RESTRICTEDWORLD TRADE
ORGANIZATIONWT/TPR/S/53/Corr.1*
7 December 1998
(98-4890)
Trade Policy Review Body
TRADE POLICY REVIEW
CANADA
Report by the Secretariat
Corrigendum
Please replace pages iii-iv, ix-xiii and 15-18 of document WT/TPR/S/53 with the attached
pages.
Note: This report is subject to restricted circulation and press embargo until the end of the meeting
of the Trade Policy Review Body on Canada.
                                                     
* English and French only.Canada WT/TPR/S/53/Corr.1
Page iii
CONTENTS
Page
SUMMARY OBSE RVATIONS ........................................................................................................... ................. ix
(1) I NTRODUCTION ............................................................................................................................... .......... ix
(2) E CONOMIC AND INSTITUTIONAL ENVIRONMENT ........................................................................................ ix
(3) T RADE POLICIES BY INSTRUMENT .............................................................................................................. x
(i) Tariffs..................................................................................................................... ..................... x
(ii) Non-tariff restrictions and controls ....................................................................................... ...... x
(iii) Other measures affecting production and trade.......................................................................... xi
(4) S ECTORAL POLICIES ............................................................................................................................... ... xi
(i) Agriculture ................................................................................................................. ................ xi
(ii) Manufacturing.............................................................................................................. .............xii
(iii) Serv ices.................................................................................................................. ...................xii
(5) T RADE POLICIES AND TRADING PARTNERS ...............................................................................................xii
I. ECONOMIC ENVIRONMENT ......................................................................................................... ...... 1
(1) I NTRODUCTION ............................................................................................................................... ........... 1
(2) R ECENT MACROECONOMIC PERFORMANCE ............................................................................................... 1
(i) Output and employment....................................................................................................... ....... 1
(ii) Public finance and debt.................................................................................................... ........... 3
(iii) Monetary, exchange rate and balance-of-payments developments ............................................. 5
(3) T RADE AND INVESTMENT PATTERNS .......................................................................................................... 7
(i) Trade in goods.............................................................................................................. ............... 7
(ii) Trade in  services .......................................................................................................... ............. 11
(iii) Foreign dir ect investment................................................................................................. ......... 12
II. TRADE POLICY REGIME: FRAMEWORK AND OBJECTIVES ...................................................... 14
(1) I NTRODUCTION ............................................................................................................................... ......... 14
(2) I NSTITUTIONAL FRAMEWORK .................................................................................................................. 14
(i) General co nsiderations...................................................................................................... ........ 14
(ii) Foreign investment regulations ............................................................................................. .... 15
(iii) Domestic ma rket issues.................................................................................................... ......... 17
(3) P OLICY OBJECTIVES AND IMPLEMENTATION ............................................................................................ 18
(i) General co nsiderations...................................................................................................... ........ 18
(ii) The World Trade Organization ............................................................................................... .. 19
(iii) Regional and bilateral arrangements....................................................................................... .. 22
(4) D ISPUTE SETTLEMENT .............................................................................................................................. 2 9
III. TRADE POLICIES AND PRACTICES BY MEASURE....................................................................... 35
(1) OVERVIEW ............................................................................................................................... ................. 35
(2) I MPORT AND EXPORT CHARGES ................................................................................................................ 35WT/TPR/S/53/Corr.1 Trade Policy Review
Page iv
(i) Tariffs..................................................................................................................... ................... 35
(ii) Export charges............................................................................................................. .............. 44
(iii) Internal  taxation ......................................................................................................... ............... 45
(3) OTHER MEASURES DIRECTLY AFFECTING TRADE ...................................................................................... 46
(i) Licensing, prohibitions and other quan titative restrictions on trade ......................................... 46
(ii) Trade defe nce measures ..................................................................................................... ....... 49
(iii) Local-content, performance and purchase requirements........................................................... 55
(iv) Export assistance and promotion activities ............................................................................... 56
