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NOTES FOR AN ADDRESS BY

THE HONOURABLE ART EGGLETON

MINISTER FOR INTERNATIONAL TRADE

ON THE OCCASION OF

PRESENTATION OF THE

CANADA-CHILE FREE TRADE AGREEMENT

TO THE STANDING COMMITTEE ON

FOREIGN AFFAIRS AND INTERNATIONAL TRADE

OTTAWA, Ontario

February 20, 1997

This document is also available on the Department's Internet site: http://www.dfait-maeci.gc.ca

Mr. Chairman,

When I was Minister responsible for Infrastructure, I had many opportunities to stand before my honourable colleagues in the House and report "Mr. Speaker, I have more good news."

And as you are all well aware, the Infrastructure program was a great success. It was a good example of three levels of government working together to enhance Canadian communities and create Canadian jobs.

On October 29, 1996, I had the pleasure of sharing with you the details of the Canada-Israel Free Trade Agreement -- and tomorrow, I will be travelling to Israel along with a business delegation to promote that agreement.

But for today, it gives me even greater pleasure to be able to say to you, "Honourable colleagues, I have more good news."

This morning, I am proud to share with you the second free trade agreement signed by our government since coming to office in 1993. This time, we are taking a major step into Latin America and the Caribbean with the Canada-Chile Free Trade Agreement.

I can't stress enough the importance of trade to the livelihood of Canadians, and it is a message worth reinforcing today.

Trade now accounts for one out of every three jobs in this country. And trade constitutes fully 40 per cent of our entire gross domestic product [GDP]. In fact, Canada is more dependent on trade to produce jobs and economic growth than any other developed country in the world.

With a relatively small domestic market, Canada has no option but to find new markets abroad if we are to create the opportunities that we want for our children and future generations.

We expect that this agreement will be a bridging agreement that will facilitate Chile's accession to the North American Free Trade Agreement [NAFTA]. But, by signing this agreement now, we can provide Canadian companies with a significant head start into the Chilean marketplace.

Not only does this agreement provide a considerable advantage over our American, European and Asian competitors, but it also gives us a leg-up on Chile's regional trading partners as well. This initiative is important to Canadian businesses active in the region who look forward to its implementation by June 1997.

This agreement is significant for other reasons:

It secures access for Canadian companies to a dynamic and strategic market.

It demonstrates our commitment to freer trade throughout the hemisphere -- and it is only the beginning.

It will create jobs for Canadians and a new economic relationship between government and the private sector in Canada and Chile, which will support further efforts to liberalize trade in the Hemisphere.

Our government's long-term objective in the Latin America-Caribbean region is a Free Trade Area of the Americas [FTAA] by the year 2005. This was the target agreed to by all heads of government at the Miami Summit in December 1994. And this is the target we are working diligently to see realized.

We see the FTAA as providing a common connection between the NAFTA countries and other trading areas in the region such as MERCOSUR, formed of Brazil, Argentina, Paraguay and Uruguay; the Andean Pact; the Group of Three; and the CARICOM countries. This free trade agreement with Chile helps open the door to this exciting region.

With growth second only to Asia, Latin America and the Caribbean represent an opportunity we cannot ignore and a market we cannot forgo. By the year 2000, this region will boast a total population of nearly 500 million, 50 million of which will be middle and upper income earners. And the region will produce a GDP of US$2 trillion.

And more than just a demonstration of our commitment to freer trade within this hemisphere, this agreement also stands as further evidence of Canada's commitment to freer trade around the world.

As these new opportunities have opened up, Canadians have embraced them with energy and success. Canadians have risen to the challenge of freer trade and stiffer competition. Our companies have restructured and innovated to become more efficient and more competitive. Quite simply, Canadians have taken the world by storm.

The figures speak for themselves. In 1992, our trade surplus stood at a little over $6 billion. Just two years later, in 1994, that number had more than doubled, to nearly $15 billion. And yesterday Statistics Canada announced Canada's trade surplus at over $34 billion.

That's what Canadians can do when markets are opened up to them. That's what Canadians can do when they compete on the international stage against the best in the world. And that's the type of growth that we are determined to sustain by seeking out new markets and new opportunities for Canadians.

I believe that this free trade agreement with Chile will play a significant role in the future development of Canadian trade.

Chile has the most stable and fastest-growing economy in its region. Over the last decade, annual economic growth has averaged almost 7 per cent. Market-oriented policies have encouraged an entrepreneurial spirit and a strong private sector.

In 1995, Chile had a budget surplus amounting to about 2½ per cent of GDP, while their foreign debt was only about 10 per cent of GDP.

The second free Presidential election, held in 1993, demonstrates that Chile's transition to democracy is proceeding smoothly and putting down firm roots in Chilean soil.

With low unemployment, falling inflation and increasing wages, Chile has established its credentials as a desirable trade and investment partner. And Chile has strong trade links not only in the region, but also with the European Union and Asia.

Canadians have been quick to take notice of this positive environment, and trade between our two countries has risen dramatically. In fact, over the past decade, Canadian-Chilean trade has more than tripled -- from $202 million in 1983 to a high of $666 million in 1995.

In one year, 1994 to 1995, our exports to Chile grew by an impressive 23 per cent.

