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Opening Doors to the World:
Canada's International Market Access Priorities 2000
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5. Opening Doors to Europe
European Union
Overview
The European Union is the world's largest single market, having surpassed the United States in both GDP and population. As a group, the EU Member States continue to rank as Canada's second-most important trading and investment partner after the United States. Two-way trade in goods and services amounted to $64.6 billion in 1999. Canada's merchandise exports to the EU amounted to $18.2 billion, while imports totalled $17.8 billion. Canadian services exports to the EU amounted to $8.1 billion in 1999, and services imports reached $9.8 billion. The EU is also the second-largest source and destination of FDI for Canada. In 1998, cumulative FDI from the EU amounted to $45 billion, while Canadian FDI in the EU grew to $46.3 billion.
Several major developments in the EU have implications for Canada, including economic and monetary union (EMU), negotiations on enlargement and new regional trade agreements. The EU will continue to grapple with the question of institutional reforms, which the accession of new members makes necessary if the EU is to function effectively in future.
The EMU is now in the final stage with the adoption of the new currency, the euro, by 11 of the 15 EU Member States on January 1, 1999. Euro notes and coins will begin circulating in 2002. Together with the private sector, the federal government is helping to ensure that Canadian business is prepared for the changes that the euro may bring to trade and investment.
Regarding enlargement of the EU, negotiations have been launched on the entry of Poland, Hungary, the Czech Republic, Slovenia, Estonia and Cyprus. At the December 1999 EU Summit in Helsinki, a decision was made to begin negotiations with Latvia, Lithuania, the Slovak Republic, Malta, Bulgaria and Romania. Turkey is also declared a candidate for membership, although negotiations with it will begin only after certain political criteria for membership in the EU have been met. The first accession of new Member States is not expected to take place before 2004. The EU is also negotiating regional free trade agreements. To date, agreements with Mexico (November 1999) and South Africa (October 1999) have been reached. While the EU and the Mercosur countries have explored the possibility of free trade, negotiations are not expected to begin any time soon. Canada will assess the impact of these new arrangements on our existing trade relationships with these countries and on the competitiveness of Canadian suppliers and firms in an expanded EU.
Canada-EU trade relations are managed under the WTO agreements, as well as the bilateral 1976 Framework Agreement for Commercial and Economic Cooperation, which established a structure of consultative committees. The 1996 Joint Political Declaration on Canada-EU Relations and the Canada-EU Action Plan set goals for broadening Canada-EU relations not only in the trade and economic areas, but on a broad range of foreign and domestic policy issues as well. On the economic front, both sides undertook to cooperate in multilateral economic fora (e.g. the WTO). As set out in the Action Plan, Canada and the EU concluded bilateral agreements in the areas of customs cooperation, veterinary equivalency, competition law and mutual recognition of conformity assessment of regulated products. The Action Plan also establishes goals for enhanced cooperation in the IT field, including e-commerce, as well as in the science and technology area more generally.
The EU-Canada Trade Initiative (ECTI), launched in December 1998, sets a limited number of objectives for market access and economic cooperation. A bilateral cultural agreement of benefit to Canada's cultural industries is under consideration. Fostering business-to-business contacts, including among SMEs, is an important ECTI objective. Already the Canada-Europe Round Table (CERT) has been established, which brings together firms from a range of sectors who support the development of the Canada-EU economic relationship.
Market Access Results in 1999
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In April 1999, the EU dehydrated alfalfa industry imposed a voluntary ban on sales of dehydrated alfalfa to Japan, thus reducing the market disruption that had been occurring in Japan as a result of low-priced, subsidized EU alfalfa.
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In April 1999, the EU opened a single year 4,000-tonne TRQ for cooked and peeled shrimp.
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In November 1999, fisheries ministers from Member States agreed to renew the TRQ for cooked and peeled shrimp for a further three years and increase the quantity to 5,000 tonnes per year.
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In June 1999, Canadian and EU authorities signed an agreement permitting information exchange and cooperation in the area of competition policy and law.
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In September 1999, the EU reduced the gap between the export subsidy levels granted for barley and for malt.
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In September 1999, the EU Standing Plant Health Committee agreed to a multi-year derogation which will allow for the importation of Canadian seed potatoes until March 31, 2002.