(v) Technical standards and regulations ......................................................................................... 60
(vi) State trading and exclusiv e or special privileges....................................................................... 65
(vii) Rules of origin........................................................................................................... ................ 65
(4) MARKET COMPETITION ............................................................................................................................. 67
(i) Competitio n Policy .......................................................................................................... ......... 67
(ii) Government assistance...................................................................................................... ........ 68
(iii) Government procurement.................................................................................................... ...... 73
(5) INTELLECTUAL PROPERTY RIGHTS ............................................................................................................ 77
(i) Patents..................................................................................................................... .................. 77
(ii) Copyright .................................................................................................................. ................ 79
(iii) Trade marks ............................................................................................................... ............... 79
(iv) Enforcement................................................................................................................ .............. 80
IV. TRADE POLICIES BY SECTOR .................................................................................................... ...... 81
(1) I NTRODUCTION ............................................................................................................................... ......... 81
(2) P OLICY DEVELOPMENTS IN AGRICULTURE AND AGRI -FOOD INDUSTRIES ................................................. 81
(i) Trends in agri-food pr oduction and trade.................................................................................. 81
(ii) Evolution of domestic and export subsidies.............................................................................. 82(iii) Canada's import regime for agricultural and agri-food products............................................... 85(iv) Developments in selected agricultural and agri-food sectors.................................................... 88
(3) M
OTOR VEHICLES ............................................................................................................................... ..... 90
(i) Structure and performance ................................................................................................... ..... 90
(ii) Policy in struments......................................................................................................... ............ 92
(4) T EXTILES AND CLOTHING ......................................................................................................................... 93
(i) Structure and performance ................................................................................................... ..... 93
(ii) Tariff reforms............................................................................................................. ............... 94
(iii) Integration under the WTO Agreement on Textiles and Clothing (ATC)................................. 95
(5) S ERVICES ............................................................................................................................... .................. 97
(i) Financial  services.......................................................................................................... ............ 97
(ii) Telecommunications ......................................................................................................... ...... 101
(iii) Audiovisua l serv ices ...................................................................................................... ......... 104
(iv) Professional services ...................................................................................................... ......... 107
REFERENCES ..................................................................................................................... ............................... 115
APPENDIX TABLES ................................................................................................................ ......................... 117Canada WT/TPR/S/53/Corr.1
Page ix
SUMMARY OBSERVATIONS
(1) INTRODUCTION
1. Canada has continued to pursue an
outward-oriented strategy that, combined with
prudent macroeconomic policies, has been
integral to a recent strong growthperformance.  Over the last two years, Canada
has participated in regional and multilateral
initiatives that have further liberalized its
generally open economy.  It has also
demonstrated its commitment to a strongmultilateral trading system through an active
and constructive participation in all aspects of
work in the WTO.  Domestic initiatives to
lower inter-provincial trade barriers, move
forward internal deregulation, enhancetransparency, and rationalize the import
regime have helped Canadian producers to
adapt to the challenges, and to take advantage
of the opportunities resulting from greater
market access both at home and abroad.
However, a few areas have proved relatively
impervious to change and remain shelteredfrom foreign competition by trade or
investment barriers;  among those are certain
activities in the agriculture, textiles and
clothing, motor vehicles and services sectors.
Moreover, although outward-oriented,Canada's preferential arrangements give rise
to questions about their possible distortion of
trade patterns.
(2) E
CONOMIC AND INSTITUTIONAL
ENVIRONMENT
2. Canada has consolidated many of the
economic trends noted in its 1996 Trade
Policy Review, maintaining output growth and
low inflation while eliminating fiscal deficits.
Economic activity has reflected strong privateconsumption and investment, supported by
prudent monetary manag ement and the stimuli
of regulatory reform, closer internal market
integration and pressure from greater
international competition.  Reduction and
reform of public spending and increased
budgetary revenues from economic growthunderpin the improved fiscal situation.
However, reflecting the accumulation ofdeficits in earlier years, the overall debt to
GDP ratio remains at almost 100%, which
leaves the budget vulnerable to interest rate
increases or slow-downs in economic activity.
Unemployment, at 8.4%, also remains an
issue.
