitoring the competitivenesschallenges facing Canadian companies in theseestablished markets and continues to worktoward ensuring a level playing field.

The 15-member Caribbean Community (CARICOM) includes Antigua and Barbuda,Bahamas, Barbados, Belize, Dominica, Grenada,Guyana, Haiti, Jamaica, Montserrat (a BritishOverseas Territory), Saint Kitts and Nevis,Saint Lucia, Saint Vincent and the Grenadines,Suriname, and Trinidad and Tobago. In 2006,Canadian merchandise exports to CARICOMamounted to $669 million, and bilateral tradetotalled $1.8 billion.

Canadian foreign policy has long recognized aspecial relationship between Canada and theCommonwealth Caribbean, stemming fromcommercial ties and from joint membership in theCommonwealth and similar democratic institutions.In recognition of this relationship, Canada hasextended duty-free access to our market to mostproducts from 18 Commonwealth Caribbeancountries and territories since 1986 through theCaribbean-Canada Trade Agreement (CARIBCAN)

preferential tariff. In 2006, Canada requested andreceived approval for a five-year extension of theWTO waiver required to provide this preferentialtariff. Canada supports the goal of free tradebetween Canada and CARICOM, which has amembership that is similar but not identical tothat of CARIBCAN. Exploratory discussions toadvance such an initiative have been productive,and Canada hopes to be able to launch negotia-tions in 2007.

Cuba is Canada’s largest export market in theCaribbean, importing $629 million in Canadiangoods in 2006. Although the Cuban businessenvironment is complex, it offers many opportu-nities for Canadian firms. Canada remains opposedto the extraterritorial application of U.S. law anddoes not support an embargo on Cuba. In 1985,Canada enacted the Foreign ExtraterritorialMeasures Act to prohibit foreign states fromimplementing measures that infringe on Canadiansovereignty and adversely affect Canadianinternational trade.

The Dominican Republic is Canada’s third-largestexport market for goods in the Caribbean regionand one of the fastest-growing import markets andduty-free manufacturing zones. In 2006, Canadianmerchandise exports to the Dominican Republictotalled $163 million (up 12.2% from 2005). Inorder to deepen our commercial relationship,Canada supports the goal of free trade with theDominican Republic. Recent government-to-government exploratory discussions have beenproductive, and consultations with Canadianstakeholders have revealed broad support for aCanada-Dominican Republic free trade agreement.Canada hopes to be in a position to launch nego-tiations in 2007.


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Australia

Canada and Australia enjoy commercial relationsthat are largely free of challenges. The two coun-tries cooperate closely within APEC, ASEAN, theCairns Group of agricultural exporting countriesand the WTO. Some Australian non-tariff measurescontinue to have an impact on market access forCanadian goods and services. These measuresinclude policy standards and government procure-ment practices. In 2006, Australian requirementsthat Canadian pork imports be tested for carbadoxwere lifted.

In 2006, Canadian exports to Australia amountedto $1.83 billion, while imports were valued at$1.59 billion. Canada’s principal exports toAustralia include machinery, electrical machinery,aircraft, pork and iron ore. Leading imports fromAustralia include aluminium and uranium, wine,machinery and meat.

New Zealand

Canada and New Zealand’s commercial relationsare close and relatively irritant-free. The coun-tries cooperate closely within organizations suchas APEC, ASEAN, the Cairns Group and theWTO. Both countries continue to work togetherto achieve a substantive outcome to multilateraltrade negotiations.

In 2006, Canadian exports to New Zealandamounted to $383.9 million, while imports werevalued at $492.9 million. Canada’s main exports toNew Zealand include aircraft, electrical machinery,machinery, fertilizers and pork. Canada’s leadingimports from New Zealand include meat anddairy products, casein and casein derivatives,agricultural machinery and wine.

