It's Your Turn
Consulting Canadians
Sectoral Services Consultations on Trade in Services
Final Report on 2004 Regional Consultations--Refining Canada's
Services Trade Negotiating Strategy
TABLE OF CONTENTS
INTRODUCTION
Between March 1 and April 1 of 2004, the Government of Canada,
in partnership with provincial and territorial governments, conducted
a series of 13 consultation workshops across Canada on the subject
of services trade negotiations currently under way both at the World
Trade Organization (WTO) with respect to the General Agreement on
Trade in Services (GATS) and, in a number of regional forums.
| March 1-2 |
Toronto, Ontario |
| March 8-9 |
Iqaluit, Nunavut |
| March 11 |
Winnipeg, Manitoba |
| March 15 |
Calgary, Alberta |
| March 16 |
Edmonton, Alberta |
| March 17 |
Victoria, British Columbia |
| March 18-19 |
Vancouver, British Columbia |
| March 23 |
Regina, Saskatchewan |
| March 24 |
Saskatoon, Saskatchewan |
| March 26 |
Whitehorse, Yukon |
| March 29 |
Halifax, Nova Scotia |
| March 30 |
St. John's, Newfoundland |
| April 1 |
Fredericton, New Brunswick |
| April 19-20 |
Montreal and Quebec City1, Quebec |
This set of meetings forms an important part of the multi-faceted
approach used in the development of Canada’s services trade
strategy. The input and feedback received through this process are
added to and combined with other tools (such as market analysis
and negotiating intelligence) to ensure that the approach adopted
is truly representative of Canada’s interests and export priorities.
Purpose of the Consultations
The purpose of this round of consultation workshops was threefold.
First, the consultations were conducted primarily because international
services trade negotiations, particularly those relating to the
GATS, had reached a stage where the advancement of Canada’s
interests necessitated more detailed information. As illustrated
in the box below, previous consultations had laid the groundwork
for Canada’s position. Now, in order to further advance Canadian
interests, the Government of Canada needed to hear more detailed
messages from the business community. Specifically, as trade negotiations
progressed, we needed to decide where to concentrate our efforts.
The consultations were designed to gather input from various Canadian
service providers, which would assist us in refining our negotiating
strategy. Essentially, we were asking Canadian service providers
to help us prioritize their goals for greater market access.
Consultations and the Evolution of the Canadian Services
Trade Negotiating Strategy
Second, through distribution of the background material and presentations
made at the meetings themselves, it was hoped that information about
the service trade negotiations currently under way would be made
further available to Canadian stakeholders. As part of this outreach
activity, the Government sought to assure Canadians that we would
continue to pursue the objectives laid out at the outset of negotiations.
We wanted to underline the message that we would maintain and preserve
the ability of all levels of Government to regulate and set policy
in areas of importance to Canadians; we would not negotiate our
health, public education or social services; and we would maintain
the flexibility to pursue our cultural policy objectives.
Third, these meetings served to further solidify the network of
people and organizations interested in these issues, who we will
continue to rely on to guide our approach to the services trade
negotiations currently under way both with respect to the GATS and,
in other services trade negotiations.
The format of this report
This report seeks to reflect closely the views that participants
conveyed to the Government representatives, both in the sessions
themselves and through sector-specific questionnaires that were
distributed prior to and during the sessions. To respect the confidential
nature of some of the input and to protect our negotiating strategy
and position vis à vis other WTO members, this section will
indicate the general guidance we received regarding priorities we
should focus on for this stage of the GATS negotiations and other
services trade negotiations2.
The report contains a brief introduction for each sector of the
services economy that was consulted. Following the introduction,
our notes regarding participant comments are presented in bullet
points.
Who was Consulted?
If there is one word that characterizes Canadian service providers
and industries, it would be diversity. Participants at
the workshops represented a wide variety of perspectives, including
a cross-section of the Canadian services industry: lawyers, accountants,
engineers, management consultants, information technology businesses,
telecommunications services providers, oil and gas, mining, research
and development, environmental and construction services providers.
Other participants included representatives from cultural industries,
labour unions, provincial economic development departments, municipal
governments, public interest advocates and consumer advocates. For
a full list of participants, please see the Annex
to this report.