3. Developments in the past two years
have confirmed trade as a major determinant
of Canada's economic performance.  Exports
continued to benefit from the United States'
cyclical lead, supported by efficiency gains inthe Canadian economy.  The U.S. share in
Canadian trade has risen further, to some
83% of merchandise exports and 67% of
imports.  Canada's aggregate output thus
remains exposed to slower growth in theUnited States.  Although diversification away
from commodity exports has progressed,
primary products still account for almost one
third of total merchandise exports, reflecting
Canada's generous endowment of natural
resources.
4. The financial crisis in Asia has had so
far a limited impact on Canada's overall
economic growth, as only 8% of Canadian
exports are destined for that region.
Nevertheless, the crisis has been felt
distinctively in western Canada and, ifprotracted, could have significant indirect
effects on the economy as a whole.
Commodity prices have fallen for a broad
range of important Canadian export products.
This, together with volatility in financialmarkets, has put downward pressure on the
Canadian dollar.  The authorities responded
by increasing interest rates at various times in
1997 and the first half of 1998, followed by a
reduction in September 1998.
5. Trade and investment policies have
developed within an essentially unchanged
institutional framework characterized by
shared federal-provincial competencies.  The
federal and provincial authorities have made
steady progress in reducing inter-provincial
trade barriers, particularly through the 1995Agreement on Internal Trade (AIT).
Reflecting the key role played by foreign
capital, the authorities have also sought toWT/TPR/S/53/Corr.1 Trade Policy Review
Page x
ease regulations and reduce other factors that
may inhibit foreign investment.  In addition,
they have continued the process of internal
deregulation while making use of new
information and communication technologies,
notably the Internet, to enhance theeffectiveness and transparency of government
actions.  Overall, these efforts have facilitated
factor flows among the provinces, eased
distortions in the incentive system and created
a stronger basis for long-term economicexpansion.
(3) T
RADE POLICIES BY INSTRUMENT
(i) Tariffs
6. After an autonomous tariff review,
Canada adopted a new Customs Tariff inJanuary 1998 that greatly simplified and
rationalized its import regime.  The new
Customs Tariff incorporated the Uruguay
Round tariff reductions planned for 1999,
unified the schedule, and decreased the
number of tariff lines from 11,000 to 8,000.  It
also converted all rates of under 2% to zero, aconversion that will be automatic in the future.
Duty free entry also replaced special codes
that had provided for the concessionary entry
of certain inputs.  Almost half of all tariff lines
are now duty free, up from a third in 1996,and the simple average tariff is down to 7.7%
in 1998, compared to 9.2% two years ago.
7. Tariffs on dutiable items average
14%, unchanged from 1996;  sectors where
tariff protection remains significant includefood products, textiles and clothing, footwear
and shipbuilding.  Tariff escalation also
remains relatively high in certain sectors,
including food products, textiles and footwear.
These features create potential impediments toexports into Canada in sectors where
developing countries could well have a
comparative advantage.  Transparency has
been enhanced by the elimination in the new
Tariff of performance-based duty remission
programmes and most end-use tariff
concessions, but provisions remain that permitonly certain firms to import motor vehicles
duty-free.8. Tariff reductions have also occurred
in the context of free-trade agreements (FTAs).
In particular, the progressive implementation
of the NAFTA has resulted in the elimination
of virtually all tariffs on trade with the United
States, the main exception being supply-managed agricultural products.  Two new
FTAs, with Chile and Israel, bring to ten the
number of Canada's preferential tariff
regimes, each involving different margins of
preference and rules of origin.
(ii) Non-tariff restrictions and controls
9. Import controls are in place
essentially for health, safety and
environmental reasons, with the exception of
the trade restrictions applied in theagriculture, and textiles and clothing sectors.
Over the past two years, environment-related
trade prohibitions have been challenged twice
by private companies under the investor-state
provisions of the AIT and NAFTA.
10. Canada has used countervailing and
safeguard actions sparingly over the past twoyears, and there has been a reduction in anti-
dumping measures in force.  More than half of
all anti-dumping measures apply in the
sensitive steel industry.  Anti-dumping actions
affect mostly U.S. suppliers;  although thispartly reflects the intensity of bilateral trade,
anti-dumping thus persists as a potential
impediment to trade in North America.
