FAAE Committee Report

RECOMMENDATION 1

That, without excluding other emerging markets, the Government of Canada make China, India, Brazil and Russia the primary focus of its emerging markets strategy.

While the Government has identified China, India and Brazil—due to their size and rapid economic transformation—as the principal focus for an emerging markets strategy, there is strong recognition that other markets, such as Russia, the Arabian Peninsula and Southeast Asia, also hold great potential for Canadian firms. The proposed emerging markets strategy recognizes the need to focus limited resources in markets in which there is the greatest potential for economic benefit. The strategy will propose enabling tools and programs to support and encourage Canadian business engagement in China, India and Brazil, but will retain sufficient flexibility to respond to opportunities in other markets as they arise.

The objective of the Government is to expand our trade and investment relationships, while at the same time ensuring Canada's long-term economic security. This will include heightened involvement in important, rapidly growing regional markets which are of significant interest to Canadian business.

RECOMMANDATION 2

That, in the context of Recommendation 1, the Government should make every effort to inform Canadian businesses of trade and investment opportunities around the world. Government programs and policies should be flexible and responsive enough to allow businesses to pursue these opportunities, within the framework of corporate social responsibility and in accordance with the laws of other countries.

Canada's network of Trade Commissioners is the primary vehicle for identifying trade and investment opportunities abroad. Supporting this human network are a range of specialized services (such as business lead dissemination, market reports, marketing tools) tailored to advancing Canadian commercial interests abroad. The Trade Commissioner network also offers a range of advice to Canadian businesses pursuing those opportunities, including on local laws and socially responsible behaviour in a particular market. To increase efforts to inform business of international trade and investment opportunities, the Government has reallocated resources to increase outreach activities by its Trade Commissioners within Canada. The Government has also built a sophisticated information technology tool, The Virtual Trade Commissioner (see the government response to recommendation 21), to bring relevant opportunities and information directly to Canadian business. Furthermore, government-led trade missions to priority markets serve both to inform Canadian businesses, and to provide access to trade and investment opportunities around the world.

The size of the Trade Commissioner Service abroad is the key limit to the Government's ability to identify business opportunities. Resource allocations within the Trade Commissioner Service are reviewed annually, as are business plans of trade programs abroad. At present, there are more than 900 Canadian and locally engaged Trade Commissioners working in over 140 cities around the world and in 12 cities across Canada.

However, comparatively speaking, Canada is under-represented in some key emerging markets. For instance, Canada has 15 offices staffed by 93 Trade Commissioners in China, Brazil, India and Russia. By comparison, Australia has 95 Trade Commissioners in 14 offices in China alone.

In addition, Government agencies, such as Export Development Canada (EDC), working closely with the Trade Commissioner network, have targeted representation in emerging markets, and co-located in Canadian missions in China, India, Brazil, Malaysia and Poland. As a consequence, EDC's financing and insurance services also help Canadian companies secure market opportunities, as well as position themselves in regional and international supply chains. Corporate social responsibility is an operating principle under which EDC is committed to carrying out its mandate in a manner consistent with its corporate values.

The Government agrees that policies and programs should be sufficiently flexible to allow businesses to pursue important opportunities in emerging markets, within the framework of corporate social responsibility and in accordance with the laws of those countries. It will be important to have the capacity to systematically bring together business, non-governmental organizations and government interests and responsibilities to support Canadian business efforts in identifying and managing the social, environmental and economic risks in emerging markets.

RECOMMANDATION 3

That, without foregoing strategic opportunities elsewhere, the Government of Canada focus its future bilateral free trade negotiating efforts on large economies or regional groupings. These agreements should include open rules of origin requirements and not undermine trade liberalization efforts at the multilateral level. No such negotiations should proceed without first consulting with Canadian stakeholders, including civil society, to ensure that their needs are addressed.

The Government agrees with the recommendation that Canada's future bilateral free trade negotiating efforts, without foregoing strategic opportunities elsewhere, should focus on large economies or regional groupings. Indeed, Canada's current suite of bilateral free trade negotiations - South Korea (large economy), European Free Trade Association and Central American Four countries (regional groupings), and Singapore (partner of strategic value) - correspond to these criteria. Bilateral and regional initiatives, such as the Free Trade Area of the Americas (FTAA) negotiations, can advance trade liberalization efforts at the multilateral level either by flagging new issues and helping to place them on the global agenda, or by providing innovative solutions to trade problems that can subsequently be adopted multilaterally. In addition, by ensuring that such initiatives are consistent with WTO rules, Canada's regional and bilateral free trade agreements can help strengthen the multilateral system.

The rules of origin in all of Canada's free trade agreements are negotiated in a transparent and open fashion with extensive industry input throughout the consultation process. The rules are designed to be clear, unambiguous and not open to interpretation or administrative discretion. Ongoing work to liberalize rules of origin in Canada's free-trade agreements is entirely consistent with and supportive of Canada's efforts in trade liberalization in multilateral forums.

The Government will continue to consult with Canadian stakeholders, including civil society, to ensure that Canada's international trade and investment initiatives continue to reflect Canadian interests, values and priorities. Public consultations are also a central part of the Framework for Environmental Assessments of Trade Negotiations — an instrument that helps to ensure that the environmental implications of each potential free trade initiative are examined.

RECOMMANDATION 4

That the Government of Canada vigorously pursue free trade negotiations with the Mercosur regional bloc. NAFTA type investor-state provisions should be excluded from any such agreement.

It is a priority of the Government to strengthen Canada's commercial linkages with the Mercosur countries (Argentina, Brazil, Paraguay and Uruguay), an important market for Canadian exporters and investors. While the Government is not pursuing a stand-alone free trade agreement at this time, Canada is advancing trade and investment liberalization with Mercosur through the Free Trade Area of the Americas (FTAA)—an initiative recognized in Canada's International Policy Statement as Canada's top trade policy objective in the region. Indeed, as per the November 2004 commitment made by Prime Minister Paul Martin and President Luiz Iancio Lula da Silva, Canada and Brazil “have agreed to promote the expansion of trade relations between Mercosur and Canada, by negotiating enhanced market access in the areas of goods, services and investment, in the context of the creation of a future FTAA.” This commitment (which has been endorsed by all Mercosur countries) will help to advance the FTAA negotiations, while at the same time leading to improved bilateral trade and investment relations. Of course, the Government will also look at other instruments identified in the Canada's International Policy Statement (e.g. trade and investment missions, increased cooperation in education, and research and development), to help strengthen our commercial linkages with Brazil and its Mercosur partners.

The Government has taken note of, yet questions, the rationale of the Committee's recommendation to exclude an investor-state dispute settlement provision in any future negotiation with Mercosur. Canada's experience with provisions on investment protection and effective rules for the settlement of investment disputes, as found in NAFTA, the Canada-Chile FTA and all of Canada's Foreign Investment Promotion and Protection Agreements (FIPAs), has demonstrated that such provisions are an important part of investor protection. The investor-state dispute settlement provisions have also been clarified and improved both in NAFTA Chapter 11 and in Canada's new FIPA model to ensure the appropriate balance between investor protection and the Government's right to regulate. For example, the investor-state dispute settlement provisions in the new FIPA model are intended to build greater transparency into the dispute settlement rules. Moreover, such rules do not jeopardize the sovereignty or threaten the economic and social values of the countries that endorse them, nor do they restrict any level of Government from legitimately legislating and regulating in the public interest. Canada intends to use the FIPA model, and therefore the improved investor-state provisions, as a basis for any future investment negotiations with the Mercosur countries, including a potential FTAA Agreement. The FIPA model can be found on International Trade Canada's public Web Site.

RECOMMANDATION 5

That the Government of Canada, in consultation with business, explore the need for and negotiate Foreign Investment Promotion and Protection agreements (FIPAs) in key emerging markets.

Following the completion of the new FIPA model, the Government is undertaking an extensive priority-setting exercise in order to determine future priorities for FIPA negotiations. In addition to focusing on commercial and economic interests, this priority-setting exercise considers investor interests, environmental implications and broad strategic geographical factors, including emerging markets. Canada is currently engaged in FIPA negotiations with China, India, Peru and other key emerging markets for Canadian investors.

The Government will continue to consult with Canadian stakeholders, including business, to ensure that Canada's FIPA negotiations with key emerging markets, such as China and India, continue to reflect Canadian interests, values and priorities.

RECOMMANDATION 6

That in its current FIPA negotiations with China and India, and any future negotiations with other countries, the Government of Canada ensure that any final agreement contains meaningful provisions to protect Canadian intellectual property.