Russia

Russia’s economic growth continues to be driven by high prices for oil, gas and other commodities,which has in turn stimulated domestic demand,prompting market expansion in investment andimports. In addition, Russia’s foreign reserves nowexceed US$300 million, according to the UNConference on Trade and Development. Canada’sexports to Russia rose by 36% in 2005 and 54% in2006 to reach $870 million. Machinery for theoil, mining and forestry industries and foodproducts dominated exports. Canadian providersof professional services, including engineering andarchitectural services, are also very active in Russia.

Many major Canadian firms have responded tothe improved investment opportunities withstrategic investments in Russia, particularly inthe transport and resources sectors. Appropriatelegal and operating structures are being used toaddress concerns about corporate governance,corruption, respect for property rights, regulatoryissues and excessive bureaucracy.

Canada concluded its bilateral WTO accessionnegotiations with Russia in December 2005.Although Russia has successfully concluded themajority of bilateral negotiations with individualWTO members, it has yet to complete the WTOmultilateral working party process. The pace andintensity that Russia brings to this effort willlargely determine the timing of its accession tothe WTO. Membership in the WTO will con-tribute significantly to Russia’s transition to amarket economy.

8. Opening Doors in Other Key Markets



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Kazakhstan

In 2006, Kazakhstan’s GDP rose 10.6%, fuelledby high oil commodity prices and domestic con-sumption. Canadian exports to Kazakhstan roseby 5.1% in 2006 to $122 million. Main exportsto Kazakhstan include agricultural equipment,log skidders, boring and sinking machinery, andselected industrial machinery. The stock ofCanadian direct investment in Kazakhstan wasvalued at $1,461 million in 2005 by StatisticsCanada. This level declined in 2006 largely dueto the sale of a number of large Canadian oil andgas companies. Remaining Canadian commercialand economic interests include investments inuranium exploration and production, mining andproduction of gold and non-ferrous metals, andhydrocarbon exploration and production.

Canada is pursuing bilateral WTO accession negotiations with Kazakhstan. Canada’s overallobjectives are to ensure Kazakhstan’s full compli-ance with WTO obligations and to seek moreopen, secure and predictable access for Canadiangoods and services.

Ukraine

Preliminary data suggest that Ukraine’s economyexpanded by 7% in 2006. Continued gradualeconomic reforms, a growing domestic market,proximity to the enlarged EU, low wage rates andnear-term WTO accession have led to a recentrenewal of Western investment in the real estate,banking, construction, warehousing, chemicalsand metals, food processing and energy sectors.Increases in domestic energy prices are expectedto dampen growth in certain sectors but also tostimulate more investment in energy conservationand efficiency in the medium term.

Total Canadian merchandise exports to Ukrainerose by 44.2% in 2005 and 29.8% in 2006 to$106.3 million. Canada’s primary exports includefish and pharmaceutical products and assortedindustrial parts. There is a significant market

potential for Canadian goods and services firmsin agriculture, oil and gas, construction, and ICT.

Ukraine’s WTO accession process is at an advancedstage. However, the country still has to addresssome outstanding multilateral issues, concluderemaining bilateral agreements and pass therequired WTO-related legislation. Future WTOaccession, continued transparent privatization oflarge state-owned companies, and new foreigninvestment should provide a significant boost toUkraine’s economy.

Sub-Saharan Africa

Canadian merchandise trade with sub-SaharanAfrica has increased substantially over theyears. Two-way merchandise trade for 2006 was approximately $4.6 billion, with exportsaccounting for $1.6 billion and imports for $3 billion. Merchandise exports to sub-SaharanAfrica in 2006 include many high value-addedcategories. The top export categories weremechanical ($236 million) and electrical machinery($95 million), cereals ($233 million), aircraft andparts ($208 million), vehicles ($147 million),textiles ($119 million), paper and paperboard($46 million) optical and medical instruments($46 million), meat ($39 million), and pharma-ceuticals ($32 million).

Canada has been obtaining service contracts for work in sub-Saharan Africa. For example,Canadian companies are successfully pursuingWorld Bank and African Development Bank projects that include the provision of engineeringand construction, forestry, geomatic, air, educa-tional and other services.