Canada has continued to seek the elimination
of anti-dumping and countervailing dutymeasures within the NAFTA, and in FTAs in
general.  These efforts resulted in provisions
to phase-out anti-dumping measures in the
Canada-Chile FTA.
11. Recognizing the important effect of
standards and technical regulations on
international trade, Canada has actively
participated in international standardization
activities, including the adoption of
international standards, the negotiation of
mutual recognition agreements, and efforts to
harmonize Canadian regulations with those ofmajor trading partners.  These efforts should
benefit all of Canada's trading partners, inCanada WT/TPR/S/53/Corr.1
Page xi
particular those with whom harmonization is
closest.
(iii) Other measures affecting production
and trade
12. In 1995-97 there was a significant
decline in the financial assistance by theFederal Government to economic sectors.  In
particular, outlays to the agri-food sector have
been substantially reduced, while industry-
specific assistance appears now to be largely
limited to the cultural sector.  Although theprovinces have also participated in the fiscal
consolidation process, the impact of this
process on provincial subsidy programmes is
not as clear.
13. Canada made market opening
commitments in government procurement both
under the WTO Plurilateral Agreement on
Government Procurement (GPA) and the
NAFTA.  However, Canada has linked the full
implementation of its GPA commitments to
moves that it deems economically equivalent
by the United States.  This position, unchangedsince the previous Trade Policy Review, has
continued to create frictions with other GPA
signatories.
14. The AIT has sought to remove
provincial procurement preferences, and thuspromote a more rational allocation of
resources.  Since 1997, transparency has been
enhanced by the launching of an Internet-
based tendering system and the conclusion of
an agreement to extend AIT disciplines tomunicipalities, academic and health
institutions.  These moves may also benefit
foreign suppliers, especially those with a
commercial presence in Canada.  On the other
hand, although the AIT prohibits buy-provincial and other practices that
discriminate against suppliers from other
provinces, its signatories are free to employ
buy-Canadian policies where no international
commitments apply.  In general, the criteria
used by provinces to allocate procurement
contracts remain opaque.(4) S
ECTORAL POLICIES
15. By and large, the Canadian economy
is open and largely free from significant
policy-induced distortions.  However, some
sectors, for various reasons including
historical and political, remain subject tointerventions that have created barriers to
trade and investment.  Even these sectors, the
main focus of this report, have come under
increased scrutiny and in some of them
changes are under way.
(i) Agriculture
16. Public financial support for
agriculture has continued to contract,
including the elimination of export subsidies in
1997, and important reductions in domesticagricultural subsidies.  However, an
increasingly market-based environment for
grains and major livestock contrasts with the
retention of supply management regimes for
dairy products, poultry and eggs.  Canada's
in-quota access is in some instances reserved
for imports covered by certain preferentialarrangements, including Canada's recent
FTAs with Chile and Israel.  Tariffs on out-of-
quota supplies often stand at over 200%.
17. WTO Members have questioned the
activities of the Canadian Dairy Commissionand Canadian Wheat Board concerning trade
in dairy products and wheat.  In addition to
these two entities, Canada has notified the
Canadian Freshwater Fish Marketing
Corporation, the ten provincial liquor boardsand the Ontario Bean Producers Marketing
Board as state-trading enterprises.
18. Canada's few but highly restrictive
trade measures in agriculture could help to
perpetuate some of the distortions in worldmarkets that Canada sought to remove in the
Uruguay Round. These restrictions, by
effectively shielding key agricultural activities
from market opening under the WTO
Agreements, also deny opportunities for trade
with Canada to more efficient agricultural
producers, particularly those not enjoyingpreferential access.  This approach detractsWT/TPR/S/53/Corr.1 Trade Policy Review
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from Canada's otherwise strong support for
production based on comparative advantage,
a principle that has served Canada well in
other areas.