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In November and December 1999, explanatory discussions were held on the possible scope of a wine and spirits agreement, which would provide improved market access for Canadian exporters in these areas.
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In December 1999, Canada and the EU announced a Joint Statement on Electronic Commerce in the Information Society, which recognized the potential global benefits of e-commerce and declared the objective of constructing an enabling global environment that maximizes social potential for citizens.
Canada's Market Access Priorities for 2000
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seek the elimination of export subsidies and the reduction of production-distorting domestic support through multilateral negotiations;
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continue discussions toward agreements that would improve market access for Canadian wine and spirits;
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complete the implementation of the 1998 Canada-EU MRA by finalizing the designation of conformity assessment bodies;
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encourage professional associations in Canada and the EU to work toward agreements concerning the mutual recognition of qualifications;
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work with private-sector organizations in Canada and the EU that represent SMEs to explore the possibilities of enhancing contacts among such firms;
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pursue discussions with the European Commission concerning the establishment of a bilateral legal instrument that would permit the joint funding of co-production projects in the audio-visual field;
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seek the broadest possible participation by Canada in the development phase of Galileo, Europe's global navigation satellite system; and
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continue cooperation with the EU in the field of e-commerce.
A number of barriers to trade exist in the EU that are of concern to Canada, particularly in the agriculture and natural resource sectors. In the wake of past food-safety scandals in the EU, Commission and Member State positions on consumer health and safety issues have grown more cautious, and factors other than scientific considerations appear to be growing in influence.
New multilateral trade negotiations will offer the best opportunity to improve Canada's market access on a wide range of industrial and agricultural goods. Bilateral liberalization efforts under ECTI will also make a contribution.
Improving Access for Trade in Goods
Common Agricultural Policy and Subsidies on Agricultural Products
In March 1999, the EU heads of state approved Agenda 2000 EU Common Agriculture Policy (CAP) reform. The approved policy was disappointing in that it resulted in only modest reductions to agriculture price supports and allowed direct production-linked subsidies to remain. As a result, the CAP will continue to restrict access to the EU market for most Canadian agricultural products and distort third country markets. Canada will pursue the reduction of market-distorting domestic support and the elimination of all export subsidies through multilateral negotiations on agriculture, which have commenced this year.
A particular example of this problem is the effect on prices received by Canadian oat producers. The EU's subsidization of large volumes of oats has disrupted the North American market in the form of huge low-price sales of EU oats to the United States. Canada has encouraged the EU to restrain the use of export subsidies on oats and to eventually eliminate them. Until an "across the board" solution can be achieved via WTO negotiations, Canada is pursuing this issue with both the United States and the EU to limit exports of subsidized oats into North American markets.
Cereals Import Regime
Canada maintains that the EU's grain-import regime is inconsistent with the its WTO commitments, which set out that no duty is to be applied when the import price exceeds the EU intervention price plus 55 percent. Rather than determining the duties payable on cereals on a "transaction value" basis, the EU devised a system of reference prices based on U.S. commodity market quotations. These U.S. quotations do not account for the premium price that Canada traditionally receives in the EU market.
Wine and Spirits
Assured access for Canadian wines to the EU is dependant on the conclusion of a bilateral agreement. The EU requires that exports of wine from countries supplying more than 1,000 hectolitres per year be subject to certification of conformity with EU oenological (wine-making) practices. It also seeks an end to the use by foreign wineries of European-origin wine names. At present, there is no access for Canadian ice wine to the European market on the grounds that it does not meet European oenological requirements. Canadian wine exports to the EU amounted to just over $1 million in 1998, while wine imports from the EU that year totalled over $450 million.
Canada and the EU have been engaged in renewed efforts to reach agreements on wine and spirits over the past year. The key Canadian objective in the wine negotiations is to secure access for exports of quality Canadian wines, including ice wine, to the European market. Canada supports a limited agenda for these discussions, including wine access, oenological practices and the protection of geographical indications. Objectives on the spirits side include the recognition and protection by the EU of the term "Canadian whisky".