The Government of Canada recognises that intellectual property enforcement is an increasingly prominent issue and share the global concern about counterfeiting and piracy. The Government is committed to ensuring that its Foreign Investment Promotion and Protection Agreements (FIPAs) effectively protect intellectual property.

While the basis for IP protection is contained in the World Trade Organizations Trade Related Aspects on International Property Rights, the current model FIPA, through its definition of investment which includes intangible property, encompasses the protection of intellectual property with regards to issues of expropriation, the free transfer of funds, national treatment and most-favoured-nation treatment.

One of the options proposed in the report to deal with the problems of counterfeiting and piracy is to strengthen intellectual property provisions at the multilateral level. The Government is of the view that the current level of intellectual property provisions is not the problem. Rather, it is the Government's view that the current provisions, including those in the model FIPA are adequate, but the problem lies in the enforcement of those provisions.

Canada is now actively engaged, both at home and abroad, in numerous efforts to ensure that intellectual property rights (IPRs) are adequately protected from infringement, particularly where it can be shown that the consequences of such activity threatens public health and safety or has a link to organized crime and terrorist activity. A federal interdepartmental working group comprised of International Trade Canada, Public Safety and Emergency Preparedness Canada, Canadian Border Security Agency, Royal Canadian Mounted Police, Justice Canada, Industry Canada, and Canadian Heritage, is currently developing strategies to increase enforcement of IP rights. Canada is also working closely with its international trading partners to find appropriate and effective means to ensuring the enforcement of intellectual rights.

China's implementation of the Trade-Related Aspects on Property Rights (TRIPS) Agreement is under regular review in the WTO, and Canada has actively participated in these reviews. At the most recent review, China outlined steps it was taking to improve its domestic enforcement system.

In its negotiations and discussions with other countries, Canada currently focuses its efforts on increasing cooperation in IP enforcement and on promoting and increasing public awareness on how counterfeiting and piracy harm economic welfare, health and safety, rather than trying to strengthen current enforcement provisions.

RECOMMANDATION 7

That the Government of Canada look for ways to reduce regulatory hurdles between Canada and emerging markets. Where enough common ground exists, and ensuring that Canadian health and safety regulations are maintained and enhanced, mutual recognition agreements should be considered.

Canada is recognized around the world as having a sound regulatory system. The Government of Canada is committed to further improving the regulatory system in order to meet emerging challenges and take advantage of new opportunities. The Government recognizes that the regulatory system could help enhance trade, innovation and competitiveness while continuing to provide a high level of protection to citizens and the environment. This includes the Government's IPS commitment to implement smart regulations and the development of a framework for international regulatory cooperation. The framework will facilitate a strategic and coordinated, whole-of-government approach to international cooperation to achieve better regulatory outcomes. Mutual Recognition Agreements (MRAs) represent one of a number of tools which can be used in efforts to enhance regulatory compliance. As such, the appropriate tool must be chosen based on the circumstances. The Government of Canada is committed to pursuing the most effective approaches to reducing regulatory hurdles with our trading partners, while continuing to ensure high levels of protection for Canadians in the areas of health, safety, economic security, proprietary interests and the environment.

RECOMMANDATION 8

That the Government of Canada work to maintain and enforce its completed air service agreements with China and India, and turn its attention to improving air service access to other priority emerging markets, especially Brazil and Russia.

The Government of Canada has achieved considerable success in the past year in negotiating expanded air service agreements with priority emerging markets. During the coming year, airlines are expected to take advantage of the significant increase in traffic rights under the new air transport agreements negotiated in 2005 with China and India.

The access gained—which includes more cities and the authorization of a three-and five-fold increase, respectively, in the number of flights permitted—will facilitate commercial exchanges.

Air Canada has been allocated five additional flights per week between Toronto and Beijing and three additional cargo flights per week between Toronto and/or Calgary and/or Vancouver and Shanghai. Harmony Airways of Vancouver, which intends to initiate service to China later this year has been authorized by Canada to operate code-share services on the flights of other airlines, in the absence of suitable aircraft of their own. Other Canadian carriers have expressed an interest in operating in China under the new agreement, starting in 2006 at the earliest. The Government has also worked to facilitate flights between India and Canada, assisting Air Canada in obtaining authority for flights between Toronto and Delhi through Switzerland, using new traffic rights, and pending Air Canada's acquisition of new aircraft that would permit resumption of more non-stop Canada-India flights.

The Government continues to pursue opportunities for greater access to emerging markets, and has scheduled talks with Panama, Turkey, and Ukraine, among others,. Efforts to encourage use of air transport agreements have resulted in a decision by Etihad Airways to introduce flights between Abu Dhabi and Toronto via Brussels. Air transport between Canada and Russia may expand as a consequence of the Government's recent decision to designate Skyservice to operate scheduled flights between Toronto and Moscow. After many years of trying, in late 2004, the Government successfully secured authority from Brazil for Air Canada to operate a seventh weekly flight between Toronto and Sao Paulo.

Government officials will continue to respond to the stated needs of industry stakeholders, including airlines, airports, shippers and the travelling public to pursue opportunities for increased air transport access to international markets.

RECOMMANDATION 9

That in any bilateral or multilateral trade negotiations, the Government of Canada seek well-defined, science-based rules that allow countries to address their legitimate sanitary and phytosanitary concerns. Sanitary and phytosanitary concerns should not be used as an illegitimate non-tariff trade barrier.

The Government of Canada agrees with this recommendation. The Government's position in all bilateral or regional trade negotiations is that the World Trade Organization (WTO) Agreement on Sanitary and Phytosanitary Measures (SPS Agreement) applies to trade covered by bilateral or regional trade agreements. The WTO SPS Agreement allows members the right to take SPS measures when necessary for the protection of human, animal or plant life or health. However, such measures are required to be scientifically based, and not to be applied in a manner that would constitute a disguised restriction on international trade. The WTO SPS Agreement is recognized by WTO members as an effective mechanism to protect human, animal or plant life or health, while minimizing negative effects on trade. As a result, it was agreed that, during the current round of WTO multilateral trade negotiations, the Agreement would not be re-opened.

In recognition of its value, Canada has not seen the need to renegotiate any new SPS disciplines in its bilateral or regional trade negotiations, but rather continues to apply the WTO SPS Agreement uniformly and consistently.

RECOMMANDATION 10

That, following the recent example with India, the Government of Canada negotiate science and technology agreements with other significant emerging markets, beginning with China, Brazil and Russia.

Whereas the Government shares the Subcommittee's view that negotiating Science and Technology (S&T) agreements can serve as an effective means of fostering cooperation with key emerging markets, Canada also enjoys many informal S&T collaborative partnerships from which it currently benefits without conventional S&T treaties, including some with emerging markets.

In the 2005 Budget, the Government announced $20 million over five years for an International Science and Technology Partnership Program (ISTPP), which aims to foster and support bilateral research projects between Canada and the emerging market countries—India, China, Brazil—as well as Israel. Pursuing formal S&T agreements with targeted countries will be among the initial steps undertaken in conjunction with the program. While reference has been made to an existing Canada-India S&T agreement, it should be noted that the two countries remain in the negotiation stages of such an agreement at the present time. With respect to China, the two Governments agreed in July on an agenda for advancing S&T collaboration, and are currently in the negotiation phases of a bilateral agreement. Through the Canada-Brazil Innovation, Science and Technology (CBIST) network, Canada is already engaged in S&T activities with Brazil, largely as a result of collaborative S&T workshops and consultations that have taken place between members of the research communities. The Government will remain flexible in its consideration of future S&T agreements with other emerging markets, including Russia, taking into account not only the interests and priorities of Canadian companies, academia, science-based departments and agencies, but also the interests of economic security.

RECOMMANDATION 11

That the Government of Canada, while respecting the jurisdiction of the provinces, ensure that there is a systematic connection between Canadian university offices for technology transfer, and appropriate international trade officials in Canada and abroad, in order to facilitate partnership opportunities for commercialization purposes. Consideration should also be given to organizing missions of university transfer officers to key countries.

Consistent with the International Policy Statement, the Canadian Trade Commissioner Service, working in close conjunction with the private sector, federal science-based departments and agencies, provincial governments, Canadian universities and private research institutes, aims to work more effectively to promote and establish international science and technology linkages that contribute to improved Canadian commercialization performance.

Stronger links between Canadian universities and international collaborative opportunities are important to the effective transfer of technology from research laboratories to commercial markets.

