RESTRICTEDWORLD TRADE
ORGANIZATIONWT/TPR/G/78
15 November 2000
(00-4712)
Trade Policy Review Body Original: English/
               French
TRADE POLICY REVIEW
CANADA
Report by the Government
Pursuant to the Agreement Establishing the Trade Policy Review Mechanism
(Annex 3 of the Marrakesh Agreement Establishing the World Trade
Organization), the policy statement by the Government of Canada is attached.
Note: This report is subject to restricted circulation and press embargo until the end of the meetingof the Trade Policy Review Body on Canada.Canada WT/TPR/G/78
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CONTENTS
Page
I. TRADE AND ECONOMIC POLICY ENVIRONMENT 5
II. TRADE POLICY DEVELOPMENTS 1999-2000 6III. FUTURE POLICY DIRECTIONS 8Canada WT/TPR/G/78
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I. TRADE AND ECONOMIC POLICY ENVIRONMENT
Strong economic fundamentals
1. Canada marked its eighth consecutive year of economic growth in 1999 with strong growth
continuing through this year.  Domestic demand, investment, and trade continued to support Canada's
solid performance, with real growth in Gross Domestic Product (GDP) accelerating from 3.3%
in 1998 to 4.5% in 1999.  Consumer price inflation remained low at 1.7% and the unemployment ratedropped to 6.8% in September 2000, close to the 24-year low of 6.6% recorded in May and June of
this year.  Job growth reached 3% with 427,000 net new jobs created in 1999.
2. The federal government recorded a surplus of Can$12.3 billion for fiscal year 1999-2000,
boosted by stronger economic growth and spending restraint.  This was the third straight surplus, a
situation not seen since the early 1950s.  The Government has now reduced the public debt byCan$19 billion, freeing more than Can$1 billion a year to support program spending and lower taxes.
The net federal debt has fallen to Can$565 billion for 1999-2000.  The debt-to-GDP ratio also
declined 12 percentage points from the peak in 1995-96, to 58.9% in 1999-2000.
3. Improvement at the provincial-territorial level accompanied fiscal progress at the federal
level.  The provincial-territorial sector had an estimated surplus of Can$2.4 billion in 1999-2000, thefirst aggregate surplus in at least 30 years.
International trade sustains economic growth
4. International trade has played a significant role in sustaining Canada's economic growth.  As
of the second quarter of 2000, Canada's exports of goods and services represent about 45% of GDP, a
substantially higher proportion than that of our major trading partners. This share is up from 43%
in 1999 and just 28% a decade ago.  Trade accounts for one in three new jobs in Canada.
5. Resources now represent about 35% of our exports compared to 60% 20 years ago.  Most of
our exports are now high value-added goods and se rvices - telecommunications, aerospace, software,
environmental technologies, and other areas of the "new economy".  The automotive sector is
Canada's leading export sector, followed by m achinery and equipment, including new technology
products.  With regard to trade in services, th e strongest growth occurred in knowledge-based
commercial services.  Exports of goods and services increased by 11.3% in 1999 and importsincreased by 7.4%.  Import growth was driven by investment demand for machinery and equipment
and oil price increases.  As a net energy exporter, however, Canada gained from the sharp rebound of
international oil prices.
6. The continued higher rate of growth of exports over imports reflects the new opportunities
created by technological advances, the health of the U.S. economy, NAFTA, and the reduction oftrade barriers following the conclusion of  the Uruguay Round of trade negotiations.
Outward investment exceeds inward investment
7. Foreign direct investment (FDI) rose by almost 10% in 1999 to reach a total of
Can$240 billion or 25% of GDP.  Canadian di rect investment abroad (CDIA) reached
Can$257 billion, confirming Canada's status as a major global investor.  Finance and insuranceaccounted for the largest share of CDIA and FDI stocks.WT/TPR/G/78 Trade Policy Review
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II. TRADE POLICY DEVELOPMENTS 1999-2000
8. Preparations for the Third WTO Ministerial meeting in Seattle and for FTAA negotiations
figured prominently in Canada's trade agenda in 1999.  In preparing for these, the Government
initiated an extensive outreach and consultation program with provinces, the business sector, other
interest groups, and the public.  We created websites providing information on trade policy issues and
inviting public comments on negotiating priorities and objectives.  The Parliamentary StandingCommittee on Foreign Affairs and International Trade conducted country-wide consultations on the
WTO and FTAA negotiations.  Its reports were posted on the website of the Department of Foreign
Affairs and International Trade.
