INTRODUCTION
The Government of Canada is pleased to respond to the Second Report of the House of Commons Standing Committee on International Trade, entitled Canada-European Union Comprehensive Economic and Trade Agreement. The Government shares the Committee’s commitment to ensuring that this landmark agreement contributes to Canada’s economic prosperity.
The Government of Canada’s Economic Action Plan 2014, in conjunction with its Global Markets Action Plan (GMAP), outline a strong and comprehensive trade policy and trade promotion agenda to support Canada’s long-term growth and prosperity. The Canada-European Union Comprehensive Economic and Trade Agreement (CETA) is at the cornerstone of this agenda, constituting Canada’s most ambitious trade partnership to date. CETA covers almost all aspects of trade between Canada and the European Union (EU), encompassing broad tariff elimination, greater market access to goods and services, government procurement, the protection and promotion of investment, and cooperative mechanisms to ensure the effective implementation of the agreement. CETA will position Canada at the forefront of global efforts to advance international prosperity through free and open markets.
The Government of Canada greatly appreciates the work of the Committee and its analysis of expected benefits of CETA for the Canadian economy. The Government has carefully reviewed the Committee’s report and recommendations, and welcomes the opportunity to respond to each recommendation individually.
RECOMMENDATIONS
Recommendation 1
That the Government of Canada publish the text of the comprehensive economic and trade agreement between Canada and the European Union as soon as it is initialed.
The Government of Canada supports this recommendation, noting the publication of the CETA text on the website of the Government of Canada in conjunction with the September 2014 Canada-EU Summit. The Government is committed to providing Canadians with comprehensive information on CETA, and to ensuring that the Canadian business community is well-positioned to explore the innumerable new opportunities that CETA will offer.
The CETA negotiations were the most open, transparent and collaborative negotiations in Canadian history. The Government will continue to keep Canadians informed about this landmark agreement as Canada and the EU proceed toward CETA’s ratification.
Recommendation 2
That the Government of Canada develop a communication plan to publicize the provisions of the comprehensive economic and trade agreement between Canada and the European Union. The communication plan should ensure that information is received by all Canadian stakeholders that will be affected by this agreement.
The Government of Canada supports this recommendation. CETA is by far Canada’s most ambitious trade initiative, broader in scope and deeper in ambition than the North American Free Trade Agreement. This breadth of scope – covering sectors that range from high value-added manufacturing to primary products, services and investment – means that all regions of Canada will stand to benefit when CETA enters into force. Accordingly, the communications that have and will be undertaken to publicize and promote the agreement will focus on the diverse strengths and potential of Canada’s regions, provinces, territories and cities.
The Government has already undertaken a series of communications activities to date, including two trade missions to Germany and the UK in 2014, numerous domestic promotional events, and comprehensive engagement with stakeholders located in every sector and region of Canada.
The Government notes that a CETA awareness tour will be developed to position Canadian businesses to take full advantage of trade and investment opportunities in the EU once CETA enters into force. This initiative will be led by the Department of Foreign Affairs, Trade and Development (DFATD) and will involve close collaboration with federal departments such as Agriculture and Agri-Food Canada, Fisheries and Oceans Canada, Industry Canada and Natural Resources Canada, with responsibility for key economic sectors that will benefit from CETA. DFATD will also work closely with federal agencies such as Export Development Canada (EDC), the Canadian Commercial Corporation (CCC) and the Business Development Bank of Canada (BDC), in addition to regional development agencies, all of which provide a range of export support for Canadian businesses. Provincial and territorial governments will also have an important role to play, based on their in-depth knowledge of sector-specific export strengths by regions. Finally, major business associations such as Canadian Manufacturers and Exporters, the Canadian Chamber of Commerce, the Canadian Federation of Independent Business, the Canadian Council of Chief Executives, I.E. Canada and other partners will be engaged.
The Trade Commissioner Service of Canada (TCS) – with its extensive network of Trade Commissioners located both in Canada and abroad – will play a central role in disseminating information and rolling out activities associated with this promotional plan, working with its functional equivalents in other departments and levels of government.
This initiative will endeavour to ensure that: (1) Canadian businesses have access to timely information on CETA benefits to explore EU trade and investment opportunities and/or support their expansion into the EU market; (2) CETA-specific advice is delivered to Canadian clients and EU investors in their areas of interest; and (3) partnerships, including with provinces and territories, be used to establish international business development priorities and business organization initiatives in support of Canadian export and investment efforts.
Recommendation 3
That the Government of Canada take all possible actions to ensure that the provisions in the comprehensive economic and trade agreement between Canada and the European Union enter into force as quickly as possible.
The Government of Canada supports this recommendation. Recognizing the many benefits and opportunities that CETA will bring to the Canadian economy, the Government is committed to the expeditious entry-into-force of CETA. On August 5, 2014, the Government of Canada and the EU announced that officials had reached a complete text of CETA.