And the nature of our trade with Chile is also changing. Since 1988, Canadian exports of machinery and industrial equipment surpassed exports of raw materials and are growing at an average rate of 26 per cent a year.

These investments are encouraging further exports of Canadian value-added goods, as well as joint ventures between Chilean and Canadian small and medium-sized companies. They also create opportunities for Canadian companies to provide goods and services to Canadian investors in Chile.

Canadian investors are increasingly seeing Chile as a good place to put their money. So much so, that we were Chile's largest foreign investor in 1990, 1992 and 1995. The cumulative total of actual and planned Canadian investment there now exceeds $7 billion.

Much of these funds are invested in mine development, but investment in banking, communications and energy is also on the rise.

One of Canada's priorities is to more effectively protect its substantial investment in Chile. We have been able to do this through foreign investment insurance from the Export Development Corporation [EDC], which has financing lines of credit with both the Banco Sud Americano and Banco O'Higgins. And these EDC programs are open to both the private and public sectors.

Reaching a double taxation agreement with Chile has also been an important objective for Canada. The two nations will begin negotiations on this after framework laws, which will soon be going to the Chilean Senate, are approved.

More than 50 Chile-Canada joint ventures are already operating in Chile, ranging from fighting forest fires to building industrial machinery. This will generate increased opportunities for exports of goods and services.

And so, the ties between our two countries have been growing dramatically in recent years. It was only natural that two countries, which are both trading nations, both with a significant natural resources component to their economies, would want to expand trade between them.

That is why Prime Minister Chrétien led Canada's first trade delegation to Chile in January 1995. More than 250 business people, representing more than 185 companies, joined the Prime Minister on that trip.

During the visit, 33 Canadian business people signed deals worth more than $1.7 billion, including $918 million in contracts and $846 million in agreements in principle with Chilean partners. In addition, Canada's Business Council on National Issues signed a strategic alliance with the Confederacion de la Produccion y del Comercio to promote direct business links.

Memorandums of understanding on the environment and on telecommunications were also signed during that visit.

And the Alliance of Manufacturers & Exporters Canada and its Chilean equivalent developed an exchange program, which has been up and running since 1992.

The Association of Consulting Engineers of Canada and its Chilean counterpart, the Asociacion de Ingenieros Consultores de Chile, have also created an exchange program.

With so much contact between our business communities, and so much exchange of personnel and information, the next logical step was a free trade agreement between our two countries. This was a natural step for Chile along its the path to NAFTA membership.

Canada had four main objectives when pursuing this bilateral agreement:

First, to obtain barrier-free access to Chile's markets.

Second, to protect Canadian investment.

Third, to secure Canada's attractiveness as an investment site.

And fourth, as has been mentioned, to provide a bridge to Chile's accession to the NAFTA.

We believe that all of these objectives have been met by the agreement that we have signed, and we are confident that our overall objective of stimulating Canada's economy and creating Canadian jobs will be met.

Let me just quickly outline the main elements of the agreement:

• Immediate duty-free access for most of Canadian industrial goods, which account for 80 per cent of our exports, as well as the elimination of Chile's 11 per cent import duty on almost all remaining industrial and resource-based goods within six years.

• Better access for a range of agricultural goods, including durum wheat, barley, lentils, seed potatoes, pork, canola products and beef. Our exporters' overall access to Chilean markets will now be better than that of their competitors in the United States and the European Union, and as good as Argentina and Brazil.

  Significant new protection for Canadian investments in Chile, including an agreement to automatically grant Canadian investors the benefits of any further liberalization that may occur in the future.

  Important new guarantees for Canadian exporters of services.

  The creation of a Free Trade Commission and secretariat to ensure the timely and effective resolution of disputes.

  Side agreements on environment and labour -- the first agreements of this nature ever signed by the Government of Chile.

  The mutual elimination of anti-dumping duties within a maximum of six years. This will further guarantee barrier-free access for Canadian exports to Chile and contribute to making further progress in reforming and eventually eliminating anti-dumping measures within the NAFTA.

  It is also important to note what this agreement does not cover. The agreement exempts cultural industries, the Auto Pact, and supply-managed products. And social and health services are fully protected.

  While this agreement is good news for all of our exporters, it holds particular potential for Canadians in the following areas:

• technologically advanced telecommunications equipment and specialized consultancy services;

• durum wheat, oilseeds and other similar crops;

• coal, mining and energy generation and transmission equipment; and

• forestry-related and environmental products and services.

  And as Chile modernizes its infrastructure, there is tremendous potential for Canadian companies both in construction and in consulting.

  In December of last year, it was my honour to participate in Canada Expo '96, a trade show for Canadian businesses, which was held in Santiago. Over 170 Canadian companies demonstrated their products and services. More than 4000 people visited the fair.

  Following this trade show, major new announcements were made by NorTel, Rio Algom, Newbridge and Teck Corporation. These projects are estimated to be worth several hundred million dollars.

  And it wasn't just the major companies that realized the potential of Chile. A survey of small and medium-sized businesses that attended Canada Expo '96 indicates that they also foresee substantial business opportunities in both the short and long terms.

  As you can see, honourable colleagues, Chile is our doorway to Latin America. And Latin America holds the promise of explosive growth and amazing opportunities for Canada. Let us embrace this agreement and others that will follow.

  Thank you.