(ii) Manufacturing
19. The motor vehicle industry is the
largest manufacturing activity in Canada, and
tightly integrated with that of the United
States.  A special policy regime has been
applied to the industry since the Auto Pact was
signed with the United States in 1965.  Thus,while MFN tariffs are currently 6.7% for light
motor vehicles and aftermarket parts, and 0%
for automotive original equipment, firms
specifically covered by the Auto Pact and
complying with both Canadian value-addedcontent and production-to-sales requirements
may import automotive products duty free
from all sources.  After the Government
announced in 1998 that it would not further
reduce unilaterally MFN tariffs on automotive
products, instead pursuing trade liberalization
through the WTO and regional arrangements,the European Union and Japan requested
consultations with Canada on the WTO
consistency of the Canadian automotive
regime.  For Canada itself, concerns also arise
about the cost of forgoing unilateral, efficiencyenhancing liberalization, with a view to
preserving barriers as bargaining elements for
future negotiations.
20. Canada has implemented the product
integration programme for the first two stagesenvisaged in the WTO Agreement on Textiles
and Clothing, and it has included some
restrained products among those integrated.
Canada has also effectively eliminated some
quotas and increased access under others as aunilateral liberalizing effort.  Trade in textiles
and clothing has also undergone regional
liberalization.  Trade within the NAFTA
region has increased considerably, due in part
to rules of origin (the "yarn forward rule")
designed to ensure that the benefits of free
trade accrue to producers located in NAFTAmembers.  In recent years, Canada's textile
imports from China and Hong Kong, China
have also increased significantly;  Chinaalready accounts for the largest, and a
growing share of clothing imports.
(iii) Services
21. The process of gradual deregulation
of the Canadian services sector has continued,
spurred by the need to remain internationallycompetitive in the face of rapid technological
change and competitive pressures from U.S.
suppliers.  Domestic reforms have facilitated,
and been stimulated by international
commitments under both GATS and NAFTA,thus ensuring that these reforms also benefit
foreign service providers.  Canada actively
participated in the WTO-sponsored
negotiations in Basic Telecommunications and
Financial Services.  In audiovisual servicesCanada is still searching for a tenable balance
between international commitments and the
perceived need to promote its cultural identity
in an increasingly borderless market place.  In
these services, as in all other activities related
to cultural industries, the Government reviews
all investments by foreigners.
22. The professional services sector
makes a significant contribution to Canada's
commercial services exports.  Professional
services are closely regulated in Canada by
provincial and territorial bodies;incorporation of professional service firms
falls under provincial or federal authorities.
Although Canada's decentralized regulatory
system has created impediments to trade in
such services, including to inter-provinciallabour mobility, steps have been taken,
notably under the AIT, for the mutual
recognition and reconciliation of occupational
standards across provinces.  In international
fora, Canada has made significantcommitments on professional services under
the GATS, and negotiated mutual recognition
agreements at the bilateral and regional level,
notably under the NAFTA.
(5) T
RADE POLICIES AND TRADING
PARTNERS
23. Canada follows a multi-track policy
approach to international trade andCanada WT/TPR/S/53/Corr.1
Page xiii
investment relations in which multilateral and
preferential arrangements are intended to play
mutually reinforcing roles.  An effective
multilateral system with universal
membership, encompassing both trade and
investment disciplines, is seen by theauthorities as the best means to attract foreign
investment to Canada and provide a secure
and fair environment for Canadian firms
operating abroad.  Canada has thus been
actively participating in all aspects of currentwork in the WTO, arguing that the core of
such work should be implementing the
Marrakesh built-in agenda and developing the
programme agreed in Singapore.  For future
trade talks, Canada is considering a "clusterapproach" that would group complementary
issues for negotiation, to identify areas where
early agreement might be possible.
24. Given the importance of bilateral
trade flows, Canada also grants paramount
importance to managing the relationship with
the United States.  Canada-U.S. preferentialtrade arrangements, more recently through the
NAFTA, have magnified the inherent
advantages of geographic proximity and, thus,
the reliance of the Canadian economy on one
trading partner.  As a counterbalance, inaddition to its solid support of the multilateral
trading system, Canada has sought to forge
preferential links with other partners,
including the new FTAs with Chile and Israel
and an active participation in broader
schemes such as APEC and the Free TradeArea of the Americas.