Although such commercialization opportunities, particularly with respect to the issue of technology transfer, will involve careful consideration of national security interests, the Government of Canada nevertheless shares the Subcommittee's view that it should work in close collaboration with universities internationally to improve Canada's commercialization performance. Consideration of key knowledge centres in the United States, the European Union, and Japan, as well as emerging sources of knowledge, such as China, India and Brazil, will be critical in determining the areas in which universities choose to focus their international collaborative efforts.

RECOMMANDATION 12

That, building on the successful experience of the 2003 Canada-India Science and Technology study on institutional linkages and academic, government and private partnerships, the federal government work with the provinces, the Association of Universities and Colleges of Canada, foreign governments and other key actors to map existing linkages and complementary research interests and strengths in countries of interest, in order to develop strategic plans of action for research cooperation between Canada and key nations. China, Russia and Brazil should be the top priorities in this regard.

Given the widespread recognition of the value of the science and technology study conducted between Canada and India, the Government also supports the Subcommittee's recommendation to pursue appropriate studies to explore links and complementarities with other key emerging markets, beginning with China and Brazil. To this end, a study is to be launched later this year exploring the synergies and common research strengths that exist between the Canadian and Chinese S&T systems. In the case of Brazil, although an evolving collaborative S&T partnership has already been established through the Canada-Brazil Innovation Science & Technology (CBIST) network, an analysis of additional opportunities for collaboration also remains a priority. In addition to the United States, the European Union and Japan, the Government agrees with the Subcommittee that mapping existing linkages will allow Canada to strategically employ its limited resources internationally. In carrying out such studies, the Government encourages the participation of the provinces, relevant members of the research community and other key stakeholders.

With respect to other emerging markets that may later be identified as priority S&T partners for Canada, the Government remains open to considering an assessment of Canada-Russia synergies in the future.

RECOMMANDATION 13

That the Government of Canada conduct a formal review of the Investment Canada Act (ICA), to ensure that the Act is effective in delivering on its stated intent and that foreign investment in Canada serves the national interest. The Investment Canada Act should make certain that foreign investment maximizes the benefit to Canadians, including, but not limited to, creating jobs in Canada, building the domestic capital stock, raising productivity levels, and improving research and development capacity. Any investment that is not in the Canadian national interest should be rejected.

The Government is fully in accord with this recommendation with respect to foreign direct investment (FDI) and the protection of Canada's national interest. The Government continuously monitors implementation of the current ICA with a view to achieving this goal.

The current provisions of the ICA support Canada's economic and cultural interests in investment. Although the ICA requires only notification of most foreign investments, significant investments require a more intensive review. These investments must demonstrate a net benefit to Canada before they may be implemented. The criteria used in assessing net benefit encompass those cited in the recommendation.

The current ICA however, does not provide for reviews of investments on the grounds that they may injure national security—a protection enjoyed by several of our major trading partners. The Government has therefore introduced Bill C-59 that provides for review, and if necessary disallowance, of any investment that might injure national security, and in particular:

• provides national security protection similar to that given in laws of other G8 nations;
• conforms to our obligations in the WTO, NAFTA and other bilateral agreement
• provides that national security reviews are independent of other public interest review provisions (this remains unchanged);
• does not discriminate among investors on the basis of country of origin;
• introduces no new bureaucracy or general paper burden for investors; and
• will rarely be invoked to disallow an investment (that is, only when the Minister of Industry has recommended to the Governor-in-Council (GIC) that an investigation should be launched and GIC, on consideration of the results of that investigation, believes that disallowance is the most effective means to address the national security concern that the investment raises).

RECOMMANDATION 14

That the Government of Canada ensure that the Canadian International Trade Tribunal has the necessary resources to conduct safeguard investigations and that the Government use import safeguards as per WTO rules.

The Government fully concurs with this recommendation. In fact, Canada's safeguard rights and obligations under the WTO Agreement (including pursuant to China's Protocol of Accession) have been fully implemented in Canadian legislation. Indeed, Canadian law affords industry direct access to the Canadian International Trade Tribunal to seek the initiation of a safeguard investigation where there is some evidence to suggest that increased imports of a particular good are causing or threatening injury to Canadian producers of like or directly competitive goods. This is part of the Tribunal's existing mandate for which it has been allocated the necessary resources.

RECOMMANDATION 15

That, in accordance with the commitment made in the September 2002 Speech from the Throne, the Government of Canada, in partnership with the provinces and universities, “position Canada as a destination of choice for talented foreign students and skilled workers by more aggressively selecting and recruiting through universities and in key embassies abroad.” To that end, the Government should follow the examples of the United Kingdom and Australia, which offer prestigious scholarships to foreign students.

The Government recognizes the importance and value of attracting qualified students and skilled immigrants to Canada. To this end and in consultation with education and academic sector stakeholders, the Government will continue to consolidate and focus scholarship programs for highly qualified student recipients in harmony with national interests. These include prestigious programs such as the Trudeau Scholarships, Millennium Scholarships, Commonwealth and Francophone Scholarships and the Government of Canada Awards.

The Government, in consultation and collaboration with the provinces, will continue to develop the foreign student portal (Live, Learn and Succeed initiative) within the “Going to Canada” gateway as part of the Government-On-Line commitment. The objective is to enable foreign students identify their study destinations in Canada more readily, by discipline, institution, city and province. It is expected that, following further development, the foreign student portal will be accessible through all Canadian embassies, in 2006.

The Government continues to engage closely with the post secondary community and with umbrella associations in encouraging participation at international networking conferences and student recruitment fairs. Embassies play an important and growing role in profiling and promoting Canada as a study destination, and in supporting the overseas promotion work of associations and academic institutions.

To enable foreign students to gain valuable work experience in Canada, the Government has put programs in place through off-campus partnerships with the provinces to allow foreign students (without Human Resources and Skills Development Canada confirmation) to work off campus for up to 20 hours a week during the school year and full time during school breaks, and to work anywhere in Canada for one year following graduation from a post-secondary institution and for two years outside the Greater Toronto Area, the Communauté Metropolitaine de Montréal and the Greater Vancouver Regional District.

RECOMMANDATION 16

That the Government of Canada examine ways to improve the visa acceptance rates of foreign students seeking to study in Canada.

The overall acceptance rate for study permit applications rose from 74 percent to 77 percent between 2003 and 2004. The Government of Canada is committed to working with stakeholders to increase the overall number of qualified international students applying to study in Canada.

In partnership with the provinces and educational institutions, Citizenship and Immigration Canada (CIC) has introduced new policy initiatives designed to make Canada more attractive to potential foreign students, such as offering work permits for off-campus employment, and extending the duration of post-graduation work permits. CIC has also made it easier for foreign students to move between educational institutions once they are in Canada. These initiatives will support the recruitment of foreign students by raising Canada's profile as a destination for study abroad.

The Government of Canada is collaborating with educational stakeholders through the Advisory Committee on International Students and Immigration, and new initiatives, such as “Live, Learn, and Succeed,” to identify ways to increase the quality of study permit applications, and to maintain an appropriate balance between facilitating the movement of students into Canada, maintaining the safety and security of Canada and Canadians, and ensuring the integrity of the foreign student program.

As legislated in the Immigration and Refugee Protection Act, potential foreign students must provide an acceptance letter from an educational institution and proof of sufficient funds for their first year of study, in addition to passing security, criminality and medical screening. They must also demonstrate that they will leave Canada voluntarily at the end of their authorized stay. However, in many emerging markets, the inability of some applicants to meet these requirements does result in lower than average overall acceptance rates. The potential contribution that student mobility may make to Canada's emerging market strategy can only be realized if the Government of Canada continues to exercise due diligence in selecting only genuine foreign students.

RECOMMANDATION 17

That the Government of Canada draft legislation under which Canadian companies operating abroad should continue to be subject to Canadian laws as they pertain to human rights.

The primary responsibility for the promotion and protection of human rights rests with States. States implement their international obligations relating to human rights through a variety of measures, including the adoption of domestic legislation.

In Canada, there are a number of legislative and regulatory mechanisms to hold Canadian companies and residents accountable when there is evidence of violations of human rights legislation associated with the activities of Canadian businesses. For example, federal and provincial human rights legislation regulates the conduct of private employers in each jurisdiction and prohibits certain discriminatory practices. Canadian criminal law may also apply in cases where there is conduct that is of the nature of a criminal offence. The Canadian Criminal Code provides for criminal liability for corporations as well as individuals. In 2004, the Criminal Code was amended to better ensure that organizations could be held accountable when they commit criminal offences. Corporate bodies (and other organizations) can now be found liable for offences as a result of the criminal actions of a wider variety of senior officers at all levels of the corporation than was previously the case: both those with operational authority (those who oversee day-to-day operations or a part thereof of the organization) and those with executive authority, such as directors or officers.