In addition to the diversity between the types of services industries
that exist, diversity can be found within an industry as well —
both in terms of the types of services provided, the size of the
service providers within a given field, and the market of interest.
For example, within the construction and telecommunications services
industries, Canada’s service providers tend to range from
a few large players to many smaller niche players — also referred
to as small and medium-sized enterprises (SMEs).
This diversity manifests itself in each consultation, demonstrating
the richness and depth of Canada’s service trade interests
both by highlighting issues in established or large markets as well
as by identifying opportunities in lesser-known or more specialized
markets. Such diversity speaks to the importance of a multifaceted
approach to the development of a Canadian services trade strategy
where each consultation meeting, session or input makes an important
contribution. This input, combined with market and policy analysis
and other research, ensures that a solid approach is developed that
represents Canada’s interests and export priorities.
Background Information
Prior to consultations in the various sectors, Canadian industry
and other stakeholders received a package of background information
on specific services sectors. This package included economic and
statistical information on the nature of the various services industries,
a definition of the sector that is commonly used for negotiating
purposes at the WTO, and a list of previously identified priority
markets and barriers to trade. Contacted individuals were also invited
to provide their input to the Government by filling out a questionnaire
on the services sector of interest to them.
Those companies and stakeholders who were able to attend the consultation
meetings themselves benefited from sector-specific presentations
in which the Government shared further information on the GATS negotiations.
These presentations included information on:
-
the gaps between offers made by other WTO members in 2003
and Canada's initial market access requests to priority countries
in 2002; and
-
the Government's suggested approach for the negotiations
in this sector, including information on the specific geographic
markets we will pursue and the barriers we will focus on.
COMMON MESSAGES FROM NON-INDUSTRY
STAKEHOLDERS
In addition to its primary objective of meeting with Canadian
service providers and gaining their feedback to refine the commercial
interests identified in Canada’s negotiating strategy, the
Government also welcomed the opportunity to meet with and hear the
concerns of non-industry stakeholders. Participants in these sessions
included provincial and municipal representatives, labour organizations,
and non-governmental organization (NGO) stakeholders representing
the environmental, health, educational and cultural services sectors.
Most participants took this opportunity to underline concerns that
they had previously communicated to the Government.
-
Some municipal governments and a few provincial ministries
not directly involved with services trade policy expressed concern
(through both written and verbal submissions) about the negotiations
and their possible impact on the right to regulate of not only
municipalities but all levels of government in Canada. Others
stated that part of this concern is largely due to the lack
of information about the impact of the GATS on municipalities,
or the prevalence of negative information generated by NGOs
regarding this issue.
The Government of Canada responded by noting the ways in which
municipal concerns and perspectives are factored into the policy
process, and highlighting initiatives designed to provide municipalities
with more information and background on existing trade agreements.
The joint working group on international trade of the Federation
of Canadian Municipalities (FCM) and the Department of Foreign Affairs
and International Trade was created at the request of the FCM in
2001, and has met on several occasions to discuss issues of interest
and relevance to municipalities regarding trade agreements such
as the GATS. The Government's reply to the questions raised in the
FCM document Municipal Questions Respecting Trade Agreements can
be found at Reply to the Federation of Canadian
Municipalities Questions on International Trade Agreements.
In addition, the Government of Canada is currently working with
the FCM to develop a factual manual on International Trade Agreements
aimed at helping Canadian municipalities to better understand international
trade obligations and impacts involving areas of municipal jurisdiction.
The manual will use plain language to inform and update elected
and appointed municipal officials who are called on to consider
projects or respond to questions from citizens, and will outline
the type of assessments municipalities may need to undertake when
considering municipal projects.
-
Other participants were concerned that Canada would be forced
by other WTO members to negotiate in the areas of health, public
education and culture in order to be able to achieve its liberalization
goals in other non-sensitive sectors. Some expressed this concern
by asking what they would need to give up in order to get things,
and by asking if Canada is being pressured by other WTO members
to open up in these sectors.