Determining CDIA in sub-Saharan Africa at acountry level is difficult, because the data for allbut seven countries in the region are aggregatedby Statistics Canada. For 2005, Statistics Canadareports approximately $2.5 billion of CDIA insub-Saharan Africa.


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The annual reports of Canadian companies activein the region provide an alternative means ofdetermining levels of investment. This methodsuggests that CDIA in 2004 was $1.3 billion for oiland gas exploration companies and $5.9 billion formineral extraction and exploration firms. Moreover,estimates from Natural Resources Canada indicatethat, with the increased demand for commoditiesfrom emerging economies (such as China, India andBrazil), new Canadian investment in the miningsector alone could surpass $14.1 billion.

Mining is the face of Canada in many Africancountries, with Canadian investors making up thelargest foreign and most important non-Africaninvestors in the continent’s mining sector. Resource-based investments are the driving force behindthe value-added components of the merchandisetrade and services accounts. Much of the explo-ration and production technology, as well as theconsulting engineering expertise that theseoperations employ, originates in Canada.

Middle East and North Africa

The Middle East and North Africa (MENA) regionhas a population of more than 300 million. Theregion holds about 56% of the world’s totalknown reserves of conventional oil and about 27%of its total natural gas. Two-way merchandise tradewith the region totalled $13.8 billion during 2006,a 16% increase over 2005. Merchandise exportsduring 2006 were $3.7 billion, an increase of14% over the previous year.

The Gulf Cooperation Council (GCC)–SaudiArabia, United Arab Emirates (UAE), Kuwait,Qatar, Oman and Bahrain–is the most prosperousgrouping in the MENA region and includes ourfirst (UAE) and second (Kingdom of Saudi Arabia)export markets. The GCC has the third-largestGDP per capita of any region, plus very high GDPgrowth and nearly 50% of the world’s proven oilreserves. With a rapidly growing population of36 million, the area represents the 17th-largest

economy in the world with a GDP of US$536 billion. It has more than $3 trillion ofavailable liquidity. The resulting economic boomhas doubled the size of the regional economyover the last five years. The GCC is increasinglyfocused on economic diversification to reduceoil dependency. An unprecedented boom in con-struction and infrastructure projects is providingmajor business opportunities for Canada.

Another important grouping in North Africa–known collectively as “The Maghreb” –includesMauritania, Morocco, Algeria, Tunisia and Libya.With a population of 85 million, a GDP of US$218 billion, forecasted growth of 5.8%, totalimports of US$78 billion, the region also offersgreat opportunities for Canada. Both Algeria andLibya are oil and gas exporting countries andcurrently enjoy huge increases in revenues thatwill allow them to invest heavily in their devel-opment. Total Canadian imports from the regioncontinued to increase in 2006 and consisted mainlyof crude oil from Algeria. Algeria was Canada’ssecond-largest source of foreign crude oil during2006, with imports valued at nearly $5 billion.Morocco was our second-largest export market forCanadian durum wheat during 2006, while Algeriawas the fourth-largest. Together with Tunisia, theyaccounted for slightly more than 25% of totalCanadian exports of this commodity.

Thanks in large measure to the Canada-IsraelFree Trade Agreement (CIFTA), bilateral tradewith Israel totalled a record $1.3 billion during2006 ($445.7 million Canadian exports to Israel;$872.6 million imports from Israel). Since itsestablishment in 1994 and its subsequent renewalin March 2006 by Canada and Israel, the Canada-Israel Industrial Research and DevelopmentFoundation (CIIRDF), has become a key vehiclefor increasing bilateral and sub-national industrialcooperation and business partnerships at thecutting edge of innovation.


Despite a deteriorating economic and businessenvironment, Canadian exports to Iran increasedfrom $274.3 million in 2005 to $309.0 million in2006–largely due to a sharp increase in sales ofwheat and other agri-food commodities. Pursuantto Canada’s Controlled Engagement Policy withIran, Canada has been applying strict exportcontrols on proposed shipments of sensitive goodsfor some time. In February, Canada implementedregulations to enforce the UN economic sanctionsagainst Iran. In light of these measures, and also ofU.S. requests that firms not sell to Iran, interestin Iran as an export market or destination forinvestment has been declining.