9. In preparing for the expected launch of negotiations at Seattle, Canada submitted proposals
for further work or negotiation on agriculture, services, electronic commerce, TRIPs, tradefacilitation, subsidies, technical assistance, trade and development, trade and environment,
transparency, biotechnology, and international policy coherence.  Although WTO Members failed to
reach agreement on a negotiating agenda at Seattle, Canada has continued its efforts to promote
confidence in the multilateral trading system and to build consensus on substantive issues and
momentum towards expanded trade negotiations.  Underlying these efforts is the belief that we needto better manage the impacts of globalization, improve understanding of the WTO and its role, and
work to create an open and rules-based trading syst em that provides all countries with the opportunity
to benefit fully from a healthy open global economy. Some of the more significant developments
during the past two years are summarized below.
Multilateral and unilateral liberalization efforts
● At the WTO, Canada participated actively in agricultural and services negotiations.  At the
June agricultural negotiation session, Canada tabled a proposal on market access and theCairns Group, of which Canada is a member, tabled a proposal on export competition.  In
September the Cairns Group submitted a proposal on domestic support.  In the lead up to the
November session, Canada worked within the Cairns Group on a shared proposal on market
access.  With respect to services, Canada actively engaged in negotiations that focused on
negotiating modalities and procedures, and in exploratory work on the potential futuredevelopment of rules on safeguards, subsidies, domestic regulation, and clarification of
guidelines for scheduling commitments.
● Canada participated actively in all WTO accession Working Party meetings and completed
bilateral market access agreements with China, Chinese Taipei, Jordan, Vanuatu, Moldova,
and Armenia as part of these countries' accession to the WTO.
● Canada contributed to DG Moore's four-point "confidence-building" plan by liberalizing
origin requirements for LDC tariff treatment and extending the LDC tariff treatment to
another 570 tariff items so that LDC exports now qualify for duty-free entry into Canada in
about 90% of Canadian tariff items.  We also supported an increase in the WTO budget for
technical assistance.  We continue to work with other Members to enhance internaltransparency and the effective participation of all Members and to address developing
countries' legitimate concerns about the implementation of existing WTO agreements without
weakening current disciplines.
● The Government amended the Bank Act to permit foreign banks to establish full-service
branches or lending branches.Canada WT/TPR/G/78
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Active participation in regional fora
● NAFTA – We joined with our partners to advance implementation of NAFTA and to guide its
future direction.  In addition to jointly promo ting the benefits of the NAFTA during the fifth
anniversary of the Agreement in 1999, we under took a review of the management, mandate,
achievements, and future priorities of the work program.  The seventh scheduled decrease in
tariffs between Canada and Mexico was implemented in January 2000, with most remainingtariffs to be eliminated by January 1, 2003.  (Tariff eliminations between Canada and the U.S.
were eliminated on schedule in 1998.)
● FTAA – Canada served as the initial chair of the FTAA negotiations and wrapped up its
18 month tenure with the FTAA Ministerial Meeting in Toronto in November 1999.  At this
meeting, Ministers agreed on, among other things, a substantive package of businessfacilitation measures (with a focus on customs and transparency).  As chair, Canada was
instrumental in establishing the Committee of Government Representatives on the
Participation of Civil Society, which serves as a forum for civil society input into the
negotiations.  As well, Canada helped establish the institutional and administrative framework
for the negotiations.  Negotiating groups are working on assembling draft text for review atthe next Ministerial meeting in Buenos Aires in April 2001.  The FTAA is expected to be a
key element of the agenda for the Summit of th e Americas in Quebec City in April 2001 and
will be a principal focus of the Summit theme, "Creating Prosperity".
● APEC – Building on Brunei's theme, "Delivering to the Community", Canada developed
three APEC priorities for 2000: trade facilitation; human resource development; and dialogue
with the business community and NGOs.  In September 2000 Canada, in cooperation with the
Asia-Pacific Foundation of Canada and the World Bank, held a workshop on trade facilitationin Singapore and is now considering how to build on the outcome of the workshop.
Complementary bilateral initiatives
● Canada continued negotiations on a free trade agreement with the EFTA countries and
agreement has been reached on most issues.  The Agreement would focus mainly on the
elimination of industrial tariffs, improving access for agriculture and agri-food products, tradefacilitation, and cooperation on competition policy.
● Canada is currently negotiating with Costa Rica on a free trade agreement.  Negotiations were
launched in June 2000 and are expected to conclude in the spring of 2001.
● Canada began exploratory talks with Singapore in early October on a possible free trade
agreement.
● At the Canada-Central America Summit in September, leaders from Canada and four Central
American countries, El Salvador, Guatemala, Honduras, and Nicaragua,  discussed Central
America's joint request for free trade negotiations.  Leaders agreed that officials would begin
immediately to consult domestically to define the scope of such an initiative.