Canada and the EU are now proceeding with the legal review of the text to ensure accuracy and consistency, which will be followed by translation of the text into the other 22 EU treaty languages (there are 23 EU treaty languages in total). Following these steps, the process required to approve the agreement in Canada and the EU, along with the steps necessary to bring policies, regulations and legislation into conformity with the obligations under CETA, will begin. CETA will enter into force once Canada and the EU have completed their implementation procedures and ratified the agreement.
The Government of Canada is committed to advancing this work on a priority basis.
Recommendation 4
That the Government of Canada support Canadian businesses, including small and medium-sized enterprises, wanting to penetrate the European Union’s market following the entry into force of the comprehensive economic and trade agreement between Canada and the European Union.
The Government of Canada supports this recommendation. The EU is already Canada’s second largest trade and investment partner, and Canadian businesses, including small- and medium-sized enterprises (SMEs), will have the opportunity to be major beneficiaries under CETA. The Government will support SMEs to take advantage of CETA by helping them to better understand the benefits of CETA and its potential market opportunities, by preparing for entry into the EU market, and by expanding existing commercial ties. The Government will provide this support in two major ways.
First, the Trade Commissioner Service (TCS) of Canada will assist SMEs by offering key services through its five Regional Office hubs and Client Service Satellites co-located with partners in every province of Canada. Second, through Canada’s network of 27 missions across the EU, the Government will continue to increase awareness and advocate the benefits of CETA to the EU, including to key stakeholders in the business community, to ensure that EU companies are sensitized to the advantages of working with Canadian companies. Trade Commissioners have been embedded in business associations across Canada to gain further insight into export sector needs and better serve companies looking to do business abroad and take advantage of the new opportunities created by CETA.
Trade Commissioners in Canada’s EU missions will also continue to provide individualized client support to SMEs through key services, and have updated a number of their tools and products to assist in this regard. For example, 38 new or updated market studies are available on the TCS website. Canada’s EU missions will continue to support participation of Canadian companies, including SMEs, in major trade shows that occur in the EU, some of which are global in scope. These include the Seafood Expo Global in Brussels, the World Mobile Congress in Barcelona and Medica in Dusseldorf. Finally, all of these efforts will be undertaken in close collaboration with provinces and territories as well as key business stakeholders in Canada.
Planning work is underway to develop a series of market access plans for each priority market identified by the GMAP, which includes the EU. These plans will be developed in close consultation with Canadian stakeholders.
The Government of Canada regularly solicits input on issues facing SMEs through ongoing consultations and through the Minister of International Trade’s SME Advisory Board, which was established to provide advice and recommendations on current trade priorities and challenges SMEs face doing business abroad. The GMAP has also prioritized assisting SMEs in successfully “making the leap” abroad, and a series of domestic trade promotion events will be held across Canada to further this objective. Trade missions to the EU, such as Germany and the UK in 2014, will remain a key feature of trade promotion efforts in support of SMEs. Further initiatives, such as the partnership between Canadian Manufacturers and Exporters (CME) and the European Enterprise Network (EEN), are focusing on connecting SMEs to business opportunities to the EU. SMEs and their global customers will also continue to receive support through EDC, CCC, and BDC federal agencies, in close collaboration with the TCS, which offer extensive knowledge and partnerships to Canadian companies.
Recommendation 5
That, to help Canadian exporters and importers, the Government of Canada immediately:
(Part 1) begin negotiations with provinces/territories with a view to eliminating interprovincial/ interterritorial trade barriers;
The Government of Canada supports this recommendation. The Agreement on Internal Trade (AIT), a political accord signed in 1994 between the federal, provincial and territorial governments, creates a framework for the reduction of barriers to trade within specific economic sectors. The AIT has achieved certain successes, including: increased labour mobility for certified workers in regulated occupations; greater transparency and openness in government procurement; and strengthened dispute resolution via monetary penalties.
However, to strengthen Canada’s internal trade framework, the Government of Canada recently outlined priorities for internal trade reform in a proposal entitled One Canada, One National Economy: Modernizing Internal Trade in Canada. The proposal reinforces the importance of working with provinces and territories to reduce barriers to internal trade. The guiding principles set out in this initiative will help ensure that Canadian businesses, workers and consumers will benefit from a stronger internal market.
This initiative complements the Government’s Economic Action Plan 2014 initiative to develop an Internal Trade Barriers Index, which will identify measures currently restricting trade, and will help all jurisdictions focus reforms and negotiation efforts on priority areas.
(Part 2) study ways in which infrastructure could be improved to allow the movement of goods across Canada in a more efficient and less costly manner; and
The Government of Canada supports this recommendation. The Government understands the importance of transportation infrastructure in facilitating trade, improving the efficiency and integration of our transportation networks, increasing our productivity and contributing to more prosperous communities.