Canadian law does not generally provide for extraterritorial application. Extending the application of Canadian legislation abroad could raise several problems, including conflict with the sovereignty of foreign States, conflicts where States have legislation that is different from that of Canada, and difficulties with Canadian officials taking enforcement action in foreign States. Canada has objected to the extraterritorial application of other States' laws and jurisdiction to Canadians and Canadian businesses where there is no sufficient nexus to those States or where the action undermines Canadian legislative authority or Canadian policy in the area.

However, Canadian law may provide for extraterritorial application in cases where there is a sufficient nexus to Canada or where the international community has agreed (for example, by treaty) on the need for such jurisdiction. While Canadian criminal law generally applies to offences committed in Canada, there are, two cases in which Canada will extend criminal jurisdiction on an extraterritorial basis.

The first is where there is a factual link between Canada and the offence. While much of the activity may have occurred outside Canada, if a significant portion of the acts that constitute the offence took place in Canada, there may be a “real and substantial link” to Canada which would provide Canada with a jurisdictional basis for prosecution. In determining whether there is such a link, the court must consider the facts that took place in Canada (at the corporate headquarters, for example, in the case of a Canadian company operating outside Canada) and also whether, in the circumstances, it would offend international comity if Canada were to exercise jurisdiction.

Second, Canadian criminal jurisdiction has been extended to cover certain offences, such as terrorist offences and torture committed by public officials, that the international community has determined are so important to prosecute that a country will have jurisdiction to prosecute, regardless of where the acts took place, on the basis of criteria established by treaty (such as the nationality of the offender or the victim). The most far-reaching example of this type of extraterritorial jurisdiction is the Crimes Against Humanity and War Crimes Act (CAHWCA), which permits the charging of persons who commit genocide, crimes against humanity, and war crimes inside or outside Canada. The CAHWCA also allows for superiors to be held criminally liable for failing to prevent or failing to report the commission of such crimes by persons under their effective authority and control. The CAHWCA provides for jurisdiction over such crimes whether the crime was committed in Canada or abroad. The definition of “persons” in the CAHWCA is the same as that in the Criminal Code, and thus includes corporations. Charges may therefore be laid against individuals acting in their own capacity, corporations, and corporate actors, such as directors and officers if they are the “directing minds” behind corporate decisions that amount to an offence under the Crimes Against Humanity and War Crimes Act. There remains some debate, however, as to whether the relevant crimes can, as a matter of international law, be committed by corporations. This legal ambiguity is relevant as the CAHWCA's definitions of war crimes, crimes against humanity and genocide refer to their international law definitions.

Legal remedies to address human rights violations can also arise from civil rather than criminal law. To the extent that crimes or wrongs, such as damage to the environment or personal injuries, committed outside Canada also constitute claims of the sort cognizable as a tort, civil law remedies may be available in Canadian courts to the foreign plaintiff. As such, Canadian corporations or their directors and employees may be pursued in Canada for their wrongdoing in foreign countries. Generally, if the defendant is a Canadian corporation incorporated under the laws of Canada, the Canadian court located in the jurisdiction of the defendant would be competent. The plaintiff does not need to be a Canadian resident or citizen. However, Canadian courts follow the common law doctrine of forum non conveniens, a discretionary principle allowing a court to decline to hear a matter where there is a stronger connection to a foreign jurisdiction. In deciding whether to apply this doctrine, Canadian courts will look at such things as the place where the harm or damage occurred, the location of the witnesses, which law applies, etc. Therefore, Canadian judges may decide that they should not exercise jurisdiction over a particular claim if another court is better placed to hear the matter.

RECOMMANDATION 18

That the Government of Canada incorporate a social responsibility pillar (i.e. human and social rights, and environmental protection) into its emerging markets strategy, and more generally, also attach stronger conditions related to corporate social responsibility to its trade and investment assistance programs.

Canada's International Policy Statement recognizes the Government's role in promoting corporate social responsibility (CSR), both as a good principle and as sound business practice, and agrees that an approach that closely integrates social, environmental and economic development policies with trade and investment objectives must be one basis for our emerging markets strategy.

Corporate social responsibility is becoming an integral part of long-term business growth and success. Adopting international CSR norms supports companies in managing risks and provides them with guidance in operating responsibly in countries with weak governance structures. Furthermore, Canadian firms with stated CSR values not only contribute to the sustainable development of communities and economies abroad, but benefit in terms of their international reputation. The Government is active in promoting CSR with the Canadian business community and civil society groups, within government and with other countries. Our activities are framed by internationally agreed upon voluntary standards, such as the OECD Guidelines for Multinational Enterprises and the UN Global Compact. Canada is in the forefront of support for balanced and integrated approaches to sustainable global economic development including corporate social responsibility.

The Government agrees that it should enhance its capacity to engage companies and other stakeholders on how to manage the impacts of their activities overseas in a manner consistent with internationally recognized CSR principles. While some Canadian companies endorse and observe internationally agreed upon CSR standards, some, smaller companies in particular, lack the resources, knowledge or incentives to adequately address issues arising from the social, cultural, political or environmental context in which they seek to operate in emerging markets.

To that end, Canada's Trade Commissioner Service, will work with Canadian businesses to help them be more aware and able to anticipate and mitigate social and environmental risks that could be associated with investments in emerging economies abroad. It will be important to have the capacity to systematically bring together business, non-governmental organizations and government to support Canadian business efforts to identify and manage social, environmental and economic risks and responsibilities in emerging markets.

RECOMMANDATION 19

That the Department of Foreign Affairs and International Trade work with the Canadian International Development Agency to identify aid projects in CIDA's target developing countries where Canadian expertise could contribute. This information should then be made publicly available as part of the initiative outlined in Recommendation 21.

The Department of Foreign Affairs and International Trade (International Trade Canada) (DFAIT (ITCan)), the Department of Foreign Affairs and International Trade (Foreign Affairs Canada) (DFAIT (FAC)) and the Canadian International Development Agency (CIDA) have long worked together in Canada and abroad promoting Canadian expertise. CIDA now maintains lists of projects that will be implemented, on their Web Site. At the time of the tendering process, these projects are subsequently posted on MERX. In this way, most aid projects that are to be implemented by the Canadian private sector are identified in time for firms to express an interest. DFAIT (ITCan) is working with CIDA to develop a process that will also post these projects in the Virtual Trade Commissioner automatic notification system, described in the Government's response to Recommendation 21. Once that process is in place, Canadian companies registered with the Virtual Trade Commissioner will receive an automatic notification of new projects.

RECOMMANDATION 20

That the Government of Canada employ a whole-of-government approach to its emerging markets strategy. This involves adopting a clear, coordinated and comprehensive approach to the strategy with all relevant government departments and agencies contributing their expertise to the Minister of International Trade.

It is clear that the Government, at all levels, must act as a coherent whole, not only to help Canadian citizens and business sectors meet the extraordinary challenges presented by emerging markets, but also to strengthen international partnerships. These are essential to building a lasting Canadian footprint in emerging markets, one that will enhance the context in which Canadian companies are pursuing their endeavours. A clearly articulated vision of Canada's strategic position in emerging markets should greatly facilitate the convergence of efforts, the coherence of messages and the fostering of collaboration. Recognizing that these competitive markets offer both opportunities and risks, DFAIT (ITCan) has initiated discussions with other federal organizations to develop bridges between complementary issues such as market access, regulatory modernization, innovation, visa/labour-force issues, infrastructure development, transportation policy and aid policy, to ensure that policies and programs are aligned and in keeping with the Government's objectives to enhance and secure Canada's economic development. Export Development Canada is working closely with DFAIT (ITCan) to ensure that the financial services requirements of Canadian companies seeking to realize opportunities in emerging markets are met. Provincial Governments have also been extensively consulted as to trade, investment, education, policy priorities and outreach initiatives. DFAIT (ITCan) will continue to play a leading role in the negotiation, implementation and monitoring of Canada's international trade and investment instruments. Finally, Canada's International Policy Statement calls for the development of whole-of-government country strategies. The Minister of International Trade will propose an emerging markets strategy that will further delineate the trade and investment components of these broader country strategies.

