RESTRICTEDWORLD  TRADE
ORGANIZATIONWT/TPR/S/78
15 November 2000
(00-4713)
Trade Policy Review Body
TRADE POLICY REVIEW
CANADA
Report by the Secretariat
This report, prepared for the  Trade Policy Review of Canada, has been drawn up
by the WTO Secretariat on its own responsibility.  The Secretariat has, as
required by the Agreement establishing the Trade Policy Review Mechanism
(Annex 3 of the Marrakesh Agreement Establishing the World Trade
Organization), sought clarification from the Government of Canada on its trade
policies and practices.
Any technical questions arising from this report my be addressed to
Ms. Catherine Hennis-Pierre (tel. 739 5640) or Mr. R. Valdés (tel. 739 53 46).
Document WT/TPR/G/78 contains the policy statement submitted by the
Government of Canada.
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.Canada WT/TPR/S/78
Page iii
CONTENTS
Page
OVERVIEW vii
I. RECENT ECONOMIC DEVELOPMENTS 1
(1) M ACROECONOMIC DEVELOPMENTS 1
(i) Output, employment, and trade 1(ii) Fiscal policy 3(iii) Monetary policy and exchange rates 4
(2) B
ALANCE OF PAYMENTS , TRADE AND INVESTMENT FLOWS 4
(i) Foreign direct investment 4(ii) Merchandise trade 5(iii) Trade in services 5
II. DEVELOPMENTS IN TRADE AND INVESTMENT POLICY 6
(1) I
NSTITUTIONAL AND POLICY FRAMEWORK 6
(2) P ARTICIPATION IN THE WTO 7
(i) Trade policy priorities 8(ii) WTO dispute settlement 10
(3) D
EVELOPMENTS IN INVESTMENT POLICIES 11
(i) Foreign investment policy 11
(ii) International investment policy 13
(4) D EVELOPMENTS IN PREFERENTIAL TRADE AND INVESTMENT RELATIONS 14
(i) Preferential trade in the Americas 15(ii) Other preferential relations 16
III. MARKET ACCESS IN GOODS 16
(1) T
ARIFFS AND OTHER CHARGES AND TAXES AFFECTING IMPORTS 16
(i) MFN tariffs 17
(ii) Preferential tariffs and rules of origin 19(iii) Other charges and taxes affecting merchandise imports 20
(2) T
ARIFF QUOTAS IN THE AGRI-FOOD INDUSTRY 20
(3) A NTI-DUMPING , AND COUNTERVAILING ACTIONS 22
(4) Q UANTITATIVE RESTRICTIONS AND CONTROLS 24
(i) Agri-food products 25
(ii) Textiles and clothing 25
(5) S TANDARDS AND TECHNICAL REGULATIONS 27
(i) Recent international regulatory activities 27(ii) Sanitary and phytosanitary measures 28(iii) Environmental regulations and trade 29
(iv) Technical regulations at provincial level 30
(6) L
OCAL -CONTENT REQUIREMENTS 30
(7) S TATE TRADING , MONOPOLIES , AND OTHER EXCLUSIVITY RIGHTS AFFECTING TRADE 31
(i) The Canadian Wheat Board (CWB) 31(ii) The Canadian Dairy Commission (CDC) 31
(iii) The twelve provincial and territorial liquor boards 31WT/TPR/S/78 Trade Policy Review
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Page
IV. OTHER POLICIES AFFECTING TRADE IN GOODS 32
(1) E XPORT ASSISTANCE 32
(i) Agricultural export subsidies 32(ii) Export financing 33
(2) E
XPORT CONTROLS , RESTRICTIONS , AND CHARGES 34
(3) F INANCIAL ASSISTANCE TO BUSINESS 35
(i) Assistance to agriculture and food processing 36(ii) Assistance in other areas 39
(4) C
OMPETITION POLICY 40
(i) Legislation and international cooperation 40
(ii) Enforcement and other activities 41
(5) G OVERNMENT PROCUREMENT 42
(6) T RADE -RELATED ASPECTS OF INTELLECTUAL PROPERTY RIGHTS (TRIPS) 44
V. MARKET ACCESS IN SELECTED SECTORS 45
(1) F INANCIAL SECTOR REFORM 45
(i) Foreign bank branching 45
(ii) Expected changes in "the widely held rule" 46
(iii) Insurance services 46
(2) A IR TRANSPORT SERVICES 47
(i) Market and competition policy issues 48(ii) Foreign investment and trade restrictions 49
(3) T
ELECOMMUNICATIONS SERVICES 49
(4) C ULTURAL POLICY AND TRADE IN RELATED SERVICES 50
(5) P ROFESSIONAL SERVICES AND MOVEMENT OF NATURAL PERSONS 51
(i) Professional services 51(ii) Movement of natural persons 52
REFERENCES 57
APPENDIX TABLES 59Canada WT/TPR/S/78
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CHARTS
Page
I. RECENT ECONOMIC DEVELOPMENTS
I.1 GDP growth rate and merchandise trade with the United States
and the rest of the world, 1990-99 3
II. DEVELOPMENTS IN TRADE AND INVESTMENT POLICYII.1 Inward and outward foreign direct investment, 1985-1999, selected years 13III. MARKET ACCESS IN GOODSIII.1 MFN tariff averages 1996-2000, selected years, and final found tariff (2004) 17
III.2 Applied tariffs on 21 groups of products subject to tariff quotas, 2000 21