To this end, the Building Canada Plan 2007, through the Gateways and Border Crossings Fund and Asia-Pacific Gateway and Corridor Initiative Transportation Infrastructure Fund, has already provided federal investments of $3 billion (leveraging total investments of over $14.5 billion) towards strategic trade and transportation projects to address bottlenecks and improve the efficiency and reliability of roads, port, rail and airport infrastructure across the country. These projects have improved multimodal connectivity and facilitated freight movements in support of Canada’s international trade.
Reflecting the Government’s continued commitment to infrastructure improvements, over the next ten years the New Building Canada Plan will provide over $53 billion towards infrastructure projects. It is expected that the New Building Canada Plan, like the Building Canada Plan 2007, will focus in large part on transportation infrastructure. The Plan’s eligible transportation investment categories include those that will facilitate the movement of goods across Canada and to export markets, such as highways and major roads, ports, rail, local and regional airports, and Intelligent Transportation Systems.
By way of continued transportation system analysis, the Government of Canada, through Transport Canada, is studying ways in which infrastructure could be improved to support more efficient movement of both goods and people. This system analysis includes the study of the multi-modal transportation infrastructure capacity, condition, and trade and traffic flows (including forecasts) to better understand the related performance, constraints and operational inefficiencies. In terms of measuring the efficiency of the system, Transport Canada has developed a performance measure based on the fluidity of the various supply chains. This measure is applied on major trade corridors.
(Part 3) improve the customs process for goods traded between Canada and the European Union, perhaps through a priority process for these goods.
The Government of Canada acknowledges this recommendation. CETA’s chapter on customs and trade facilitation includes commitments to facilitate trade that will result in the improvement of customs processes for all goods, including those traded between Canada and the EU. To expedite and facilitate customs procedures for goods traded between Canada and the EU, the Government of Canada has committed to provisions that complement those recognized by international bodies such as the World Customs Organization, World Trade Organization, and United Nations Conference on Trade and Development. CETA supports the collaborative efforts established under the 1998 Canada-EU Agreement on Customs Cooperation and Mutual Assistance in Customs Matters and the 2013 Canada-EU Agreement on Customs Cooperation with Respect to Matters Related to Supply-Chain Security.
In CETA, Canada and the EU have acknowledged the importance of administering effective and efficient border measures that facilitate the movement of legitimate commercial goods while mitigating those risks that pose a threat to national safety and security. Both Canada and the EU have agreed to simpler, more efficient border procedures that will ultimately reduce the transaction costs incurred by traders. These include measures to expedite and automate the release of goods through the application of simplified documentation requirements, automated processes and risk assessment principles. The CETA provisions on advance rulings on origin and tariff classification will further facilitate trade by providing traders with certainty and predictability with respect to how a given good would be treated by the customs administration once the importation has taken place. The CETA also provides for an impartial and transparent redress mechanism.
As part of CETA, Canada and the EU have also committed to enhanced cooperation and information sharing with a view to facilitating trade and promoting compliance with national requirements while ensuring that information collected in the context of trade facilitation is treated in accordance with respective privacy and confidentiality laws.
Recommendation 6
That, before the comprehensive economic and trade agreement between Canada and the European Union is ratified, the Government of Canada:
(Part 1) establish geographical indicators with a view to protecting Canada’s products and brands; and
The Government of Canada acknowledges this recommendation. Geographical indications (GIs) identify a good as originating in a certain territory or locality, where a given quality, reputation, or other characteristic of that good is essentially attributable to its geographical origin. The Government recognizes that GIs are becoming increasingly important in international trade environments. Businesses benefit when they are able to distinguish their goods as coming from a certain geographical area, and to protect the quality and reputation of their goods. Consumers also benefit from an increased level of certainty in the quality of GI-protected products, as well as greater choice in the marketplace. Consistent with Canada’s international obligations, businesses can currently seek GI protection for wines and spirits. There are 25 Canadian GIs that have protection under this regime (e.g., “Canadian Whisky”, “Niagara Escarpment”, and “Vancouver Island”). A number of these GIs are already protected in the EU and will continue to be protected under CETA. GIs for other products may be protected as a certification mark (e.g., Gaspé for salted fish, and “BC Made” for various food products). Certification marks enjoy the same robust protection offered to other trademarks. CETA will also provide for the addition of further Canadian GIs in the future.
(Part 2) ensure that certain recognized industry clusters, such as scientific, are maintained.
The Government of Canada acknowledges this recommendation. The Government recognizes the contribution of industrial clusters. Recent studies that have explored the concept of clusters and their impact on productivity and competitiveness indicate that firms in clusters tend to benefit from having access to a common pool of specialized workers, and that they benefit from knowledge-sharing (often called “spillovers”) with competitors and suppliers. In turn, competitive clusters tend to lead to technological growth and export success.