Fish
Canadian exporters of fish, shrimp and seafood products continue to be disadvantaged by high EU tariffs. The EU groundfish tariffs on many items of interest to Canada fall within the range of 12 percent to 23 percent. Coldwater shrimp exports are faced with tariff rates of 12 percent to 20 percent, depending on the product form. Primarily because of these barriers, Canadian fish and seafood exports to the European Union have declined since the beginning of the decade, stabilizing around the $300 million level. It will continue to be a priority for the Canadian government to seek improved access to the EU for Canadian fisheries exports.
In April 1999, the EU opened a 4,000-tonne autonomous TRQ for cooked and peeled shrimp, under which the product was subject to a reduced duty of 6 percent if imported for further processing in the EU. While of great value to Canadian shrimp processors, the TRQ was created primarily to supply the needs of the European food processing industry. Recognizing this domestic importance, EU Member State fisheries ministers decided in December 1999 to extend the TRQ for a further three years and to increase the quantity to 5,000 tonnes per year. Canada will actively pursue continued renewal and improvement of the TRQ until unrestricted duty-free access for this product can be obtained via WTO negotiations.
Aluminium
Reduced tariffs on aluminium ingot and other non-ferrous metals remain a priority for Canada. With regard to aluminium, for example, the Government will support the Canadian industry's efforts to encourage like-minded producers and users of ingot in the EU to urge the European Commission to suspend the 6-percent tariff.
Technical Barriers
A key element of the EU single-market program is the elimination of technical barriers to internal trade. This will be accomplished through mutual recognition of voluntary national standards, testing and certification of conformity, as well as through the legislation of EU-wide directives on essential technical requirements. The directives cover a wide range of goods, including construction products, toys, machinery, electrical goods, telecommunications terminal equipment and medical devices. Compliance with EU technical directives, Member-State legislation and/or voluntary standards (where applicable) are prerequisites for access to EU markets for a growing range of goods.
The 1998 Canada-EU MRA on testing and certification of conformity with the signatories' respective technical requirements covers telecommunications equipment and electromagnetic compatibility, recreational boats, medical devices, pharmaceutical goods manufacturing practices and electrical safety. The MRA will help to reduce the costs of compliance by allowing Canadian exporters to have their products tested and certified by a designated Canadian agency. The MRA does not harmonize regulations between Canada and the European Union. The confidence-building phase for this agreement is now under way.
Canada is concerned that measures intended to protect the environment or the health and safety of consumers could, in fact, constitute unwarranted technical barriers to trade if they lack a firm scientific basis. Canadian exports in the agricultural and natural resources sectors are particularly vulnerable to such measures. Canada has raised concerns at the highest levels of the EU when faced with trade impediments of this kind and is prepared to pursue its rights under the TBT agreement. At the same time, Canada recognizes the complex challenge of protecting the public at large from health and environmental threats and is open to discussing common approaches with the EU.
Genetically Modified Canola
The EU has yet to approve all of the types of genetically modified (GM) canola Canada currently has in production, and thus Canada is unable to export canola to the EU. Canadian canola exports to the EU peaked in 1994 at $425 million. Canada's position is that there are no health, food safety or environmental reasons that the GM canola should not be approved for the EU market.
The EU Commission has taken a scientific approach on a case-by-case basis regarding GMO approvals. The Commission has released two favourable scientific reports, which state that two GM canola varieties already under cultivation in Canada do not pose health or environmental risks. Although the Commission's approach to the GMO issue is science-based, this is not necessarily the case for all Member States, who can collectively determine approvals on the basis of a qualified majority vote. A blocking minority of Member States has developed, which virtually ensures the continuation of a de facto EU moratorium on further GMO approvals until such time as the revised EU GMO regulation 90/220 is approved (as late as 2002).
Canada's largest export markets for canola (Japan, the United States and Mexico) have accepted the varieties under cultivation in Canada. In 1999, some 60 percent of Canadian canola acreage was grown with canola with novel traits. Canada continues to express its concerns at the highest levels of the EU regarding this market access barrier for GM canola varieties currently cultivated in Canada.
Chrysotile Asbestos
In the European Union, ten Member States (Austria, Belgium, Finland, France, Germany, Italy, Luxembourg, Netherlands, Sweden and the United Kingdom) have severely restricted or banned the use of chrysotile asbestos. In the summer of 1999, the European Commission implemented an amended directive on asbestos calling for a total ban among its Member States by January 2005. Canada's exports to the EU of asbestos and asbestos products amounted to some $44 million as recently as 1995.