25. Canada's bilateral and regional
liberalization reflects an outward-oriented
strategy, which, has created however, an
elaborated system of preferential tariffs andrules of origin that give rise to concerns about
trade diversion.  Moreover, difficulties in
balancing internal pressures in a federal
system, regional integration, and multilateral
liberalization continue to complicate Canada'sexternal trade relations, and WTO partners
have questioned over the last two years
Canadian measures in areas such as patent
protection, milk and dairy products pricing,
film distribution, taxation of periodicals,
export support for aircraft and the automotive
trade regime.Canada WT/TPR/S/53/Corr.1
Page 15
federal-provincial colloquia allow discussions on emerging trends in trade policy and their impact on
domestic interests;  the first was held in October 1997 in the areas of standards and services.
6. Provinces have been actively involved in develo ping strategies to resolve international trade
disputes, such as those concerning beer, spirits, softwood lumber and the NAFTA Panel on tariffs for
supply-managed products on bilateral trade and, as observers, were invited to join the WTO
consultations on Canada's dairy products (section (4) below).  Provinces are represented in certaininternational meetings;  they participated, for example, in the WTO Singapore Ministerial Conference
in December 1996 and the UNCTAD Expert Meeting on ISO 14000 in October 1997.  Officers from
Canada's permanent mission to the WTO periodically visit provincial capitals and participate in
seminars or conferences in Canada.
7. A permanent advisory committee system provid es for a continuous, confidential flow of
information and advice between the Government and the private sector on international trade matters.
The system has two principal components:  the Sectoral Advisory Groups on International Trade
(SAGITs) and the Team Canada Inc. Advisory Board (TCIAB).  The 15 SAGITs provide sectoral
views while TCIAB's terms of reference extend to all international trade matters.  The TCIAB (which
replaced the International Trade Advisory Committee) provides advice on trade policy and marketaccess questions, as well as issues related to trade and investment promotion.  Business people are
invited to report to the Board problems they may be experiencing, by communicating in confidence
the barriers they encounter in foreign markets, and providing practical information and advice on
trade policy matters.
8. Since the early 1990s, Canada has been engaged in a process of regulatory reform to boost
economic efficiency by ensuring that the benefits of all government regulations outweigh the
associated costs (Box II.1).
(ii) Foreign investment regulations
9. No single agency is responsible for formulating or implementing investment regulations in
Canada.  The three principal departments with direct responsibility for investment are Industry;
Finance;  and Foreign Affairs and International Trade.
10. Foreign direct investment in Canada takes place within the framework provided by the
Investment Canada Act of 1985, which is administer ed by Industry Canada.  The purpose of the Act is
to encourage investment that contributes to economic growth and employment, and to provide for the
review of significant investments by non-Canadians to ensure such benefits.  Investments are judged
by criteria such as their impact on competiti on, productivity, compatibility with national and
provincial policies, and the participation of Canadians.  The review requirement applies if the assetvalue of the Canadian business being acquired exceeds:
- if the investor is a WTO Member, Can$179 million in 1998 (adjusted annually for
real growth plus inflation)
1;
- if the investor is not a WTO Member, Can$5 million for a direct acquisition and
Can$50 million for an indirect acquisition;  these limits also apply to WTO investors
                                                     
1Requirements at the federal level in mining, energy and services sectors are reviewed in
WTO (1996a), Chapter IV.WT/TPR/S/53/Corr.1 Trade Policy Review
Page 16
if the business is involved in uranium production, financial services, transport
services or cultural activities.2
11. Any investment in a cultural activity that falls below thresholds may be reviewed if the
Governor in Council authorizes a review in the public interest.  The Canadian authorities have
indicated that no investment proposals have been formally disallowed since the passage of the Act in
1985.
Box II.1:  Regulatory reform
The Canadian Government launched departmental and parliamentary reviews of regulations in 1992.