RECOMMANDATION 21

That the Government of Canada establish a program whereby its trade officers regularly compile information on project activity by sector in their part of the world. A one-stop information source, combining this project intelligence with that collected under Recommendation 19, should be set up. Project information should be posted on the Internet and a distribution system created that allows Canadian companies to subscribe to receive free updates as new information on projects relevant to their sector becomes available. Canadian trade officers should be provided with all the tools necessary to fulfil this task.

The Government of Canada now operates a free Internet service called the Virtual Trade Commissioner that provides Web pages and e-mail notifications that are customized to match the industries and markets of interest to Canadian businesses who register. The Virtual Trade Commissioner also gives clients direct on-line access to the international trade services of the Canadian government.

Registered Canadian firms can receive, by e-mail, notification of business leads, government-led trade missions and other market information related to their industry and markets of interest.

Canadian firms can choose to receive e-mails daily, weekly or monthly—and even select the day of the week or month that they receive their e-mails. In addition to the e-mail, Canadian firms can go to the Internet to see custom built Web pages containing market reports, business leads, notices of trade events and other information. They can also use the Virtual Trade Commissioner to seek information on new projects or markets outside their main areas of interest.

Considerable investments have already been made and more are being made to ensure that Trade Commissioners in Canada and abroad have the tools and training to be able to input business leads, project information and other material directly into this service. The main limitation on the amount of project specific business information in the system is the number of Trade Commissioners in the field available to locate opportunities.

Primarily funded by Department of Foreign Affairs and International Trade (International Trade Canada), the Virtual Trade Commissioner has received funding from the Government-on-Line initiative and is also partially funded by partner organizations (Agriculture and Agri-Food Canada, Export Development Canada, Canadian Heritage and the Canadian Commercial Corporation). Participation allows partners to integrate their officers and service offerings into the Virtual Trade Commissioner Service, as well as participate in the development, content and coordination of the service. Negotiations are underway to secure additional partners.

In December 2004, the Canadian Federation of Independent Business wrote: “One good example of an efficient instrument for Canadian SMEs is the Virtual Trade Commissioner...all departments and agencies should integrate their services through the Virtual Trade Commissioner...Last but not least, this service needs to be loudly promoted...” Since its official launch in November 2002, the Virtual Trade Commissioner has grown to over 19,000 registered accounts. In 2004, account registrations grew by over 80 percent, primarily by word of mouth. Despite this growth, most Canadian businesses and business people involved in international commerce have not heard of the system. Increasing awareness is perhaps the Virtual Trade Commissioner's biggest challenge.

In addition, the Government of Canada has operated a free procurement Web site since 2001, called SourceCAN. SourceCAN is a collaborative initiative of Industry Canada, the Canadian Commercial Corporation, Team Canada Inc, Canada Business and Export Development Canada. It delivers business opportunities, both domestic and international, to Canadian companies and provides a bridge between buyers, sellers and third parties to facilitate trade in an open and transparent manner.

The core functionality of SourceCAN is the electronic Bid-matching service. Clients are able to customize profiles outlining the types of business opportunities that will fulfill their business needs. SourceCAN generates approximately 2,200 new filtered opportunities per day from 44 different opportunity sources. Some examples include: provincial tender sources, the federal government, and international financial institutions and organizations. Government employees are able to post opportunities on-line which are viewed under a separate heading called Global Business Opportunities. Clients are either e-mailed matches to their profile or have the option of visiting their SouceCAN account to view matches.

Efforts are underway to examine whether bids now available in SourceCAN can also be made available via the Virtual Trade Commissioner Service.

RECOMMANDATION 22

That the Government of Canada ensure that its export-readiness services adequately inform Canadians about the realities of conducting business overseas—both the opportunities and the risks.

Canadian companies preparing to export can receive assistance from many Government of Canada sources. The first step in the Team Canada Inc (TCI) export services continuum is general information provided by the export help line (1-888-811-1119) answered by Canada Business Services Centres in each province, as well as through the TCI Web site. Using a broad range of tools, TCI members provide Canadian clients with skills development, export counselling, market entry support, export financing and in-market assistance. DFAIT (ITCan)'s Regional offices help Canadian companies select target markets and develop their international business strategies. Trade Commissioners at our posts abroad offer in-depth knowledge of foreign markets and identify business opportunities that are communicated directly to Canadian companies through DFAIT (ITCan)'s International Business Opportunities Centre or through the Virtual Trade Commissioner portal. All TCI partners advise Canadian companies of the opportunities and challenges involved in international business to assist them in making informed business decisions. The Government, through the Trade Commissioner Service, also informs companies of risks related to environmental, economic, security and social issues, including human, labour and indigenous rights issues, that may be encountered when operating in countries with weak governance structures.

RECOMMANDATION 23

That, in an effort to strengthen ministerial and other high-level government relationships, the Government of Canada increase the number and frequency of official visits to priority emerging markets. While visits to China, India, Brazil and Russia should be the highest priority, visits to other emerging markets should also take place as often as possible.

The Government recognises the importance of maintaining a steady display of high-level interest in priority markets through frequent and targeted visits, and is committed to continuing such visits as often as possible. The Government is also cognizant that close coordination is required among federal departments and partners to ensure that visits are as focused and targeted as possible.

These visits not only lend a high-level of visibility to Canada in emerging markets, but the relationships cultivated during the visits will also serve to aid Canada in bilateral and multilateral forums.

Trade missions remain an integral part of the Government of Canada's strategy to increase trade and investment in emerging markets, while also serving to support the Government's larger foreign policy agenda laid out in Canada's International Policy Statement. High-level trade missions led by either the Prime Minister or by the Minister of International Trade, continue to open doors for Canadians. Following both the visits of the Prime Minister and trade missions led by the Minister of International Trade—as well as other ministers—to Brazil, China and India, the Government is ensuring that it maintains a high profile in these and other priority markets through continued high-level visits. For example, the Ministers of Environment and Health both visited India earlier this year, while the Ministers of Industry, Labour and Housing recently completed visits to China. The Minister of State (Northern Development) recently visited Russia to attend a symposium on Oil and Gas Development in the Arctic, while the Minister of Justice was in the Middle East during the summer. The Government is committed, through these and future visits, to maintaining and strengthening high-level government relationships with both priority and other emerging markets.

RECOMMANDATION 24

That Canada increase the number of trade missions it sends to its key emerging markets. A combination of larger and smaller missions should occur at least two or three times a year. Smaller missions should focus on specific economic sectors, as business demand warrants.

The Government, in consultation with various stakeholders, including the business community, recognizes the value of frequent missions to emerging markets. It conducts multiple trade missions throughout the year, organized by various government departments, and intends to continue offering missions in the future. These missions range in scope, size and sectoral focus.

The larger trade missions led by the Minister of International Trade to Brazil, China and India in the past year are being followed up by smaller, more targeted, missions organized by a number of government departments. For instance, the Minister of Transport is leading a trade delegation to China in the fall, while Natural Resources Canada is leading a mission to India and Thailand that will focus on disaster management technologies.

Industry Canada, through its Trade Team Canada sectors, also organizes many targeted sectoral trade missions and visits, and is currently planning a mission to China, focused on environmental and climate change technologies, for February of next year. This past June, Natural Resources Canada led a mission of senior representatives from major Canadian mining companies to St. Petersburg, Russia. In addition, following the signing of a joint declaration on Science and Technology between Canada and India during the trade mission in April, Canada participated as this year's partner nation at a Science and Technology Summit in Delhi highlighting Canadian expertise and technologies to a large Indian audience. The Government is committed to continuing to organize and participate in both large and small missions to priority and other emerging markets.

RECOMMANDATION 25

That the Government of Canada consult with businesses and business associations on a regular basis to determine in which countries other than China, India, Brazil and Russia—and in which economic sectors—trade missions would be most beneficial. These missions would be secondary in priority to those outlined in Recommendation 24.

Canadians' ability to communicate directly with their government representatives is a critical component of an informed debate during the development of trade and investment programs, trade missions and policies. In this regard, consultations with stakeholders, including Parliamentarians, the provinces and territories, municipalities, non-governmental organizations, business, industry, academia and the Canadian public, have been held on specific initiatives ensuing from the emerging markets strategy, and will continue to be an effective element of keeping the strategy “evergreen.” Examples of an ongoing consultation mechanism include: the SME Advisory Board, which meets twice a year to provide feedback on issues affecting small and medium-sized enterprises (SMEs) with an interest in exporting; and the Trade Team Canada Sectors (TTCS), a national structure of representatives from the federal government, industry associations, companies and provincial governments, who are involved in the trade planning and implementation of activities and trade missions for the Team Canada Inc priority sectors. In addition, during the ministerial-led Canada Trade Missions (CTMs) mentioned in response to Recommendation 24, participating companies are given the opportunity to discuss future sector and market destinations they wish to explore. These consultations, as well as others, are an important part of the Government's overall commitment to ensuring that Canada's trade and investment agenda, including missions, continues to reflect Canadian interests, values and priorities.