The Canadian government, in partnership with the Government of Quebec, the asbestos industry, labour unions and the affected communities, seeks to maintain market access for chrysotile asbestos products to the EU.
Canada considers that the bans imposed by many EU Member States and the Commission cannot be justified by scientific risk assessments and are not proportional to the risks presented by chrysotile asbestos in specified applications. In Canada's view, the scientific evidence favours a controlled-use approach to chrysotile asbestos. In consequence, the federal government has pursued every opportunity to persuade the EU and individual Member States to maintain responsible-use policies instead of imposing bans.
At Canada's request, a WTO dispute settlement panel was established to resolve an ongoing dispute with France over market access for chrysotile asbestos. The panel's final report is expected to be released in the first half of 2000.
Bans and Restrictions on Certain Non-Ferrous Metals
The European Commission has proposed a number of directives (on batteries and accumulators; waste management of electrical and electronic equipment; and end-of-life vehicles) that provide, among other things, for restrictions and an eventual ban on the use of certain substances, including lead, mercury and cadmium, of which Canada is an exporter. These substance bans, if implemented in their proposed form, would have adverse trade implications for Canada with respect to both the non-ferrous metals in question and the manufactured products making use of them. Canada questions whether such product bans are proportionate to any attendant risks and whether these measures are more trade restrictive than necessary to achieve the proposals' objectives.
Canada supports the use of recycling to achieve broad health, safety and environmental objectives. However, Canada is concerned that the draft directives do not make it clear who is responsible for the creation of the end-of-life collection, the take-back and dismantling schemes, or the recycling, reuse and recovery programs that the draft directives set out. Moreover, Canada is concerned about the retroactive application of the directives. The draft directives also appear to contain export restrictions which may be inconsistent with international trade rules. To date, the European Commission has not outlined to third parties the scientific grounds that it believes justifies the proscriptive measures contained in the draft directives.
Concerns over the proposed directives have been raised by Canada, together with the United States, Japan and Australia, in recent meetings of the WTO Technical Barriers to Trade Committee. Canada has also raised its concerns directly with the European Commission and has requested information about the scientific considerations taken into account in drafting the proposed directives. Canada has called on the European Commission to conduct formal risk assessments and explore appropriate risk management options with a view to achieving its stated objectives.
Eco-Labelling
The European Commission has an eco-labelling scheme called the "Flower Program". Items covered include a number of paper products (e.g. sanitary papers). The criteria used for the program largely reflect European domestic environmental requirements, values and European-based performance measures. Canada has been excluded from the process of setting criteria and is concerned that the Flower Program has not been developed in a transparent manner and discriminates in favour of EU producers.
Canada will closely follow EU developments in this field to ensure that the EU adheres to the TBT Agreement's Code of Good Practice in its eco-labelling programs, particularly those with respect to transparency and ensuring fair access of foreign producers to eco-labelling programs.
Forest Certification
Over the past few years, a number of national and private voluntary forest certification schemes have emerged in response to public demands that forest products originate from sustainably managed forests. Voluntary certification is among many potentially useful tools that can be used to promote sustainable management practices in the forest industry. However, the possibility that Canadian forest products exported to certain European markets may be compelled to be certified based on criteria over which Canada has minimal or no control is an issue of concern for Canadian industry. While Canada supports certification as a marketplace activity insofar as it promotes sustainable forest management, it is concerned about the spread and acceptance of schemes that are developed without industry or government input or consultation, which are being pushed onto consumers through pressure tactics of third parties. Depending on structure and criteria, some certification systems could effectively serve as non-tariff barriers against Canadian forest product exports and may be of dubious environmental benefit.
Canada considers that forest-certification systems should be developed in a manner consistent with a balanced standards process, remain voluntary, be market-based and not have the effect of creating unnecessary obstacles to trade. As there are several approaches to forest-management certification, Canada supports the concept of equivalency between different national and regional forest certification systems that have been developed through an open, transparent and verifiable process. Canada supports greater efforts to achieve international agreement on certification systems that will promote sustainable forest management without creating discriminatory de facto technical barriers to trade.