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Canadian companies will continue to encounterinvestment barriers abroad, including investmentprohibitions, restrictions on the scope of businessactivity, performance requirements, investmentauthorizations and residency requirements.Canada’s various investment agreements thusplay an important role by providing Canadianfirms with a predictable foreign investment climate. International rules do not restrictCanada’s ability to regulate in the publicinterest, as foreign investors must abide by the same laws and regulations (e.g., on health,safety, labour and environment) as domesticinvestors. The same holds true for Canadianfirms present in foreign states.

Bilateral Investment AgreementsSince 1989, Canada has concluded 23 bilateralFIPAs. These agreements assure Canadian firmsthat the rules governing their investments arebound by certain standards of fairness and pre-dictability. A complete list of Canada’s FIPAs canbe found at www.international.gc.ca/tan-nac/fipa_list-en.asp. In 2006, Canada signed a FIPAwith Peru. Canada is also engaged in FIPA nego-tiations with China, India and Jordan, and isholding exploratory discussions with Vietnam,Indonesia and Kuwait.

Other Regional and Bilateral InitiativesInvestment chapters are an important componentof the NAFTA and the CCFTA. The investmentchapter of NAFTA provides the basis for invest-ment provisions in the CCFTA and most ofCanada’s FIPAs. In addition, investment is included

in Canada’s free trade negotiations with Korea,Singapore and the CA4 countries (El Salvador,Guatemala, Honduras and Nicaragua). For furtherinformation on Canada’s free trade agreements andnegotiations, please visit www.international.gc.ca/tna-nac/reg-en.asp.

Finally, Canada participates in regional investmentdiscussions through the APEC forum. The APECeconomies are working to liberalize their invest-ment regimes through a program of voluntaryindividual action plans. Canada’s plan can beaccessed at www.apec-iap.org.

Corporate Social ResponsibilityThe Government of Canada expects Canadiancompanies to carry out their operations in a sociallyresponsible manner, at home and abroad. To thisend, it strongly encourages Canadian companiesto adhere to standards of corporate social respon-sibility (CSR) such as the OECD Guidelines forMultinational Enterprises. The OECD Guidelinesare a government-endorsed framework of voluntarystandards for responsible business conduct. Theyprovide recommendations on issues such as envi-ronmental protection, respect for core labourstandards, anti-corruption and respect for humanrights. The Guidelines apply to multinationalenterprises operating within Canada and to theoverseas operations of Canadian companies. Theyare particularly important in countries wheregovernance structures are weak.

9. Investment


In June 2005, the Parliamentary StandingCommittee on Foreign Affairs and InternationalTrade issued a report entitled Mining in DevelopingCountries and Corporate Social Responsibility. Inresponse to this report, the Government of Canadaheld four national round tables between June andNovember 2006 on the topic of corporate socialresponsibility and the Canadian extractive sector indeveloping countries. Held in Vancouver, Toronto,Calgary and Montreal, the round tables examinedways to ensure that Canadian extractive sectorcompanies operating in developing countries meetor exceed leading international CSR standards and best practices. More information on these round tables can be found athttp://geo.international.gc.ca/cip-pic/current_discussions/csr-roundtables-en.asp.

Canada has established a national contact pointto work with business and other stakeholders inraising awareness of the OECD Guidelines andresolving issues. Further information is availablefrom Canada’s National Contact Point website(www.ncp-pcn.gc.ca) or the corporate socialresponsibility section of the Foreign Affairsand International Trade Canada website(www.international.gc.ca/tna-nac/DS/csr-en.asp).

An important development in Canada’s promo-tion of CSR was the official announcement inFebruary 2007 of the government’s support forthe Extractive Industries Transparency Initiative(EITI) a coalition of governments, industries,investors, and international and non-governmentalagencies. EITI supports improved governance inresource-rich countries through the full publica-tion and verification of company payments andgovernment revenues for oil, gas and miningindustries. A detailed description of the programcan be found on the EITI website atwww.eitransparency.org.