Departmental reviews required government departments to examine their regulations through public
consultations and to publicly justify their regulat ory programmes.  Departments and agencies completed
their reviews in 1993 and set up a schedule of revocations and revisions for the next five years.  The processwas completed in 1994 with 835 regulatory revisions and revocations having taken place.  Parliamentaryreviews were designed to determine the impact of fe deral regulation on Canadian competitiveness.  The
Standing Committee on Finance identified six areas fo r change and recommended, among other things,
better analysis so that regulatory goals could be achieved more effectively at lower costs;  more
collaboration with other governments in Canada and abroad;  and better coordination among federaldepartments.
In 1994, the Federal Regulatory Reform Agenda beca me a key item in the Government's Jobs and Growth
initiative.  The Agenda focused attention on the Business Impact Test (BIT), an interactive software-basedtool designed to help regulators ascertain the impact of proposed regulations on the private sector.  Since
1996, all regulatory departments and agencies are required to use the BIT, or an equivalent analysis, for
major regulatory changes.
In 1986, Canada adopted the Regulatory Policy, which required that regulatory authorities demonstrate that,
among other things, a problem  or risk exists, the benefits outweigh the costs, and that they have respected
inter-governmental agreements and taken full advantage of opportunities for coordination with othergovernments and agencies.  The Regulatory Policy was reviewed and updated in 1995 to require that
regulators minimize the regulatory burden on small businesses when considering new regulations and
changes to regulations.
The Treasury Board Secretariat m onitors the performance of regulator y authorities and the effectiveness of
this policy.  The Secretariat, in consultation with federal departments and users, has developed
regulatory-process management standards to improve the consistency of regulatory practices across
departments, and define clear levels of  system performance.  These st andards were implemented in 1996 by
seven departments responsible for the bulk of fede ral regulatory activities (Agriculture and Agri-Food;
Environment;  Fisheries and Oceans;  Health;  Industr y;  Revenue;  and Transport).  In late 1998, other
departments were assessing the implementation process.
Starting in 1998, the reporting of upcoming and future regulatory initia tives are incorporated into the
departmental Reports on Plans and Priorities, which are tabled in Parliament in the spring.  The objective is
to strengthen accountability to Parliament for the use of regulatory powers granted in the legislation.
Technical regulations must be prepublished and open for public comment for a minimum of 75 days;  the
authorities must notify Canada's trading partners throug h the WTO Enquiry Point at the Standards Council
of Canada.
Source: WTO Secretariat.
                                                     
2For other details see WTO (1996a), Chapter III(4)(iii).Canada WT/TPR/S/53/Corr.1
Page 17
12. After approval, reviewable investments are monitored by Industry Canada to ensure
compliance with the firm's commitments.  Non-Canadian investors must notify when they commence
a new business or acquire control of an existing Canadian business unless the investment is
reviewable.  There are no restrictions on the foreign investor's ability to repatriate investments or
profits but withholding taxes apply to the payment to non-residents of dividends, interest, salaries,
bonuses, commissions or other services rendered.  For certain investors, withholding taxes are
reduced under bilateral treaties with their country of residency.  Under the Canada Business
Corporations Act, companies may impose their own ownership restrictions if these are deemed
necessary, under federal or provincial law, to qualify for the operation of a business or for licences,
permits and other benefits;  these restrictions appear to be seldom used.
13. Various investment restrictions maintained at provincial level affect foreign participation in,
for example, large-scale projects, privatizations, petroleum and gas projects, electric power systems,
chicken production, liquor licences and mining leases.3  Several provinces regulate the sale and
ownership of land with respect to foreign owners, largely in the agricultural and recreational sectors.
Canada has made a number of reservations concerning tax and subsidy measures at the provincial
level in its Schedule of GATS commitments.
(iii) Domestic market issues
14. Despite federal-provincial efforts to improve the common framework for policy-making,
disparate provincial policies and interprovincial trade barriers remain an issue.  Examples of technical
barriers to internal trade include construction regulations;  criteria and processes for inclusion of drugs
under provincial health plans;  and prohibitions on advertising.  As already noted in previous Trade
Policy Reviews, supply management systems in the dairy, poultry and eggs sectors remain, and
continue to segment the Canadian market.  There are limited disciplines on investment incentives atdifferent levels of government but work is in progress to clarify and improve existing rules.