Certification of Organic Food Products
Canada has experienced some market access problems as a result of proposed EU regulations that specify certification requirements for organically-produced foods. While the EU-wide rules are not yet in force, certain Member States are applying their own standards or interpretations of the EU rules. In April 1999, a National Standard for Organic Agriculture was ratified by the Standards Council of Canada, which outlines principles of organic agricultural production and management practices for crops and livestock. Canada is of the view that this new national standard meets the EU requirements on organic production of agricultural products and foodstuffs. A national certification and accreditation system is also being developed to complement the standard. Canada will seek recognition from the EU that our national standard and our national certification approach meet EU requirements.
Sanitary and Phytosanitary Import Regulations
Pinewood Nematode
Since July 1993, the EU has required that Canadian exports of softwood lumber, except Western Red Cedar, be heat-treated in order to ensure the destruction of the pinewood nematode (PWN). This requirement has effectively eliminated Canadian exports of untreated softwood lumber to the EU. Canada has indicated on numerous occasions that it views this mandatory requirement as excessive, given the negligible risk of establishment of PWN in the EU as a result of trade in Canadian softwood lumber.
Over the years, Canada has proposed alternative measures to control PWN, while allowing trade in untreated lumber. However, the EU has not accepted Canadian proposals for less trade-restrictive measures. At Canada's request, WTO consultations were held on July 15, 1998, but the issue remains unresolved. Government officials will work with industry and provincial representatives to assess next steps.
Beef Hormones
In 1989, the EU banned the use of growth-promoting hormones in livestock and imposed a ban on the importation of beef produced with growth-promoting hormones. Both Canada and the United States consistently opposed the ban on the grounds that it was not based on scientific evidence and was an unjustified barrier to trade. The safety of growth-promoting hormones has been endorsed by the Codex Alimentarius and by Canada's own scientific reviews.
After Canada and the United States referred the matter to the WTO, a panel concluded in August 1997 that the EU ban violated the SPS Agreement since it could not be justified by scientific evidence. The panel's conclusion was further confirmed by the WTO Appellate Body in January 1998. The EU was given until May 1999 to implement the reports, but it failed to do so.
In August 1999, because the EU was in breach of its WTO obligations, and given the absence of an acceptable offer of compensation, Canada imposed retaliatory tariffs on a list of imports from the EU, including beef, cucumbers, gherkins and pork. These measures will remain in effect until such time as the EU offers a satisfactory compensation package or until the ban is removed. Canada's objective remains open access to the EU market for Canadian beef.
Canada-EU Veterinary Agreement
On December 17, 1998, Canada and the EU signed a Veterinary Agreement governing trade in live animal products, fish and fish products. The agreement establishes a mechanism for achieving recognition of equivalent sanitary measures between Canada and the EU aimed at improving bilateral trade. A Joint Management Committee (JMC) has been established to implement the agreement. A first meeting of the JMC was held in September 1999. The committee agreed to establish equivalent standards in appropriate areas, to build clear lines of communication in order to ensure early notification on food-safety issues and to bring labelling and food contaminants under the agreement. To ensure that each side meets the standards agreed under the auspices of the agreement, Canada and the EU will develop audit principles. Working groups were formed to advance each of these issues.
Seed Potatoes
A derogation from EU phytosanitary requirements is required for continued access to the EU for Canadian seed potatoes. The particular pests of concern are bacterial ring rot (BRR) and potato spindle tuber viroid (PSTV).
Traditionally, an annual derogation had been granted based on requirements that Canada conduct stringent laboratory testing and certification of disease-free zones in Prince Edward Island and New Brunswick for all exports to the European Union.
In September 1999, the EU Standing Plant Health Committee approved a three-year derogation for Canadian seed potatoes. Under this multi-year derogation, the shipping window will be increased in years two and three, from December 1 to March 31. Canada is now awaiting publication of the decision in EU legislation and subsequent adoption by Italy, Portugal and Greece into their national legislation.
Specified Risk Materials (SRM) Ban
In July 1997, the EU proposed a ban on the use of specified risk materials (SRMs) as a bovine spongiform encephalopathy (BSE)-related measure. The ban was originally intended to cover products of animal origin intended for food, feed and fertilizer, as well as cosmetics, pharmaceuticals and industrial products, and would have applied to the manufacture of tallow and its derivatives.