III.3 Number of anti-dumping duties in force, by partner, June 2000 23III.4 Imports of clothing from selected suppliers, 1994 and 1999 26
IV. OTHER POLICIES AFFECTING TRADE IN GOODSIV.1 Current and capital assistance to business, 1991-98 36
IV.2 Estimates of support to agriculture by the largest OECD agricultural exporters 37
IV.3 Government expenditure in support of the agri-food sector, 1994-2001 38
IV.4 Public expenditure on goods, services, and construction, 1996 43
TABLES
I. RECENT ECONOMIC DEVELOPMENTS
I.1 Performance of the Canadian economy, 1993-2000 2II. DEVELOPMENTS IN TRADE AND INVESTMENT POLICYII.1 Selected investment restrictions and controls by sector, 2000 12WT/TPR/S/78 Trade Policy Review
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APPENDIX TABLES
Page
I. RECENT ECONOMIC DEVELOPMENTS
AI.1 Balance-of-payments, 1995-2000 61
AI.2 Canada's inward and outward FDI stock, 1990-99, selected years 62
AI.3 Canada's trade by product, 1995-99 selected years 63AI.4 Canada's exports, 1995-99 64AI.5 Breakdown of Canada's trade with the United States and the rest of the world,
1995-1999, selected years 65
AI.6 Canada's imports, 1995-99 66
AI.7 International transactions in services, by category, 1997 and 1999 67
II. DEVELOPMENTS IN TRADE AND INVESTMENT POLICYAII.1 Status of dispute-related WTO matters involving Canada, September 1998-September 2000 68
AII.2 Canada's preferential trade and investment agreements and arrangements, September 2000 71
III. MARKET ACCESS IN GOODS
AIII.1 Import duties by tariff regime, 2000 72
AIII.2 Initiations of anti-dumping investigations, July 1998 to June 2000 73AIII.3 Countervailing duty measures in force, September 2000 74
IV. OTHER POLICIES AFFECTING TRADE IN GOODSAIV.1 Export subsidies and WTO commitments in the dairy sector, 1995-2000 74Canada WT/TPR/S/78
Page vii
OVERVIEW
1. Canada's trade and investment regime
is amongst the world's most transparent and
liberal notwithstanding persistent barriers in a
few but important areas, including certainagri-food industries, textiles and clothing, and
some service activities.  Even these areas have
come under increased scrutiny recently, and in
some of them changes are under way.
Reaping the fruits of a generally outwardlooking environment, both trade and
investment flows have continued to expand
rapidly since Canada's previous Trade Policy
Review in 1998.  Sound economic policies and
the United States' cyclical lead have allowedCanada to enjoy its ninth consecutive year of
economic growth, achieve an improved fiscal
balance, reduce unemployment, and increase
real after-tax incomes.  Canada's liberal trade
regime has played an important role in these
achievements, highlighting the benefits of
trade for specialization, resource allocationand, ultimately, living standards.
2. Canada participates fully in the work
of the WTO, including through information
sharing, support for trade facilitationinitiatives, and active efforts to increase
transparency.  Under the WTO dispute
settlement mechanism, Canada has been
involved as a complainant in various cases
seeking to preserve market access for itsexports (e.g., aircraft, asbestos, beef, and
salmon).  Concurrently, a number of long-
established Canadian sectoral support
programmes have been challenged under
multilateral rules, including those for dairyexports, aircraft, motor vehicles, genericdrugs, and magazines.
3. Canada is active in the ongoing
negotiations in agricultural and services.  Inagriculture, it seeks on the one hand improved
market access, export subsidy elimination, and
reduced trade-distorting domestic support,
while on the other it wishes to preserve its
right to operate "orderly marketing systems"in the wheat, dairy, poultry and egg sectors.
In services, Canada seeks to strengthen
multilateral rules and improve market access,
while ensuring that its public health andeducation systems are not jeopardized, and
that new obligations do not run counter to itscultural policy objectives.
4. Canada has continued to build up its
already extensive network of preferentialarrangements.  Although these have helped
open the Canadian market, such arrangements
may also distort trade and investment patterns
as they involve different margins of preference
and rules of origin.  Since 1998, Canada hasengaged in negotiations for new FTAs with
Costa Rica, EFTA, and Singapore.