15. Efforts to promote a unified market across Canada have been focused since 1995 through the
Agreement on Internal Trade (AIT), which aims to ac hieve the free flow of products, investment and
labour through, among other things, the mutual recognition of provincial standards and regulations.
4
Developments since the entry in force of the AIT include:
- an agreement in principle, reached on 20 February 1998, to apply procurement
disciplines to municipalities, academic institutions, social service agencies and
hospitals (the MASH sector) in all jurisdicti ons except for British Colombia (the issue
is still under consideration in the Yukon);
- the approval of measures to harmonize corporate registration and reporting
requirements across the country and establish an electronic system for corporate
registration;
- the development of an Internet-based electronic tendering system for government
procurement (Chapter III(4)(iii));  and
                                                     
3For further details on investment conditions maintained at provincial level see WTO (1996a),
Chapter III(4)(iii).
4For details see WTO (1996a), Box II.1.WT/TPR/S/53/Corr.1 Trade Policy Review
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- the preparation of guidelines laying out a process for provinces and territories to
mutually recognize occupational standards and reconcile differences between
standards.
16. Attention is now being focused on the extensio n of procurement disciplines to many Crown
corporations, the completion of an energy chapter and improved disciplines on investment incentives.
The Canadian authorities noted that while negotiations in all of these areas were well advanced,agreements acceptable to all governments had not yet been reached.
17. A report released in February 1998 by the Canadian Chamber of Commerce evaluated the
progress made on fifteen key areas of the AIT.
5  According to the report, the Canadian market for
telecommunications services was largely barrier- free;  the sole remaining exemption from the
obligations of the Telecommunications Act for Sa skatchewan's Crown telephone company was being
phased out.  On government procurement, the report noted the introduction of a national electronic
tendering system, but said that agreement had not been reached on reducing the list of excluded
Crown corporations and services.  Some progress had been made in agriculture and food, with most
barriers to interprovincial trade in alcoholic be verages eliminated, but impediments to trade and
competitiveness remained (these remaining impedime nts have been the subject of public consultations
in 1997 and 1998).
18. The report was critical of the continuous exclusion of financial services from the AIT
(Chapter IV(5)).  It also questioned the actual working of the AIT's investment provisions and pointed
out the need for clearer rules in this area.  According to the report, numerous restrictions still limited
the extraction and processing of raw resources to only local operators, to the considerable
disadvantage of fish processing plants, sawmills and processors in other provinces and territories.
19. The AIT contains a formal dispute settlement mechanism accessible to governments and the
private sector.  According to the Committee of Ministers on Internal Trade, early indications are that
the mechanism has been working well at the initial stages.  Internal trade representatives report that
they have been able to deal successfully with indi vidual complaints at the first, consultative stage in
the process.  The later stages in the process, involv ing formal panel review have yet to be utilized.  As
of mid-1998, a total of 44 complaints had been filed.  The majority of complaints were underChapter Five - Procurement (28 cases), and Chapter Seven - Labour Mobility (10 cases).
(6) P
OLICY OBJECTIVES AND IMPLEMENTATION
(i) General considerations
20. Canada regards increasing trade and investment flows as a key element of its economic
development strategy, both because of its potential to boost growth and for its capacity to create jobsand diversify markets.  The authorities have noted that an extra Can$1 billion in exports creates, in the
medium term, 6,000 to 8,000 new jobs in Canada.  As only 100 companies account for over half of
the country's total exports, the Government has set a goal of doubling the number of active Canadian
exporters by the year 2000.
6
21. The Canadian authorities have pointed out the significant increase over the last decade in
foreign direct investment (FDI) to and from Canada (Chapter I(3)).  In their view, both inward and
                                                     
5Canadian Chamber of Commerce (1998a and 1998b).
6Industry Canada and Department of Foreign Affairs and International Trade (1998).  Starting in 1998,
this publication (CIBS) is only available on the Internet as constant revisions made necessary the use of anelectronic design.