The Government of Canada is committed to supporting advanced research and innovation to foster a vibrant entrepreneurial culture where new ideas are translated into products and services in the marketplace. Since 2006, the Government has provided more than $11 billion in new resources to support basic and applied research, talent development, research infrastructure, and innovative activities in the private sector, including more effectively aligning federal support for research with business needs. Examples include the Government’s Strategic Aerospace and Defence Initiative, the Automotive Innovation Fund, the Advanced Manufacturing Fund, the Business-Led Networks of Excellence Program, and Centres of Excellence for Commercialization and Research.
Further, CETA contains new provisions, not included in Canada’s previous free trade agreements, that will strengthen the current framework for cooperation between Canada and the EU on science, technology, research and innovation. These new provisions encourage and enhance cooperation at all levels of government, the promotion of private sector investments, commercialization of innovation, and the fostering of partnerships between Canadian industry, research centres, universities and civil society.
Recommendation 7
That the Government of Canada use the comprehensive economic and trade agreement between Canada and the European Union to move toward compatible approval processes for new technologies, products and services and remove non-tariff barriers to trade and investment.
The Government of Canada acknowledges this recommendation. As tariffs are reduced and eliminated, governmental policies and non-tariff measures – which encompass regulations, standards-related measures, government procurement, and the process of approving new technologies, products and services – take on greater importance in determining whether a market is open to trade. For industry, it is important that these policies and measures not be more trade restrictive than necessary.
CETA contains important provisions that help to build a more compatible approval process for new technologies and products, and contribute to reducing unjustified non-tariff barriers to trade and investment. Through CETA, Canada will work together with the EU, when in Canada’s best interests, to minimize divergence between regulatory approaches and improve cooperation on the development of regulations, standards and mutual recognition of conformity assessment procedures, which could include working together to build compatibility in the process of approving new technologies and products. One of the ways that CETA will facilitate a more compatible approval process is by creating a mechanism to allow Canadian conformity assessment bodies to be recognized in the EU as competent to test and certify products to EU requirements here in Canada.
Recommendation 8
That the Government of Canada continue to pursue additional comprehensive trade agreements to open new markets and provide opportunities for growth for Canadian businesses.
The Government of Canada supports this recommendation. As recognized in the Government’s Global Markets Action Plan (GMAP), the success of the Canadian economy is closely linked to Canada’s trade with other countries.
The Government of Canada is committed to the pursuit of comprehensive trade agreements with established and emerging markets that will provide new opportunities for growth for Canadian businesses. Since 2006, the Government has concluded free trade negotiations with 38 countries in a broad range of sectors and regions. The Government has also undertaken numerous exploratory discussions and is in the midst of negotiating trade agreements with 30 countries, including key emerging economies. These initiatives will position Canada as a strong competitor in the international marketplace.
On March 11, 2014, the Government announced the conclusion of negotiations for the Canada-Korea Free Trade Agreement (CKFTA), Canada’s first free trade agreement in Asia. South Korea is a gateway to the wider Asia-Pacific region, with a sophisticated economy that offers strategic access to regional and global value chains. The CKFTA will provide a platform for Canadian companies to become increasingly competitive in the region and bring substantial benefits to Canadian consumers, exporters, producers and investors across all regions of the country. In addition, the Government is negotiating with several other important trading partners, including Japan, India and the Trans-Pacific Partnership members. Multilateral and plurilateral negotiations are also taking place at the World Trade Organization.
Recommendation 9
That the Government of Canada continue to negotiate strong investor-state dispute settlement and investment protection measures into trade agreements to provide predictability and stability for Canadian investors.
The Government of Canada supports this recommendation. As a country oriented toward international trade and investment, Canada has a vested interest in a rules-based system that keeps the flow of trade and investment strong.
In all of its investment-related negotiations, the Government of Canada pursues a high standard of protection for its investors and seeks to include a robust investor-state dispute settlement (ISDS) mechanism. Doing so establishes a stable and predictable rules-based investment climate and provides access to an independent, impartial and timely process for the resolution of disputes.
Furthermore, the Government of Canada negotiates investment chapter obligations that achieve a careful balance between investor and investment protections and the right of governments to regulate in the public interest. The Government also negotiates exceptions and reservations to its investment agreements and free trade agreement investment chapters that preserve existing and future policy flexibility in sensitive areas, particularly in the areas of health, the environment, culture and social services.
Providing a predictable framework for investment, including an effective and enforceable ISDS mechanism, not only benefits Canadian businesses abroad but also sends a clear and objective signal that the Government intends to promote Canada as an attractive destination for investment.