Notwithstanding these efforts, the privileged
relationship with the United States is likely to
remain paramount for Canada for years tocome.  The relationship has served well
Canada's economic interests, but also
magnified its exposure to the U.S. market,
which now absorbs some 86% of Canadian
exports.
5. Canada has also continued to seek
and conclude new bilateral and regional
investment agreements but its support for a
multilateral agreement on investment appearsto have become mainly limited to the related
"analytical and educative" work in the WTO.
Since 1998, Canada has remained a powerful
magnet for foreign investment despite existing
review requirements on foreign acquisitionsexceeding a threshold, and outright
restrictions applied in some primary and
tertiary activities.
6. Restrictions remain in areas such as
financial services, transportation,
telecommunications, and "cultural sectors",
but overall Canada's market access in services
is relatively liberal and has been further
enhanced since 1998.  Thus, in financialservices, steps have been taken to improve
foreign access, while in the
telecommunications industry certain domestic
ownership requirements and monopolies have
been abolished.  Other restrictions have come
under close domestic scrutiny:  in air
transport, competition policy concerns led thecompetition authority to question existing
barriers to foreign participation;  in the
cultural sectors, new instruments are being
sought to promote Canadian culture in theWT/TPR/S/78 Trade Policy Review
Page viii
face of an increasingly rigorous application of
multilateral disciplines.
7. For goods, tariffs are the main trade
instrument.  The tariff regime offers duty-free
entry to over 90% of imports, either underMFN or preferential rules, resulting in a trade
weighted average tariff of only some 0.9%.  By
contrast, the simple MFN average tariff stands
at 7.1%, while the average on dutiable items is
some 13% due to the higher tariff applied to anumber of sensitive products;  these include
vegetables, cut flowers, sugar, wines, textiles,
clothing, footwear, and ships, many of which
are of export interest to developing countries.
In this respect, and despite changes to thetariff regime for least developed countries
since 1998, Canada's autonomous tariff
concessions in favour of developing countries
remain modest compared with preferences
established under reciprocal free-tradeagreements (FTAs).  Extending such
preferences on a MFN basis would both
enhance welfare in Canada itself and improve
market access to developing and other
partners.
8. Canadian producers have continued
to seek protection against imports through
anti-dumping (AD) actions;  85 definitive AD
duties were in force in mid-2000 makingCanada one of the most intensive AD users.
Exports from some 35 partners are affected,
58% of which cover steel products.  About
16% of AD measures have been in place for
ten years or more.
9. A number of quantitative restrictions
are maintained to protect domestic producers
against foreign competition.  Despite its
unilateral liberalizing efforts, Canada's importquotas on textiles and clothing impose
significant restrictions to certain products,
some of great interest to developing countries.
Tariff on products subject to tariff quotas
(TQs) ranging to over 300% in the dairy and
poultry industries continue to amount to de
facto quantitative restrictions.  By shieldingthose industries from market opening, TQs are
perpetuating inefficiencies at the cost of
Canadian consumers, and denying trade
opportunities to more efficient foreignproducers.  Other import controls relate to
health and sanitary reasons:  SPS concerns
have resulted in meat being imported from
only four countries.
10. Canada has gone a long way towards
setting up a transparent procurement regime;
in particular, under the Agreement on Internal
Trade, procurement disciplines have been
extended to municipalities, amongst other
entities.  Nevertheless, buy-local restrictionsremain in force that deny taxpayers the best
value for money and can distort trade.
Canada is a signatory of the WTO Agreement
on Government Procurement but it continues
to condition market opening commitmentsunder the Agreement to moves that it deemseconomically equivalent by the United States.
11. Market distortions may arise from
local-content requirements in place at federalor provincial level.  The first apply in the
"cultural" subsectors and under the Auto Pact;
recent WTO panels found that in both cases
certain schemes were inconsistent with
multilateral rules.  Provincial  local-contentrequirements apply to wine production, and
wood and mineral processing.  In three
provinces, local wines benefit from less
restrictive marketing conditions than foreign
products.
12. Financial support is made available to
selected activities, with effects on production
and, potentially, trade and investment.  Some
40% of total financial transfers to the economygoes to the agri-food sector, mainly in the
form of income risk management programmes.
Reversing earlier trends, assistance to that
sector has increased substantially since 1998.
Although Canadian assistance to agricultureremains minor relative to other large
agricultural exporters, it can but compound
the problem of subsidies and market
distortions affecting world markets.  Federal
financial transfers to non-agricultural sectors
include grants and direct investment schemes,
one of which was found by a panel to providedWTO-inconsistent subsidies to the regionalaircraft industry.