RECOMMANDATION 26

That the Government of Canada consult with participants in its recent trade missions to China, India and Brazil for their views on how future missions could be improved.

Focused consultations with business, business associations and other government departments and provincial counterparts, remain vital to the Government's international trade agenda by informing the development of future mission programs and activities. To this end, comprehensive mission surveys have been developed and are sent to participants following each mission to solicit their feedback on various aspects of the mission, including both its logistics and substantive elements. The results gathered serve as guidance for the improvement and implementation of government service delivery in subsequent missions.

For instance, as a result of the 2004 Brazil mission survey, a revised and more comprehensive Web site was developed for the use of business clients, leading up to the 2005 China mission.

The implementation of Export Cafés in the missions to Brazil, China and India, were in direct response to the business community's desire for face-to-face meetings to discuss market access and business opportunities with our Trade Commissioners on the ground. Companies participating on Canada Trade Missions can now meet with Senior Trade Commissioners, not only in the host market, but also in other countries of the region. For example, in the 2005 mission to Beijing, Shanghai and Hong Kong, companies could also meet with Senior Trade Commissioners from Malaysia, Singapore, Japan, Brunei and the Philippines, to name a few. This format allowed companies to save valuable resources in time, research and travel. Representatives from Export Development Canada and the Canadian Commercial Corporation were also invited to these sessions to address the financial and contracting needs of clients, as well as to extend their services to the business community. This collaborative consultation mechanism between the private sector and government will remain a priority for all future trade missions.

RECOMMANDATION 27

That the Government of Canada launch an outreach campaign that actively encourages government and/or business leaders from emerging markets to visit Canada as frequently as possible. Canadians active in the region should also be invited to participate.

While there is a focus on organizing outbound trade missions to promote Canadian goods and services in key markets, the value of organizing inbound visits to Canada for influential members of government and business of our priority markets is also recognized. Although there is no formal campaign run by DFAIT (ITCan), visits to Canada that include government and/or business leaders from emerging markets are frequently planned.

For example, the Governor and a delegation from the Brazilian State of Santa Catarina visited Toronto and Ottawa. The visit, organized by the Consulate General in Sao Paulo, in partnership with the Ontario Government and DFAIT (ITCan and FAC), focused on investment and e-services. In addition, the Principal Scientific Advisor to the Government of India recently travelled to Canada to meet with Canadian Science and Technology partners. A round table was organized by DFAIT (ITCan and FAC) during this visit that brought together Research and Development institutions in both the private and public sectors, many of which were already active in India. In May of this year, Vice Minister Ma Xiuhong from the Ministry of Commerce of China travelled to Fort McMurray to visit the oil sands of Alberta prior to her coming to Ottawa to hold a Joint Economic and Trade Commission. This visit was initiated by DFAIT (ITCan), organized with the help of the Alberta provincial government and aimed at giving Chinese leaders a view of the potential Chinese investment opportunities in Canada in the oil and gas sector. Every year, our posts in Russia, in collaboration with DFAIT (ITCan) organize incoming delegations to Canada, notably on the margins of trade shows such as Construct Canada, Western Agribition and Global Petroleum. In fact, 35 delegates from Russia attended the Construct Canada trade show in 2004. There are at least six more such visits planned from Russia in 2005-2006.

In addition, international conferences and symposiums held in Canada present an excellent opportunity to engage in dialogue with foreign business and political leaders. The Government is committed to encouraging more of these visits from priority markets.

RECOMMANDATION 28

That, given the gaps identified by this report, the Government of Canada review the scope and mandates of its trade and investment-support programs and make any necessary changes.

The Government, at all levels, has a vital role to play in helping our business sector to reposition itself to succeed in an increasingly competitive and integrated global marketplace, and in particular to strategically engage with rapidly emerging markets, such as China, India and Brazil. It is recognized that the issues brought forward by the rise of these new economic powers extend beyond government promotional activities in support of business clients.

Canadians can benefit from the rapid growth of these new economic powers only if they are active participants in global value chains that draw on the strengths of these new economic powers to serve global markets. Active participation or commercial engagement must extend beyond traditional exports to include strategic sourcing, as well as aggressive two-way flows of investment and technology. Governments' key roles in facilitating such two-way flows are to put in place rules of commercial engagement that provide traders, investors and owners of intellectual property with the confidence to proceed, and to provide the necessary market intelligence and contacts. On this front, DFAIT (ITCan), along with its partner departments and agencies, is reassessing the current array of policy instruments and business development tools, with a view to designing results-oriented initiatives that would create the enabling environment business needs to respond to the opportunities, challenges, risks and competition in the rapidly changing global marketplace.

For example, today EDC's sphere of operations is more comprehensive than that of a traditional export credit agency, covering a wider scope of international commerce activities. Specific initiatives include expanded support for both Canadian direct investment abroad and foreign direct investment into Canada, as well as the consideration of expanded support for companies with innovative export-oriented technologies. EDC and DFAIT (ITCan) are consulting in terms of the application of EDC's mandate to establish how programs can be enhanced to meet the needs of Canadian exporters and investors.

RECOMMANDATION 29

That, given the cancellation of the Program for Export Market for Industry (PEMD-Industry), the Government of Canada consider establishing a program to provide support to small and medium-sized enterprises to cope with the costs and risks associated with conducting business in emerging markets.

The Program for Export Market Development (PEMD) was part of the Government of Canada's international business development strategy for over 30 years. This program was cancelled in 2004 because it no longer suited the international business development needs of small and medium-sized enterprises.

New programming that is in keeping with the Government's international commerce priorities is being considered. It is a priority of the Government to support small and medium-sized enterprises in emerging markets, as well as to expand opportunities in the United States and support Canada's innovation agenda.

RECOMMANDATION 30

That, notwithstanding the recent increase in funding contained in the 2005 Budget to enhance Canada's overseas presence, additional resources are needed to further expand the on-the-ground support for Canadian businesses in emerging markets.

The Government undertakes an annual review of trade resources abroad to ensure that they are distributed effectively and in the best interests of Canadian business. Notwithstanding this ongoing realignment, a gap analysis of trade, investment, and science and technology personnel in China, India and Brazil has shown that more resources are necessary to respond to growing interest and opportunities. Resources with expertise in critical industry sectors, market intelligence, economic security, S&T, research and development, commercialization, trade and investment policy and promotion, and facilities to accommodate increased personnel, will be needed. In addition, Canadian trade representatives abroad will need access to the specialized training and tools necessary to work effectively with Canadian businesses, and to provide the market intelligence and leads needed to succeed in the highly challenging and competitive emerging markets.

RECOMMANDATION 31

That the Government of Canada extend the length of term of international postings for its trade officers in China, India, Brazil and Russia to a period of five years.

While longer postings might give officers more experience in specific markets, there is also a balance to be struck with respect to attracting qualified trade officers (and their families) to accept extended periods abroad in sometime challenging conditions. The length of the assignments of Canada-based employees at Canadian missions abroad is determined by the hardship levels of individual missions as set by DFAIT (FAC) on the recommendation of the Inter-Departmental Post Hardship Committee. These hardship levels are normally reviewed on a two-year cycle, and take into account three categories. The first category concerns the physical environment, and includes geographic restrictions, climate and altitude, air pollution and noise pollution. The second category addresses local conditions: transportation, office accommodation, recreation, food, sanitation, diseases, medical facilities, language and culture, the existence of Canadian-equivalent primary and secondary schools, and any impediments to spousal employment. The third category deals with personal security and political violence. This hardship evaluation system was agreed upon within the Foreign Service Directives Committee of the National Joint Council.

While trade officers in China, India, Brazil and Russia are offered assignments for the period of time as determined by the hardship evaluation system described above, it should be noted that extensions of one or two years are frequently sought and granted. This may result in Canada-based Trade Commissioners staying for up to four, and on occasion, five years at one mission abroad.

Officers that receive language training (e.g. Chinese, Russian) are frequently posted to these countries on more than one occasion.

It should also be noted that locally engaged staff at Canadian missions abroad provide continuity and expertise in specific markets. Many of Canada's locally engaged Trade Commissioners have remained in the same location for their entire careers.