-
One stakeholder concerned about culture noted that, despite
the fact that Canada had not made any commitments with respect
to cultural services, this sector is already quite open in Canada,
and perhaps Canada should negotiate in this sector. Alternatively,
another stakeholder remarked that Australia had been devastated
by the commitments that it had taken in this sector.
The Government responded by underlining the message that we
will maintain and preserve the ability of all levels of Government
to regulate and set policy in areas of importance to Canadians,
we will not negotiate our health, public education or social services,
and we will maintain the flexibility to pursue our cultural policy
objectives. More information
on the Government’s responses to these and similar concerns.
- Many participants were interested in learning about and or
clarifying their knowledge of the GATS and the negotiating process.
Many questions were posed regarding issues such as the timing
of the negotiations, the terminology behind the agreement and
the mechanics of taking commitments in various sectors.
Government representatives responded to all queries regarding
the workings of the GATS to the extent that time allowed. More
information on the GATS and the negotiations themselves.
COMMON MESSAGES FROM CANADIAN BUSINESS
Throughout the sectoral consultations and in the completed surveys,
several common themes emerged when the input from participants in
various sectors was analyzed. These themes are expressed below.
Support for Canada’s involvement
in the trade in services negotiations
-
Canadian industry expressed general support for the negotiations,
indicating that:
-
the way in which the Government positions itself is key
to supporting service providers; and
-
Canada’s participation in the negotiations is necessary
to influence the rules that are being developed to govern
trade in services.
-
One participant noted that governments must be able to promote
things like investment and related best practices. Trade agreements
must be able to facilitate this kind of regulation.
Temporary movement of people
-
In virtually all feedback that the Government received during
this round of consultations, the issue of facilitating the temporary
movement of people was raised. Whether the priority market is
across the border, across the continent or across the ocean,
Canadian businesses expressed that the ability to move people
into and out of a market to deliver their services — no
matter what sector — is key. The Government has been asked
to address such issues as restrictions on the length of stay,
the existence of economic needs tests, inconsistent application
of immigration rules, and confusing entry requirements.
-
In addition to actual restrictions on the movement of people,
some feedback indicated that the lack of transparent and accessible
information on how to enter a market proved to be a significant
impediment to gaining access to a market.
Accessible rules and regulations in
all markets
- Canadian business continues to express frustration with obscure
regulatory regimes encountered in foreign markets. Even when entry
into a market is permitted, the difficulty in accessing information
about rules and regulations for operating within that market can
be so burdensome that it makes it difficult and sometimes not
worth the trouble to provide a service. The Government views this
input as guidance to continue in its efforts to ensure and encourage
transparency, not only in scheduled commitments, but also in the
information dissemination practices of other members of the WTO
— both in terms of the type and accessibility of information
regarding business regulations.
Conducting business by electronic
commerce (e-commerce)
-
Feedback during this round of consultations revealed that
Canadian businesses, regardless of their specific sector, conduct
a portion of their international activities using e-commerce
tools.
-
While barriers to e-commerce appeared to be few, some specific
problems were identified. Firms and individuals said the e-commerce
portion of their service would often go off without a hitch,
but trying to cross the border with a physical manifestation
of that service (such as hard copies of architectural or engineering
drawings and a disk, or a computer with custom software) could
be very problematic. Regions where these instances have occurred
include Europe, South America and the United States.
-
Other input indicated that service providers using e-commerce
are being asked to declare revenue on these activities and/or
physical products. One participant noted that in the United
States, some states try to regulate the cost of consultants,
causing them to charge more than they normally would.
-
The need to have protection for intellectual property was mentioned
by several participants across various sectors. An example was
provided of a situation in China that caused an information
technology (IT) company to go out of business. In a related
comment, one participant expressed belief in the competitive
benefits of adopting a regime like that in the United States,
where one can patent a “system” whereas in Canada,
one can only patent its expression in software.
-
Participants understood the need for regulations for public
protection, but wanted to ensure that any rules and disciplines
developed for e-commerce rules not become so onerous as to limit
trade using this method of delivery.
The small and medium-sized enterprises
(SME) perspective
-
Related to the issues raised above, SME participants and contributors
stated that the use of communication and IT tools facilitates
efficient international operation, and the Internet's competitive
advantages of speed, convenience and reduced costs has helped
them to enter new markets.