● Business groups in Japan and Canada have called for stronger trade and investment relations
between the two countries.  The private sectors in the two countries, and the Canadian and
Japanese Governments, are examining ways to enhance the trade and economic relationship.WT/TPR/G/78 Trade Policy Review
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● Canada continued its negotiations of bilateral Foreign Investment Protection Agreements
(FIPAs) with Russia, China, Jordan, and Guatemala to improve trade and investment links
and to provide greater security for Canadian investors.  The FIPA with Costa Rica recently
entered into force.
Resolution of disputes
10. Canada was involved in several disputes under both NAFTA and the WTO.  As either a
complainant or third party, Canada utilized dispute settlement procedures to ensure exporters do not
face barriers inconsistent with the agreements.  As the subject of complaints from other Members,
Canada has consistently complied fully with the recommendations and rulings of the Dispute
Settlement Body.
11. As an active user of the WTO dispute settlement mechanism, we have been actively involved
in enhancing transparency and accessibility, clarifying procedures, and effectively implementing
recommendations and rulings of the Dispute Settlement Body.  We will continue these efforts.
III. FUTURE POLICY DIRECTIONS
12. As a trade-oriented and globally integrated economy, Canada benefits from a healthy, open,
transparent, rules-based international trading syst em.  We believe that the best way forward is to
ensure that the international framework of trade and investment rules continues to keep pace with
changes in business practices, technological developments, economic trends, and social systems.  We
see the trade agenda and trade agreements not as e nds in themselves but rather tools for promoting
public interest through the advancement of Canada's trade and economic interests.
13. Canadian trade policy will continue to be open, transparent, and inclusive, and will be guided
by the same multilateral rules and principles it helped to establish.  Canada will continue to be active
in the work of the WTO, including current efforts to improve its structure and operation.  Canada'srecent proposal on improving external transparency of the WTO reflects our view that a greater
window onto the WTO will help the public better understand and appreciate how clear and equitable
rules governing liberalized trade provide opportunities and benefits to all and, at the same time,
facilitate the provision by the public of its views.
14. Bringing trade with China under WTO disciplines remains a priority for Canada.  We will
work with other Members of the China Working Pa rty to complete China's accession to the WTO as
soon as possible.  We will also work to facilitate the accession of Russia and other countries to make
the WTO membership more universal.
15. While the WTO remains the cornerstone of its trade policy, Canada will continue to pursue
reductions in barriers to trade and investment at all levels.  Our regional and bilateral trade initiativesare a means to secure markets for Canadian business, to gain better access to lower cost goods and
services, and to strengthen rule-making.  By ensu ring such arrangements are consistent with WTO
rules, these initiatives also help strengthen the multilateral system.  Canada believes that regional
initiatives that support multilateral goals and are consistent with WTO rules, in particular the
provisions of GATT Article XXIV, can mutually reinforce multilateral liberalization efforts nowunderway.
16. As a dominant factor in Canada's trade and investment performance, Canada's economic
relationship with the U.S. will continue to receive priority attention.  This emphasis reflects the
benefits that we derive from improved access to the world's largest market.  The share of Canada'sCanada WT/TPR/G/78
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exports to the U.S. has increased on account of strong U.S. domestic demand, combined with lower
demand in other regions due to the 1998 financial crisis.  In 1999, 86% of Canada's exports went to
the U.S.; however, this includes goods that were exported through the U.S. using U.S.-based
transportation facilities.  Meanwhile, Canada's markets in other regions, including those affected by
the financial crisis, have recovered;  our exports to them have been growing more quickly.  Canada
will continue to seek market opportunities for Canadian companies, wherever they can be found.
Expanding WTO negotiations
17. Canada will continue to seek progress in agricultural and services negotiations.  On the
agricultural front, we are seeking the elimination of all export subsidies as quickly as possible;
substantial reductions or elimination of trade-distorting domestic support; substantial improvements in
market access; and new disciplines on export taxes and restrictions.  With respect to services, whichgenerates about 65% of Canadian GDP and 73% of  employment but only 13% of exports, Canada
seeks stronger rules governing trade in services  and improved market access.  We will continue to
safeguard our right to regulate in the pursuit of national policy objectives; Canada's culture, public
health, and public education systems will not be jeopardized in these negotiations.
18. The prospects for success of these negotiations would be enhanced by expanding the
negotiating agenda.  At the same time, a broader negotiating framework will allow the interest of all
Members to be met, including developing country concerns about market access and implementation,
and will ensure that the rules keep pace with technological development and changes in business
practices.