RECOMMANDATION 32

That the Government of Canada review its visa application and approval process with a view to expediting the process. As part of this review, the Government should ensure that adequate visa application services are available in the highest traffic and/or more central cities.

Visa offices overseas assess over one million temporary resident applicants each year to meet the needs of Canadian schools, businesses, tourism operators and families. This work is accorded a high priority, and in many offices same day service is provided. Currently, more than 70 percent of all visitor applications are processed within two days.

The overseas visa network strives to provide service to all clients on a comprehensive basis. Citizenship and Immigration Canada (CIC) provides service that is accessible while respecting the limits imposed by its resource base. Where CIC is located overseas is dependent on the existing Foreign Affairs network, space availability and application patterns. Points of service have been established where application volumes are highest. CIC does review its overseas network on an annual basis and adjusts it over time to better balance resources, workload and client service.

CIC is working in an innovative environment at our High Commission in New Delhi, where private sector Visa Application Centres (VACs) in nine cities assist applicants to ensure that their applications, with supporting documents, meet the necessary requirements to facilitate quick decision making. CIC ensures, through quality assurance exercises, that this initiative meets acceptable program integrity and client service standards.

The department continues to review the performance standards of partnership initiatives, such as VACs, to ensure that business travellers can apply for and receive visas as rapidly as possible. Where appropriate, the department will recommend the expansion of such initiatives to other overseas operations.

RECOMMANDATION 33

That the Government of Canada establish a clear and explicit list of required documents for business visa applicants, taking into account security and safety considerations.

Citizenship and Immigration Canada (CIC) recognizes the need to improve the quality and accessibility of the information provided to its clients. In the most recent budget CIC has been allocated $100 million for client service improvements, including significant investments in the Going-to-Canada portal and Web site enhancements.

In the case of trade fairs and other special events, CIC has established a special unit to work closely with organizers and sponsors to ensure that foreign nationals coming to Canada to attend these events have the most current information on visa requirements, that overseas missions are aware of the timing and nature of these events, and that Ports of Entry are advised of potential participants to make entry to Canada as seamless as possible.

CIC will continue to develop its existing tools, such as on-line application kits and public Web sites, to ensure that foreign nationals who wish to immigrate to or visit Canada for business purposes have all the information necessary to complete business visa applications as easily and conveniently as possible.

CIC also maintains mission specific Web sites and checklists to better inform applicants of the required documents.

RECOMMANDATION 34

That the Government of Canada establish a “fast track” process for repeat business visa applicants. Under such a process, candidates would undergo a thorough preliminary screening, but once approval and a visa were granted for the first visit, subsequent visas would be guaranteed expedited clearance.

The Government of Canada is committed to facilitating the admission to Canada of those visitors whose business activities represent an economic benefit to the country.

“Fast track” processing for business visitors is a current reality in most visa offices, as these applications are routinely processed with 24 to 48 hours unless there are issues related to national security, criminality or the bona fides of the applicant. The issuance of long-term multiple entry visas to established business travellers is the norm.

As well, visa offices work closely with other government departments such as DFAIT (FAC and ITCan) to ensure that such applications are identified and processed in an expeditious manner.

RECOMMANDATION 35

That the Government of Canada consider establishing a “fast track” program similar to that outlined in Recommendation 34 for companies that frequently send business people to Canada. Under such a program, firms that undergo a preliminary screening and exhibit a good track record would receive expedited clearance to regularly send employees or representatives to Canada on temporary business visas. These individuals could vary from trip to trip, provided that they all met Canadian immigration requirements.

The Immigration and Refugee Protection Act (IRPA) sets out the requirements for the admission of foreign nationals to Canada, and requires certain foreign nationals to apply for and obtain a temporary resident visa (TRV) prior to their travel to Canada. The regulations require that the individual applicant, rather than the sponsoring organization, be assessed against the applicable criteria. However, it is standard practice for visa offices to take into consideration the track record of companies that regularly do business with Canada when assessing the visa applications of their employees.

Visa offices routinely encourage frequent business travellers to apply for long-term multiple entry visas to facilitate their travel to Canada.

RECOMMANDATION 36

That the Government of Canada review the list of countries from which it requires an entry visa, and remove visa requirements where unnecessary. By so doing, the Government can free up staff resources and redeploy them to countries where the need is greater.

Led by Citizenship and Immigration Canada (CIC) in consultation with other government departments, the Government of Canada does review the list of countries from which it requires a temporary resident visa. In reviewing visa requirements, CIC must ensure that a balance is struck between the desire to welcome visitors to Canada and the obligation to protect Canadian society. Canada's TRV Program must respond to the dual priorities of facilitation and control. Currently, Canada exempts 43 countries from the visa requirement. Recently CIC concluded a review of the visa requirement for the EU accession states.

RECOMMANDATION 37

That the Government of Canada establish an innovation centre within Canada—a venue in which Canadian companies can showcase their new products and technologies.

Several different tools are currently used to showcase Canadian technologies and services, including domestic and international trade shows, trade missions, and various electronic tools. The Government agrees that more could be done to promote Canadian expertise, both to domestic and foreign buyers. However, the establishment of an innovation centre may not be the optimum venue or method to accomplish this goal. Potential buyers of Canadian products and services cover a very wide range of interests. It may be difficult to cater to these various needs through a single vehicle, and targeted efforts that focus on the needs of a particular clientele and that are tailored to a particular industry sector may be more successful. The Government will consider how it can build and expand on existing tools to help Canadian companies market themselves to the world, without jeopardizing national interests.

RECOMMANDATION 38

That the Government of Canada lift the current borrowing limit in place on ports.

The borrowing limits imposed on Canada Port Authorities (CPAs) are one of several important controls necessary for ensuring the ongoing financial viability of CPAs, and for reducing potential liabilities to the Crown. Related controls included in the CMA (S.8(3)) state that a CPA or wholly owned subsidiary of a CPA may not borrow money as an agent or Her Majesty in right of Canada, and S. 25 and S. 26 preclude the federal government from making an appropriation to a CPA to discharge its liabilities (except in very specific instances) or issuing a Crown guarantee for the discharge of an obligation or liability. All CPAs have the option of approaching the Minister to request an increase in their borrowing limit by way of Supplementary Letters Patent, which require GIC approval.

Amendments to the CMA are proposed in Bill C-61, introduced in Parliament in June of 2005. The proposed amendments to the CMA follow the tabling of a report in June 2003, which was based on extensive consultations held across Canada by the CMA Review Panel, including over 140 written submissions from stakeholders in the marine industry, other levels of government, and other interested parties.

One proposed amendment is the streamlining of current borrowing limit approval processes, with particular emphasis on the borrowing limits for smaller ports of up to seven million dollars. With respect to the larger ports, the Government of Canada plans to continue work to streamline the existing procedures for borrowing limit requests.

RECOMMANDATION 39

That the Government of Canada consult with the various Canadian Port Authorities, transportation associations and other stakeholders to ensure that capacity in Canada's ports and all related transportation infrastructure is adequate to meet the demands arising from increased trade with emerging markets. In addition, the Government should re-examine its infrastructure support programs with a view to making ports eligible for funding.

In the interest of making strategic investments in ports in support of government priorities, including those related to national security and infrastructure, the Government is proposing to remove current restrictions under the CMA that preclude CPAs' access to contribution programs. For infrastructure, the federal funding would be limited to 20 percent of eligible costs for qualifying projects, thereby encouraging CPAs to form partnerships with private industry and other levels of government. The proposal recognizes the periodic need for limited public sector assistance, but in such a way that the commercial spirit and independence of port authorities are not compromised.

RECOMMANDATION 40

That the Government of Canada invest in border infrastructure to increase the capacity of its border crossings. It must also improve government policy coordination with regard to border issues. A single department or agency should be directly responsible for all border activity.

Owing to the complexity of border issues, and to the involvement of multiple jurisdictions, including municipal, provincial/state and both the Canadian and U.S. federal governments, a single department or agency cannot be directly responsible for all border activity. Indeed, different organizations such as Transport Canada and Infrastructure Canada are better positioned to address specialized requirements, and have developed expertise in diverse areas. On December 12, 2003, Prime Minister Martin announced a number of organizational changes to enable the Government to operate more effectively and strategically in regard to border management and security policies. Among other changes, Public Safety and Emergency Preparedness Canada was brought into existence, under the leadership of the Deputy Prime Minister, to ensure policy coordination and cohesion within a security-oriented portfolio that includes the Canadian Border Services Agency (CBSA), the RCMP, CSIS, the Canada Firearms Centre, the National Parole Board, and the Correctional Service of Canada. The CBSA was created as part of the reorganization to provide overall border management, through the amalgamation of immigration enforcement, customs and food inspection functions. As a result, Canada now has a fully integrated border agency advancing security and legitimate trade and travel, using an intelligence and risk-based approach that effectively balances both of these key priorities on a daily basis. In recognition of the agency's vital border management role, the Government dedicated over $400 million in the most recent federal budget to respond to CBSA priorities and increased demands at key border locations.