In November 1998, the Commission released a draft of its new SRM proposal that categorizes countries on the basis of BSE risk. Canada has submitted information to the EU to substantiate our claim to be free of BSE.
In December 1998, the EU Council of Agriculture Ministers postponed for a third time the original SRM ban, to January 1, 2000. In December 1999, the EU Commission announced a fourth postponement to March 31, 2000 to allow for a new proposal to be adopted. The new proposal is expected to class countries using the International Office of Epizootics (OIE) Code on BSE. Depending on BSE status, countries would be required to apply different measures with regard to the removal of SRMs. The new proposal would not apply to industrial, cosmetic or pharmaceutical products or to medical devices.
Other Issues
Government Procurement
The EU has only recently obtained compliance from Member States to implement the legislative changes required to give effect to the WTO AGP. Full compliance with the procurement procedures has not been demonstrated. Canadian suppliers still do not have access to EU markets in a number of sectors, including telecommunications equipment and services, transportation equipment and electric utilities. Particular barriers that serve to restrict access include standards, certification, qualification and local-content requirements. Canada is addressing these issues with the EU in the WTO Government Procurement Working Group to further reduce or eliminate tariff and non-tariff barriers.
Telecommunications
While the liberalization of the European market for telecommunications services progresses smoothly, Canadian companies have identified some problems. Over the last year, the Government has been monitoring German regulations regarding interconnection with the common carrier's network to ensure that costs and conditions remain in keeping with the spirit of the Reference Paper on Regulatory Principles. It is hoped that the EU's proposed licensing harmonization measures may help to solve the problems of cost. The EU has also identified several continuing barriers to new competitors in Germany, regarding the timeliness and transparency of the liberalization process.
European Free Trade Association
In 1997, the Prime Minister indicated that Canada would like to see a free trade agreement between Canada and the European Free Trade Association (EFTA). The EFTA comprises Iceland, Norway, Switzerland and Liechtenstein. Two-way merchandise trade was valued at $5.1 billion in 1999 (Canadian exports: $1.2 billion; imports $3.9 billion). FDI from EFTA Members into Canada in 1998 totalled $5.2 billion, concentrated in finance, insurance, chemicals, fish processing and onshore and offshore oil and gas development.
The Government launched negotiations with the EFTA countries in late 1998 following extensive consultations to gauge Canadians' interest and sensitivity toward such an initiative. The negotiations are supported by a broad cross-section of Canadians (business, the provinces and NGOs). The Government has consulted closely with stakeholders throughout the negotiations.
The Canada-EFTA FTA negotiations are at an advanced stage and are expected to be completed later this year. The eventual agreement is expected to focus primarily on tariff elimination and trade facilitation. It will not include new obligations in areas such as services, investment or intellectual property. The agreement will introduce a new concept in cooperation on competition policy and will launch cooperative work in the area of trade facilitation. It will be Canada's first transatlantic free trade agreement.
The initiative to conclude a free trade agreement with the EFTA countries is a clear example of Canada's firm commitment to trade and investment liberalization on all fronts. We believe that all trade and investment relationships will flourish through the negotiation of bilateral, regional and multilateral free trade agreements. Canada and the EFTA countries already have strong bilateral connections and a history of shared values and activities. The Canada-EFTA FTA will facilitate new areas of opportunity and cooperation bilaterally and will open channels for like-minded interaction in a wide range of multilateral fora. Also, the agreement stands to contain a competition chapter that will be progressive in terms of regional trade agreements.
A MRA with Iceland, Liechtenstein and Norway is expected to be signed in the first half of 2000. This will be a complement to the Canada-EU MRA and Canada-Switzerland MRA and will complete the coverage of all of the Western European nations subject to the Directives of the European Commission. All MRAs are virtually identical, with the exception of the MRA with Switzerland, which lacks the recreational craft sector.
Russian Federation
Overview
The financial crisis in 1998 resulted in a drastic decline in Canada's merchandise exports to the Russian Federation -- from $379 million in 1997 to $288 million in 1998 and $166 million in 1999. Imports of goods from Russia to Canada declined 17 percent in 1999 to $607 million. Most Canadian exporters have scaled back their activities in Russia, adopting a "wait and see" attitude. In 1999, the value of Canadian direct investment in Russia was estimated at some $1.25 billion, principally in the mining and oil and gas sectors, and to a lesser extent, in food services and high technology.