Addressing developing country concerns
19. Canada will continue to work with other Members to achieve the full implementation of the
Uruguay Round agreements and commitments and build the foundation for further advances.  We willcontinue to work to address the legitimate implementation concerns of developing countries while
preserving the integrity of the WTO agreements and their disciplines.  On the implementation of the
Agreement on Textiles and Clothing, Canada has fully complied with all, and in many cases
exceeded, its WTO obligations.  We reaffirm that no restraints will remain in place beyond the 2005
deadline for the elimination of import quotas.  On market access, Canada has an unconditional andgenerous system of preferences that provides enhanced market access for developing countries and
duty-free access for least developed countries.  Canada's recent liberalization of 570 additional tariff
items means that about 90% of tariff items from LDCs may enter Canada duty-free.  Canada has also
been active in providing technical assistance to leas t-developed countries to help build trade and trade
administration capacity.  For example, Canada contributed Can$700,000 to the International TradeCentre to assist LDC members of the Francophonie.   We also helped found the Advisory Centre on
WTO Law with a contribution of Can$1.5 million and continue to support an increase in the WTO's
budget for technical assistance.
Complementing trade policy with trade promotion
20. While our trade policy agenda provides opportunities for Canadian firms, trade promotion
activities help them seize those opportunities.  We will continue to actively promote exports through
the activities of Team Canada Inc. and trade missions.  Led by the Prime Minister, provincial
premiers, and territorial government leaders these missions seek to highlight Canadian commercial,
political, educational, and cultural links with the countries visited.  The presence and support of high
level officials facilitate access to key economic decision-makers for Canadian firms and provide aWT/TPR/G/78 Trade Policy Review
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much greater public profile to business participan ts, helping them network with the local business
community.  Canada completed missions to South America, Australia, Russia, Central Europe, and
the Maghreb and Iberian peninsula.
Addressing the social dimensions of trade
21. The open world trading system that we have collectively constructed over the past 50 years
has provided tremendous benefits to all WTO Members, and especially to those members, likeCanada, that have opened themselves to the world.  The evidence is clear – trade creates better jobs,
increases access to goods, services, and technology at competitive prices, and generates revenues to
support social programs.  An open, healthy trading system is critical to Canada's continued prosperity
and the economic and social well-being of all nations.  This is especially true as we pursue the new
opportunities and manage the challenges brought about by globalization – in the form of advances intechnology, communications, and transport, and changes in business practices.
22. We will, therefore, continue to support efforts to further liberalize trade and investment.  At
the same time, we will ensure that we maintain our values, culture, social systems, and the
government's right to regulate in the public interest and ensure that the opportunities and benefits that
flow from an open trading  system are available to all.
Promoting domestic and international policy and institutional coherence
23. Canada will continue to promote good economic governance to strengthen markets, legal
frameworks and social structures.  Clear, transparent, and enforceable rules provide the regulatory
environment necessary for traders, investors, and consumers to prosper.
24. At the same time, concerns about changes that accompany globalization's impacts on
sovereignty, social policies, the environment, and national identities resonate as much in Canada as
elsewhere.  We recognize that the WTO cannot, by itself, address all of these concerns; many issuescan be addressed better in other fora.  For example, we will continue to support the work of the
International Labour Organization on core labour  standards and the United Nations Environment
Programme on the environment.  Canada will ensure that the social dimensions of trade are
considered fully in the formulation of trade policy and we will continue to work in international fora
to address these concerns.
25. Canada will work with other WTO Members and through intergovernmental organizations to
promote international coherence of policies and institutions.  The financial crisis of 1997-1998
brought to light the increased interdependence among nations and the need for coordinated policy
responses – financial, economic, development, social, and environmental.  If we are to take full
advantage of the opportunities from trade, as well as manage its social impacts, we need effectiveinternational economic and social structures.
Continuing public consultations
26. As we negotiate trade agreements, implement trade initiatives, and prepare for expanded trade
negotiations in the WTO, Canada will continue to consult closely with Canadians – provinces and
territories, the business community, interested citizen groups, and the public at large.  Theseconsultations provide valuable input into the formulation of our trade policy.  We also will continue
our efforts to enhance public understanding and appreciation of the benefits and impact of trade
liberalization and globalization.Canada WT/TPR/G/78
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27. The Government will continue to conduct multi-stakeholder consultations that are essential to
identifying Canadian objectives and developing negotiating positions that promote Canadian interests.
Two such sessions were held leading up to the FTAA Ministerial in Toronto and the WTO Ministerial
in Seattle.  More recently, we undertook a series of cross-country round-table sessions on the General
Agreement on Trade and Services (GATS) as part of the process of preparing for multilateral
negotiations.
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