Transportation infrastructure, security and technology are all important components of border capacity. Budget 2000 announced $600 million for Transport Canada's Strategic Highway Infrastructure Program (SHIP), which includes a $65 million border component. Budget 2001 provided $600 million for Infrastructure Canada's Border Infrastructure Fund (BIF). Under both SHIP and BIF, since 2001, the federal government has allocated some $665 million towards border improvement projects. The projects are targeted at strategic border crossings in Saskatchewan, Quebec and New Brunswick, as well as in Ontario and British Columbia. Budget 2005 committed the Government of Canada to renewing federal infrastructure programs as they expire, and further details on the renewal of federal infrastructure programs will be available in future budgets.

On March 23, 2005, Prime Minister Paul Martin, United States President George Bush and Mexican President Vicente Fox launched the Security and Prosperity Partnership of North America (SPP) to enhance the security, prosperity and quality of life for our citizens. On June 27, 2005, the Deputy Prime Minister and Minister for Industry invited their United States and Mexican colleagues to Ottawa to launch the public release of the SPP Action Plan. This plan has ambitious goals and underlines the importance of working collaboratively with Mexico and the United States to ensure that North America is the most competitive, prosperous and secure location in the world. It demonstrates ongoing political involvement at the highest level to ensure continued momentum aimed at protecting North America from external threats, in order to better streamline operations along our shared borders.

This will allow all three countries to dedicate more border resources to high or unknown risk elements and reduce scrutiny on our most trusted corporate citizens and travellers. The SPP Action Plan includes commitments to complete negotiations of a formal Canada-U.S. land preclearance agreement with implementation at two land preclearance pilot sites, and to work with state and provincial partners to develop an implementation plan to prioritize future infrastructure investments.

To keep the Canadian border with the United States open to bilateral trade and to demonstrate the Government's commitment to ensuring that Canada is not a base for threats to our allies, on April 27, 2004, the Government released Securing an Open Society: Canada's National Security Policy. This policy underlines the importance of building a fully integrated security system that connects key partners, including provinces and territories and the private sector to bring government resources together in a more coordinated manner.

RECOMMANDATION 41

That, in the interests of increasing the international competitiveness of Canadian industries by promoting productivity-enhancing investment, the Government of Canada review its capital cost allowance rates.

On an on-going basis, the Government reviews capital cost allowance (CCA) rates that, as a general principle, should reflect the useful life of assets and thus provide adequate recognition of capital costs. Alignment of CCA rates with the useful life of assets can enhance productivity and standards of living through a more efficient allocation of investment across classes of assets. As part of this review, the Government has increased CCA rates for several assets in recent years, including, for example: in the 2004 budget, computer equipment (from 30 percent to 45 percent) and broadband, Internet, and other data network equipment (from 20 percent to 30 percent); and, in the 2005 budget, oil and gas transmission pipelines and electricity transmission and distribution assets (from 4 percent to 8 percent).

The Government has also taken other actions to improve the international competitiveness of its corporate tax system, create a Canadian advantage for investment, and support productivity. The Government's approach has been to reduce tax rates while improving the tax structure. A key initiative has been to reduce the general corporate income tax rate from 28 percent to 21 percent. The 2005 budget proposed that this rate be further reduced to 19 percent by 2010 and that the corporate surtax be eliminated in 2008. Going forward, the Government is committed to further reducing the tax burden for Canadians and to making the tax system more efficient and internationally competitive, as fiscal resources permit.

RECOMMANDATION 42

That the Government of Canada reform its foreign tax credit system to allow project-based companies to retain the use of their unused tax credits accumulated in one country for application against taxation in another country in the following year.

Canada's income tax system allows residents of Canada to deduct, from the Canadian tax they would otherwise pay on their foreign-source income, any foreign income or profits tax they have paid on that income. This foreign tax credit mechanism operates on a country-by-country basis, in that the credits are computed separately in respect of each foreign country from which the Canadian resident has income. As a result, foreign tax paid in one foreign country cannot ordinarily be used to reduce Canadian tax on income earned in a different foreign country.

This country-by-country approach is not the only one possible. Some other countries do structure their foreign tax credit systems differently—for example, by combining incomes from different foreign countries according to the rate of foreign tax applied to that income, and allowing foreign tax from any high-tax country to be credited against domestic tax on income from any other high-tax country.

While Canada could in principle adopt this or some other alternative, Canada's country-by-country approach has operated satisfactorily for many years, and is deeply entrenched in the general income tax system. The sort of major change contemplated in recommendation 42 would thus be complex, and would pose significant transitional challenges. Furthermore, it is not clear how much of a contribution the change would make to the overall objectives that underlie the report.

RECOMMANDATION 43

That, in order to meet the opportunities and challenges associated with emerging markets—both in terms of export competitiveness and the adjustment within Canada to outside competitive pressures—the Government of Canada ensure that Research and Development (R&D) support is sufficient and easily accessible. Funds for any given R&D initiative should be delivered out of a single access point within Government.

The Government of Canada remains committed to supporting R&D and since 1997, has made a cumulative incremental investment through new initiatives of more than $13 billion in innovation and R&D. This funding has supported R&D and innovation across the Government, and in the higher education and business sectors. Significant federal support for R&D flows through programs and mechanisms such as Technology Partnerships Canada (TPC), the National Research Council's Industrial Research Assistance Program (IRAP), the Canada Foundation for Innovation and support for Genome Canada. In addition, the scientific research and experimental development (SR&ED) tax credit is one of the most important components of the federal strategy of providing assistance for industrial research and development (R&D) in Canada. On an annual basis, about 11,000 corporations receive about $1.8 billion of assistance from SR&ED investment tax credits. This significant federal support has contributed to economic competitiveness by, among other things, enhancing Canada's R&D capacity and contributing to the development and retention of highly skilled workers. Recent reviews and recommendations such as those from the Workshop on Coordination and Collaboration in Genomics have stressed the need to maintain the base of support for R&D in Canada in order to maintain and build on recent progress.

The Government of Canada is also committed to examining how to maximize the benefits of federal investments in R&D for Canadians. In May 2005, the Minister of Industry announced the appointment of an Expert Panel on Commercialization, which will advise the Government on an action plan for meeting its commercialization objectives. It will also make suggestions as to what Government, business and academia can do to improve commercialization in every sector of the economy. The Panel is slated to report by the fall of 2005.

In terms of providing targeted and coordinated support for R&D partnerships and collaboration with emerging markets, as noted earlier, the Government of Canada has set aside $20 million over five years in Budget 2005 to support expanded S&T relationships with selected countries such as China, India, Israel and Brazil. The Budget 2005 funding will be allocated through an International Science and Technology Partnerships Program (ISTPP). ISTPP funding and activity are expected to commence in the fall of 2005. The program is designed to support international collaboration across the research spectrum, with an emphasis on promoting collaboration among and between universities and businesses. The Government of Canada intends to put a governance structure into place to oversee its investment, which could leverage funding from other programs and which will serve as a coordinating mechanism for initiatives aimed at enhancing S&T collaboration with emerging markets, while protecting our interests. The ISTPP will complement the joint cooperative R&D partnership activities that a number of federal agencies are engaged in with partners from emerging markets.

RECOMMANDATION 44

That the repayment obligations of the Technology Partnerships Canada program be extended to allow companies to spend more money on commercialization.

The Government's policy is to require repayment of contributions made to a business that are intended to allow it to generate profits or increase the value of the business. This ensures that the Government can recoup its investment and share in company growth stimulated by its contribution.

The Government agrees that a company's Technology Partnerships Canada (TPC) repayment obligations should not interfere with that company's commercialization process, and has taken steps to ensure that the terms of repayment reflect a company's particular situation. In this respect, TPC repayment obligations are negotiated on a case-by-case basis in full consideration of the company's needs at the various stages of the product development and marketing cycles. Agreements typically provide that the company is required to begin repaying its contribution from TPC for the research and development of a particular technology only when the company has begun to sell the goods or services arising out of that technology. Repayments usually take the form of royalties based on gross company revenue or fixed repayments, and are anticipated to be lower than the profit margin on the sales of the company's goods and services.