Science and Technology and Innovation

Innovation is not a focus on S&T, but a focus onInnovation is not a focus on science and technology(S&T), but a focus on taking S&T to markets. Ithelps enhance access to the best global technologyand keep Canada competitive in world markets.Strong international S&T linkages also help con-nect innovative Canadian firms with the globalsupply of ideas, talents and technologies (crucialto ensuring that domestic firms have access toleading-edge research), boost Canada’s competi-tiveness and productivity, and ultimately lead toa higher standard of living for all Canadians.

Canada’s global innovation capacity rests upontwo key drivers: adopting technology and commercializing R&D. In order to increase ourperformance in both, we need to build effective,results-focused, international S&T networks inareas of strategic importance to Canada. Thesenetworks can improve Canada’s internationalS&T performance by:

• building innovation teams (through realigningthe Trade Commissioner network); coordinatingglobal actions to connect Canadian S&T capacitywith international players and market oppor-tunities (e.g., through the Canada-CaliforniaStrategic Innovation Partnership); and positioningCanada as a valued international S&T partner;

• fostering greater access to global S&T (throughsupporting international collaboration in R&D,as well as by using effective innovation teamsto ensure that Canadian knowledge producersare aware of and can benefit from emergingand cutting-edge technology opportunitiesaround the world); and

• maximizing performance in innovation andcommercialization (through helping innovativeCanadian companies grow internationally, sotheir new products, processes and servicessucceed in global markets).


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Foreign Affairs and International Trade Canadaalso has some tools to enhance Canada’s interna-tional R&D performance. For instance, the GoingGlobal S&T Program supports projects designedto bring Canadian researchers together with keyplayers in foreign countries to foster identifiedopportunities for collaborative partnerships.There is also the International S&T PartnershipsProgram. This five-year, $20-million programaims to increase bilateral research projects withgood commercialization potential between Canadaand partners such as Israel, India, China and, intime, Brazil.

Our worldwide network of S&T officers targetsR&D business partners in the global marketplace.Support for business development and interna-tional R&D collaboration by Canadian missionsabroad, as well as regional offices across Canada,will help expand domestic R&D strengths byconnecting Canadian businesses and scientistswith world-class technology opportunities andkey international research partners.

For further information on the department’s S&Tprogram, please visit www.infoexport.gc.ca/science.


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ACCESSION: The process of becoming a contracting party to a multilateral agreement.Negotiations with established members of theWTO, for example, determine the concessions(trade liberalization) or other specific obliga-tions a non-member country must undertakebefore it is entitled to full WTO membershipbenefits. (Accession)

ANTI-DUMPING: Additional duties imposed byan importing country where imports that arepriced at less than the “normal” price charged inthe exporter’s domestic market, or less than theirfull cost, are found to be causing material injuryto the domestic industry in the importing country.(Antidumping)

APEC: Asia-Pacific Economic Cooperation forum.Comprises 21 countries around the Pacific Rimthat seek further Asia-Pacific economic cooperation.Members are Australia, Brunei, Canada, Chile,China, Hong Kong (China), Indonesia, Japan,Korea (Republic of), Malaysia, Mexico, NewZealand, Papua New Guinea, Peru, Philippines,Russia, Singapore, Chinese Taipei (Taiwan),Thailand, United States and Vietnam. (APEC :Coopération économique Asie-Pacifique)

CA4 (Central America Four): El Salvador,Guatemala, Honduras and Nicaragua. Currently infree trade negotiations as a group with Canada.(Groupe des quatre de l’Amérique Centrale)

CAIRNS GROUP: A coalition of 19 agriculture-exporting countries (Argentina, Australia, Bolivia,Brazil, Canada, Chile, Colombia, Costa Rica,Guatemala, Indonesia, Malaysia, New Zealand,Pakistan, Paraguay, Peru, Philippines, SouthAfrica, Thailand, Uruguay) that cooperate in thecontext of multilateral trade negotiations.(Groupe de Cairns)