-
Some SMEs related experiences that illustrated how onerous
licensing, registration requirements and excessive user fees
can create barriers that are particularly burdensome for SMEs.
Some asked the Government to continue to focus on efforts to
overcome barriers related to a discriminatory, burdensome and
non-transparent regulatory environment.
-
Because of their smaller capacity to enter and sustain their
activities in foreign markets, SMEs export services primarily
by using mode 1 (cross-border) and mode 4 (movement of natural
persons) because these are the least expensive and most effective
ways to conduct business. Feedback indicated that to assist
SME service exporters, the Government should continue to encourage
members to explore ways to remove unwarranted mandatory commercial
presence requirements on the cross-border supply of a service.
SECTORAL CONSULTATIONS
Computer and Related Services
Background
Prior to and during the meetings, the Government of Canada provided
the following information to facilitate feedback from participants
and stakeholders:
What Canada requested
In this sector, Canada has requested that priority markets improve
their commitments by eliminating limitations on the participation
of foreign capital (e.g. in terms of the maximum percentage limit
of foreign shareholding or on the total value of individual or aggregate
shareholding) and by eliminating restrictions that limit the duty-free
exemption from import duties applicable to the production of goods
in the sector to domestic producers. Canada also requested that
countries make broad commitments for all subsectors of computer
and related services, if they have not already done so.
Where things stand
In general terms, countries that have made negotiating offers in
this area have made fairly liberal commitments, covering most subsectors.
Some countries have also indicated an interest in classification
and definitional issues, but these would only clarify commitments;
they should not affect the scope of market access.
Where do we go from here?
Canada is suggesting that it focus on obtaining maximum coverage
in this sector from all WTO members — meaning no barriers
to market access in all methods of delivery used by service providers.
Canada will continue to encourage all WTO members to use the established
classification system and definitions used by the majority of members
when making their commitments, in order to strengthen these commitments
and increase transparency.
Feedback and Comments
-
One participant expressed interest in the classification of
computer and related services, noting that, as business models
evolve, it becomes more difficult to fit the services offered
by information and communication technology (ICT) companies
into existing classification schemes. Transaction processing,
which involves developing a program and maintaining it in-house,
was given as an example of a service that differs from the traditional
business model. In the past, a program would be developed for
a client and then transferred to the client (through a sale
or a licence). Under the new scenario, the program rests with
the company that performs transactions for various clients on
an as-needed basis (e.g. billing).
-
Some participants indicated that classification would always
be an issue because the industry tends to reinvent itself every
three years. Consequently, current trade terminology may not
describe what is happening, and can have an impact on the feedback
that the industry is able to provide. Some participants suggested
that the word “software” not be used anymore, as
it tends to have multiple or overlapping meanings. For example,
when speaking of banking on the Web and banking software, it
is unclear whether this is a software service or a banking service.
-
Other comments highlighted that restrictions on the ability
to move people in and out of foreign markets are key for this
sector. In some instances, service providers were asked to post
exorbitant bonds based not only on the value of equipment and
software that they may be carrying, but also on the entire value
of the commercial contract to which their visit relates.
-
Some feedback detailed instances when the border authorities
express concern over the possibility that a service provider
might leave a laptop — and programs contained thereon
— in the foreign market, while others were barred from
crossing the border at all because their laptops contained software
originating in certain countries.
-
Other barriers included references to cumbersome and non-transparent
regulations applied by Governments in other sectors, as well
as overly broad national security reservations or exemptions.
Once specific reference was made to local employment and payroll
taxes in the state of California.
- Feedback on priority markets included comments indicating that
the United States and the Caribbean were the only acceptable risks
for this industry, with the U.S. being the highest priority. Other
comments identified Australia, China, the European Union, Japan,
New Zealand and Mexico as priority markets. Countries of secondary
interest included Hong Kong, Switzerland, Taiwan, Korea and Singapore.
Some felt that other countries identified were too small to be
of much interest, or conversely, many Canadian companies were
too small to make the necessary inroads.