The Russian economy is showing signs of recovery, although structural reform remains slow. Russia will continue to be a key strategic market for Canadian resource extraction, agri-food and the housing/construction materials sectors. The Canadian government is working to improve access to this important emerging market along three main tracks: through the bilateral Intergovernmental Economic Commission (IEC); accession negotiations on Russia's entry into the WTO; and negotiation of a new FIPA.
Bilateral
The Canada-Russia IEC was established in 1995 with a mandate to identify and resolve trade and investment irritants and obstacles that Canadian and Russian companies face in each other's markets. Sectoral working groups (focussing on oil and gas, agriculture, housing and construction, mining, the Arctic and the North and industry development in advanced technologies) work to enhance opportunities and market access for Canadian traders and investors. Also under consideration are proposals to organize ad-hoc IEC events for the forestry sector, and to promote closer economic relations between Western Canada and the Russian Far East.
Canadian exporters face a multitude of product testing and certification standards before their products can enter the Russian Federation. Different products frequently require multiple certificates of conformity (e.g. fire, health, occupational safety), each issued by different, and sometimes competing, Russian regulatory authorities. Published information on these regulatory requirements is often difficult to obtain. Inconsistent application of customs procedures and lack of transparency on changes in duties, rules, export tariffs and licences also pose difficulties for Canadian exporters and investors.
Through the IEC and other bilateral initiatives, including technical cooperation, Canada is promoting reforms to the Russian tax code; dispute settlement and contract enforcement procedures; and policy frameworks for resource development. We have also pressed for the removal of numerous administrative barriers to trade and investment and for uniformity in the application and enforcement of laws and regulations.
WTO Accession
The Russian Federation applied to join the WTO in 1993. Canada is a member of the WTO working party charged with examining Russia's application and is holding bilateral discussions with the Russian Federation to advance the accession.
Canada has underlined its support for Russia's eventual membership in the WTO on commercially viable terms generally applicable to newly acceding Members. Russia's membership in the WTO will give Canadian traders and investors enhanced and more predictable access to this important market. It will also help to consolidate the economic transition process in the Russian Federation and will strengthen the multilateral trading system. Although much has been achieved in recent years, Russia has a great deal of work to do to bring its trade and economic system up to WTO standards. Canada will continue to press for increased transparency as well as for more open, secure and non-discriminatory market access for Canadian providers of goods and services.
The Russian Federation presented its initial tariff offer in February 1998. In June 1998, Canada initiated bilateral discussions in Moscow, and there have been some further bilateral discussions since then. Canada is seeking tariff concessions on products of current and future export interest to this market, such as oil and gas equipment, agricultural and agri-food products, vehicles and telecommunications equipment. Canada will, among other things, look to Russia to bind all of its tariffs at or below currently applied rates, to join various zero-for-zero initiatives agreed in the WTO and to provide non-discriminatory access, for example, in the oilseeds sector.
The Russian Federation presented an initial services offer in October, 1999. In subsequent negotiations, Canada will ask Russia to make binding commitments relating to the temporary movement of natural persons and the establishment of commercial presence. Canada has particular interests in the areas of professional and other services, including computer and related services, basic and enhanced telecommunications, financial services, construction services, environmental services and transport services. Canada will also be looking for the removal of restrictions and discriminatory measures for the cross-border, consumption-abroad and commercial-presence modes in these sectors.
Investment
The protection of Canadian investment in Russia remains a priority for Canada. Canada has a significant interest in Russia, particularly in the mining and oil and gas sectors. Natural resource development and other forms of infrastructure, services and industrial development are key areas of potential interest for Canadian investors.
While the encouragement of foreign investment is a stated priority of the Russian government, there have been difficulties creating a stable, attractive investment climate. Current concerns for investors in the Russian Federation include: crime and corruption; taxation levels; the complexity and uncertainty concerning domestic legislation; and a lack of effective recourse through the judicial system in order to resolve investment disputes.
The existing FIPA signed between Canada and the USSR in 1989 provides limited protection for Canadian investors compared to more recent NAFTA-style investment agreements. Negotiations were initiated in January 1998 and are continuing in 2000 with the aim of developing a new and enhanced FIPA to improve conditions for increased Canadian investment.
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