CCFTA: Canada-Chile Free Trade Agreement.Implemented July 5, 1997. (ALECC : Accord delibre-échange Canada-Chili)

CCRFTA: Canada-Costa Rica Free TradeAgreement. Entered into force on November 1,2002. (ALECCR : Accord de libre-échange entrele Canada et le Costa Rica)

CIFTA: Canada-Israel Free Trade Agreement.Implemented January 1, 1997. (ALECI :Accord de libre-échange Canada-Israël)

DISPUTE SETTLEMENT: Those institutionalprovisions in a trade agreement that provide themeans for settling differences of views betweenthe parties. (Réglement des différends)

DOHA DEVELOPMENT AGENDA: The agendaof World Trade Organization negotiations, launchedat the Ministerial Conference in Doha, Qatar, inNovember 2001. (Programme de Doha pour ledéveloppement)

EFTA: European Free Trade Association. Whenfounded via the Stockholm Convention in May1960, EFTA had seven members. Since itsfounding, the composition has changed as newmembers joined and others have acceded to theEU. Currently, there are four members: Iceland,Liechtenstein, Norway and Switzerland. (AELE :Association européenne de libre-échange)

10. Glossary


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FOREIGN DIRECT INVESTMENT: The fundscommitted to a foreign enterprise. The investor maygain partial or total control of the enterprise. Aninvestor who buys 10% or more of the controllingshares of a foreign enterprise makes a direct invest-ment. (IED : Investissement étranger direct)

FTA: Often refers to the Canada-U.S. Free TradeAgreement that entered into force on January 1,1989. (ALE : Accord de libre-échange)

FTAA: Free Trade Area of the Americas. Proposedfree trade agreement between the 34 democraticcountries of the Western hemisphere. The FTAAprocess was conceived in Miami in 1994 andnegotiations were launched in Santiago, Chile,in 1998. (ZLEA : Zone de libre-échange des Amériques)

GATT: General Agreement on Tariffs and Trade.From 1947 to 1994, the multilateral agreementoverseeing the global trading system, as well as theinternational agreement governing trade in goods(GATT 1947). The GATT was subsequentlysuperseded in January 1995 by the new institutionknown as the World Trade Organization. GATT1994 (the agreement), which reflects amendmentsto the original agreement and incorporates newWTO agreements, continues to govern trade ingoods. Other WTO agreements apply to, forexample, trade in services. All of these agreementsthat apply to all WTO members, including theGATT, are components of the WTO Agreement(1994). (GATT : Accord général sur les tarifsdouaniers et le commerce)

GDP: Gross domestic product. The total value of goods and services produced in a country.(PIB : Produit intérieur brut)

INTELLECTUAL PROPERTY: A collectiveterm used to refer to new ideas, inventions, designs,writings, films, etc., protected by copyright, patents,trademarks, etc. (Propriété intellectuelle)

ITA: Information Technology Agreement. A WTO-based agreement with over 50 members thatprovides for duty-free trade information technologyand telecommunications products. (ATI : Accordsur la technologie de l’information)

LIBERALIZATION: Unilateral, bilateral or multi-lateral actions to reduce tariffs and/or removeother measures that restrict international trade.(Libéralisation)

MFN: Most-favoured-nation treatment (Article Iof the GATT 1994). Requires countries not todiscriminate between their trading partners; anyspecial treatment for one member must be grant-ed to all. This includes trade in goods, services andintellectual property (although in each area theprinciple is handled slightly differently) (NPF :Traitement de la nation la plus favorisée)

NAFTA: North American Free Trade Agreement,involving Canada, the United States and Mexico.Implemented January 1, 1994. (ALENA : Accordde libre-échange nord-américain)

NON-TARIFF BARRIERS (MEASURES):Government measures or policies other than tariffsthat restrict or distort international trade. Examplesinclude import quotas and discriminatory governmentprocurement practices. Such measures have becomerelatively more conspicuous impediments to tradeas tariffs have been reduced during the period sinceWorld War II. (Obstacles non tarifaires)