Construction and Related Engineering
Services
Background
Prior to and during the meetings, the Government of Canada provided
the following information to facilitate feedback from participants
and stakeholders:
What Canada requested
Canada requested that its priority markets for this sector remove
restrictions on the type of legal entity allowed for commercial
presence; foreign capital limits; constraints on the value of transactions
or assets allowed when foreign companies establish a commercial
presence; and local hiring, nationality and residency requirements.
Where things stand
Of the countries receiving a Canadian request, half have either
fully or partially met our request.
Where do we go from here?
The Government is proposing that we continue to focus on countries
that have not met our requests and that we continue to press for
new, improved and expanded commitments in all subsectors and all
modes of supply.
Feedback and Comments
-
While feedback about this sector was sparse, one participant
noted that the big construction companies are active in a small
number of offshore markets but that smaller firms — which
comprise the majority of the industry — did not see sufficient
payoff given the investment required to enter international
markets.
-
Another participant noted that requirements to hire and be
responsible for local trades constitute a significant barrier
in this sector — especially for SMEs. In addition, SMEs
in this sector may be more interested in providing consultancy
rather than contracting services. With respect to this type
of service, projects based on collaboration were thought to
be the most feasible, with the Caribbean being of interest for
design services.
-
The United States was confirmed as the priority market for
this sector, with a suggestion to also focus on China, Australia
and Mexico. Sudan was indicated as a market of secondary interest.
(Note that Sudan is not a member of the WTO and as such is not
party to the negotiations currently under way in that forum.)
-
Other priority barriers to trade include references to restrictions
on the type of legal entity allowed for commercial presence
and national-treatment restrictions on the licensing, standards
and qualification requirements for foreign workers. Inconsistent
application of immigration rules and nationality and residency
requirements in foreign markets also topped the list.
Environmental Services
Background
Prior to and during the meetings, the Government of Canada provided
the following information to facilitate feedback from participants
and stakeholders:
What Canada requested
Generally, Canada requested that its priority trading partners
in this sector take full commitments for all subsectors of environmental
services for all modes of supply, and further, that they eliminate
any existing restrictions.
Where things stand
More than half of the countries receiving a Canadian request have
made an offer in this sector. Only a few members have made improvements.
Indeed, the majority have not improved their offers, or more troubling,
some have provided an offer that results in fewer market access
commitments than previously existed.
Where do we go from here?
The Government is suggesting that, as the negotiations progress,
we focus on key subsectors for Canadian business, and that we press
on the removal of restrictions that limit the cross-border supply
and establishment of a commercial presence as methods of delivery
for these services. Priority markets to focus on include Europe,
Latin America and Asia.
Feedback and Comments
-
Some feedback indicated that the United States, China, Korea,
Poland and the Czech Republic were the priority markets to focus
on for firms providing water-treatment services. Other suggested
additions to the top echelon of priority markets, including
Australia, Japan, New Zealand, Mexico and Spain.
-
The main barriers to trade for this subsector were lack of
transparency regarding rules and regulations and restrictions
on the entry and stay of managers, professionals and experts.
-
Due to low participation from private-sector environmental
service providers, most of the comments in this area were given
from the perspective of NGOs.
-
From an NGO perspective, the Government was cautioned to make
sure energy efficiency goals are not compromised by rules on
subsidies. Specifically, concern was expressed about unintended
consequences of liberalization, such that a program delivered
through foreign aid could potentially contradict disciplines
on subsidies. For example, negotiations should not negatively
impact the work that the Canadian International Development
Agency (CIDA) does in providing assistance to Canadian environmental
services firms in other countries — work that ultimately
supports the Kyoto protocol. Conversely, as another participant
stated, CIDA’s activities can sometimes be perceived as
supporting the voluntary sector to the detriment of private-sector
SMEs (which are unable to compete for service projects against
a non-profit organization that is being funded by CIDA).
-
Some comments addressed the challenges of promoting environmental
measures and of convincing large companies to pay for a high
level of environmental performance. Other general comments were
also made about regulatory systems, in particular the belief
that there were very few incentives to improve the environment
in Canada and other countries. Acid rain legislation was given
as an example of effective regulation, and reference was made
to “technology-forcing” legislation in Europe. Other
comments suggested that there should be a stronger link between
Government officials working on trade issues and those working
on implementing the Kyoto protocol.
- Questions and concerns were raised about water and Canada’s
position on water services should we receive a request for commitments
in this area.
Federal government officials provided an update on subsidies
negotiations and committed to have their environmental services
officer follow up on the specific questions raised. Other
government responses to questions on environmental services.
Financial Services
Background
Prior to and during the meetings, the Government of Canada provided
the following information to facilitate feedback from participants
and stakeholders:
What Canada requested
In general terms, Canada requested that its priority trading partners
improve their commitments by removing restrictions on the type of
legal establishment allowed, on foreign ownership, and on permitted
business lines; by improving transparency in financial sector regulation;
and by removing regulations such as discriminatory capital requirements.
Where things stand
Many of the offers submitted by WTO members to date have included
an offer covering financial services, and some have partially met
Canada’s requests in this sector.
Where do we go from here?
Canada already has one of the most open financial sectors in the
world, and a key objective of the market access phase of negotiations
is to seek a comparable level of openness from those trading partners
we have identified as a priority.
Feedback and Comments
-
Feedback received supports the priority markets identified
to date, including those in Asia, Europe, North and South America
and the Caribbean. Expressions of interest for other markets
included the European Union and the United Kingdom.
-
Support was expressed for increasing competition for elements
of this sector such as stock exchanges. Some participants felt
that there were certain advantages to Canadian firms operating
in this subsector, but would only welcome increased competition
from foreign markets if it was of a reciprocal nature.
-
Discrimination in favour of local firms through regulation
or discriminatory capital requirements was identified as the
priority barrier for firms providing investment services. Lack
of transparency and regulatory and tax audit reciprocity —
especially with respect to the United States — were also
identified as barriers to trade. One participant noted that
its e-commerce activities in this area may be negatively affected
by the different tax and regulatory jurisdictions in Canada
and the United States.
-
Representatives from the insurance subsector indicated that
there are barriers to be dealt with domestically before consideration
can be made to international restrictions on trade. In addition,
representatives from this industry argued that Canada’s
regulations in this area are sound — especially from the
point of view of public protection and security — and
would not benefit from liberalization pressures. The requirement
to be licensed provincially before selling insurance in BC was
given as an example of a desirable regulation that should not
be changed as a result of liberalization.
-
Some other comments highlighted concern about the “commodifying”
of the insurance industry. One participant noted that this concern
was often expressed as a protectionist view — especially
at the broker level — in reaction to the growing complexity
of the industry. Such a view tended to oppose the retailing
of insurance through banks (which is currently prohibited in
Canada) and enhanced market access.
-
Another issue raised concerned “non-admitted carriers”
in the insurance industry. A difficult market has led to situations
where brokers, in order to show a profit, have gone to non-admitted/licensed
carriers to carry risk. The implication for consumer is that
these policies may not be as solid as those available through
companies operating in Canada.
Management Consulting Services
Background
Prior to and during the meetings, the Government of Canada provided
the following information to facilitate feedback from participants
and stakeholders:
What Canada requested
Canada made a limited number of requests in this sector, asking
(among other things) that its priority trading partners improve
their commitments with respect to the temporary entry and stay of
our management consultants, and reduce discriminatory qualification
and licensing requirements and procedures.
Where things stand
To date, some countries have met our request but, almost one third
of the countries receiving a Canadian request have not made an offer
in this sector at all.
Where do we go from here?
Canada is recommending that we focus our efforts on improving market
access and expanding the scope of commitments from priority countries
in Asia and the Pacific Rim.
Feedback and Comments
-
Participants noted that this industry was characterized by
more independent sole practitioners than by large firms, and
that for many, the big issue is access to the U.S. market. Specific
reference was made to the lack of consistency in procedures
at the U.S. border, and to restrictions on entry and stay of
management consultants.
-
Priority markets identified include the United States, Japan,
the United Kingdom, Mexico, the European Union, Russia, including
Siberia, and various markets in Latin America. (Note that Russia
is not yet a member of the WTO.)