OECD: Organisation for Economic Co-operationand Development. Paris-based organization ofindustrialized countries responsible for the studyof and cooperation on a broad range of economic,trade, scientific and educational issues. (OCDE :Organisation de coopération et de développe-ment économique)


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QUOTA: Explicit limit on the physical amountsof particular products that can be imported orexported during a specified time period, usuallymeasured by volume but sometimes by value.The quota may be applied on a "selective" basis,with varying limits set according to the countryof origin, or on a global basis that specifies onlythe total limit and thus tends to benefit moreefficient suppliers. (Contingent)

RULES OF ORIGIN: Laws, regulations andadministrative procedures that determine the origin of a good. Rules of origin may be designedto determine the eligibility of a good for prefer-ential access under the terms of a free tradeagreement, or they may be designed to determinea good’s country of origin for various purposes.A decision by a customs authority on origin candetermine whether a shipment falls within aquota limitation, qualifies for a tariff preferenceor is affected by an anti-dumping duty. Theserules can vary from country to country and frompurpose to purpose. (Règles d’origine)

SUBSIDY: An economic benefit granted by agovernment to producers of goods, often tostrengthen their competitive position. The subsidymay be direct (a cash grant) or indirect (e.g.,low-interest export credits guaranteed by a government agency). (Subvention)

TARIFF: A tax on merchandise imports. Leviedeither on an ad valorem (percentage of value) oron a specific basis (e.g., $5 per 100 kilograms).Tariffs give price advantage to similar locally pro-duced goods and raise revenues for government.(Tarif douanier)

TRANSPARENCY: Visibility and clarity of lawsand regulations. (Transparence)

WTO: World Trade Organization. Established onJanuary 1, 1995, to replace the Secretariat of theGeneral Agreement on Tariffs and Trade, it formsthe cornerstone of the world trading system.(OMC : Organisation mondiale du commerce)


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11. List of AcronymsAGP (WTO) Agreement on

Government Procurement

APEC Asia-Pacific Economic Cooperation(forum)

ASEAN Association of Southeast Asian Nations

BSE Bovine spongiform encephalopathy

CA4 Central America Four

CARIBCAN Caribbean-Canada TradeAgreement

CARICOM Caribbean Community

CCFTA Canada-Chile Free TradeAgreement

CCRFTA Canada-Costa Rica Free TradeAgreement

CDIA Canadian direct investmentabroad

CIFTA Canada-Israel Free TradeAgreement

CMP Canada-Mexico Partnership

CSR Corporate social responsibility

EFTA European Free Trade Association

EU European Union

FDI Foreign direct investment

FIPA Foreign investment promotion andprotection agreement

FTA Free trade agreement

FTAA Free Trade Area of the Americas

FTC Free Trade Commission

GATS General Agreement on Trade in Services

GATT General Agreement on Tariffs and Trade

GCC Cooperation Council for the ArabStates of the Gulf (formerly GulfCooperation Council)

GDP Gross domestic product

ICT Information and communicationstechnologies

IPR Intellectual property rights

ITARs International Traffic in ArmsRegulations

LDC Least developed country

MENA Middle East and North Africa

Mercosur Southern Common Market

MOU Memorandum of understanding

NAFTA North American Free TradeAgreement

OECD Organisation for Economic Co-operation and Development

OIE World Organisation for AnimalHealth

R&D Research and development

S&T Science and technology

SPP Security and ProsperityPartnership of North America

TIEA Trade and investment enhancement agreement

TRIPS Agreement on Trade-RelatedAgreement Aspects of Intellectual Property

Rights

UAE United Arab Emirates

U.S.-CAFTA-DR Free trade agreement between theUnited States, Costa Rica, theDominican Republic, El Salvador,Guatemala, Honduras andNicaragua

WHTI Western Hemisphere TravelInitiative

WTO World Trade Organization

Documents

C a nada's I nt er n at ional M arket Ac ces s Rep ort 2007 · $523.7 billion,accounting for about 36.4% of Canadian GDP. All major categories of exports increased in 2006, led by