-
Other barriers identified included lack of transparency in
regulations and arbitrary licensing requirements.
-
Some participants indicated that companies in this sector sometimes
enter foreign markets by following their clients to that market.
Others indicated that they actively look for clients in foreign
markets themselves by entering the market on their own with
a view to selling their expertise.
-
Companies in this sector also indicated that they seek clients
from a wide range of entities. Their potential client base includes
individual consumers, private-sector companies, Governments
and international financial institutions, among others.
-
There was general agreement that despite diverse priorities,
progress toward liberalization and enhanced market access is
good for the various players in this sector.
Mining Services
Background
Prior to and during the meetings, the Government of Canada provided
the following information to facilitate feedback from participants
and stakeholders:
What Canada requested
As with most of its requests, Canada asked priority countries for
this sector to meet Canada’s level of liberalization largely
by eliminating a number of discriminatory measures, such as restrictions
on the repatriation of profits and arbitrary business and licensing
requirements.
Where things stand
An analysis of the offers submitted to date reveals few improvements
for commitments in this sector. Further, more than 50% of the priority
markets identified for this sector have yet to make an offer.
Where do we go from here?
The Government suggested to participants that, for this sector,
we continue to focus our negotiating efforts on priority countries
that have not met our requests. Additionally, we should continue
to press for new, improved and expanded commitments in all subsectors
and all methods of service delivery.
Feedback and Comments
-
Participants in these sessions highlighted China as possibly
the most important market for this sector. Ghana was also mentioned
as a potential priority market. Other priority markets identified
include Libya and Iraq, although it should be noted that these
countries are not WTO members, and thus are not party to WTO
services negotiations at this time.
-
Some participants pointed to the security of mineral tenure
as the single biggest issue for explorers. Canadian service
providers will avoid countries that do not provide assurance
that mineral exploration investment is safe and that a mine
can be developed. Examples were given of situations in Venezuela
and the Philippines, where legal disputes on this issue are
effectively restricting exploration investment.
-
Other priority market access barriers identified included
undue restrictions on marketing materials (China) and onerous
business registration procedures that exist in some jurisdictions
at the very preliminary stages of exploration. Further, additional
licensing and testing requirements on equipment and machinery
that have already been approved in Canada can be quite restrictive,
as are punitive product and service liability environments.
-
Some contributions pointed to the onerous processes associated
with gaining access to land. Canada was cited as an example
of a jurisdiction where land access can be difficult. Service
providers acknowledged that access to land can be severely limited
by local interests with differing philosophical views of mining
activity and dissatisfaction with the way mineral rights are
granted in their countries. One participant stated that all
service providers can ask for in this instance is that the Government
provide moral support and confirm the company’s legal
right to operate.
-
In some countries, detailed agreements must be negotiated
with Governments even before a grass-roots exploration project
is started. Yet, in a matter of weeks, this huge up-front effort
will be wasted if the project is deemed to warrant no further
work. Some jurisdictions (Mali) require unmet expenditure commitments
to be forfeited to the government.
-
Some participants identified the movement of people as an
issue because of inconsistent, non-transparent and slow-moving
rules and procedures, which can be a major disincentive to operate
in a potential market. Brazil and Ethiopia (not a WTO member)
were cited as areas in which inconsistent rules can threaten
mining operations.
-
The smooth importation and exportation of equipment and supplies
that make the provision of services possible were also identified
as key to ensuring real market access. Examples of problems
in Bolivia and Brazil were given, where obstacles may include
corruption, unclear rules and/or reasons of national security.
-
Most explorers stated that they are happy to comply with local
hiring requirements, and that there are benefits associated
with them. Even the Canadian jurisdiction has such requirements.
However, these requirements become restrictions if they are
so onerous as to make it difficult and expensive to lay off
employees — Burkina Faso was cited as example of a market
where this occurs.
-
Some contributors identified the need for a general state of
good law and order that can help mitigate against attacks on
mining operations brought on by anti-mining sentiment, local
politics or theft (of equipment and payroll). Papua New Guinea,
Bolivia and the Philippines were given as examples of countries
in which these types of situations occur.
-
One participant suggested that efficient access to information
processes would be extremely valuable — especially for
reports outlining the results of previous exploration efforts.
Current processes for gaining access to these reports can be
costly and time-consuming, and many are plagued by corruption.
-
Contributors said that SMEs in this sector will select markets
with few non-tariff barriers rather than invest resources to
fight against the barrier of informing associations or government
agencies of the existence of the restriction.
Oil and Gas Services
Background
Prior to and during the meetings, the Government of Canada provided
the following information to facilitate feedback from participants
and stakeholders:
What Canada requested
Canada made numerous requests in this sector, asking its priority
trading partners to eliminate restrictions on the repatriation of
profits and on the entry of professionals and equipment, and to
eliminate arbitrary business and licensing requirements.
Where things stand
Sixty percent of the countries receiving a Canadian request have
also made an offer in this sector, but only 27 percent of those
have partially met our requests.
Where do we go from here?
Based on the analysis of the gaps between offers being submitted
at the WTO and Canada’s initial market requests, the Government
suggested that for this sector, we continue to focus our negotiating
efforts on those priority countries that have not met our requests.
Additionally, we should continue to press for new, improved and
expanded commitments in all subsectors and in all methods of service
delivery.
Feedback and Comments
-
Some participants noted the difference between offshore and
onshore oil and gas services in this sector. In particular,
the number of SMEs providing offshore services is larger than
for onshore — providing valuable export capacity with
respect to these services. In addition, it was noted that offshore
engineering is a unique skill and that many local engineering
firms in the Maritimes had been acquired by other national or
international firms because of their expertise in this area.
-
The regulatory approval process for this sector is extremely
cumbersome, and some in the industry wonder if international
standards should be adopted to increase the profitability of
the industry. At the same time, industry representatives value
transparency with respect to the rules and regulations of business
activity to combat the problems associated with inconsistent
application, arbitrary changes and a general lack of knowledge.
-
Participant feedback also indicated that restrictions on the
entry of equipment and tools, and discrimination in favour of
suppliers from other countries or, in favour of local companies
(Greenland, Norway and the United States were cited as examples)
were particularly problematic.
-
Other market access barriers identified as priorities included
restrictions on the temporary entry and stay of energy services
managers, professionals and experts; restrictions on the repatriation
of profits, and import and export restrictions.
-
One participant indicated that Brazil’s tax structure
with 17 different taxes was a significant barrier to services
trade.
-
Dissatisfaction was expressed with Canada’s domestic
Income Tax Act. Participants claimed that Canadian businesses
are at a disadvantage with enterprises from the United Kingdom,
Germany and the United States when trading overseas, as businesses
from those countries receive significant tax breaks from their
Governments.
-
One participant encouraged Canada to provide more direct export
subsidies to SMEs, and compared our program unfavourably to
Australia in terms of dollars committed.
-
Some participants stated that more incentives are needed for
Canadians who want to work overseas.
-
Comments were also made indicating that some in this industry
would like to see Canada liberalize its own investment regime
— specifically with respect to the requirement that a
minimum portion of the board of directors of a business in Canada
be Canadian. In so doing, Canada would benefit by becoming a
more competitive recipient for foreign direct investment.
-
Generally, participants expressed satisfaction with the priority
countries/markets identified by the Government for this sector,
and offered input to indicate that the top seven markets are
the United States, Brazil, Australia, Norway, United Kingdom,
Mexico and China. Suggested additions to the list of priority
markets overall include New Zealand, Greenland, Iraq, Angola,
Tunisia and South Africa. (Note that Iraq and Greenland are
not members of the WTO and thus are not party to negotiations
for this sector.)
-
Other feedback indicated that less emphasis should be placed
on the U.S. market, and that efforts should focus on gaining
commitments in the circumpolar region — especially from
the perspective of SMEs in this sector. Rather than invest directly
in these markets, SMEs would prefer to use strategic alliances,
primarily through joint-venture arrangements.
Professional Services
Background
Prior to and during the meetings, the Government of Canada provided
the following information to facilitate feedback from participants
and stakeholders:
What Canada requested
Professional services include legal services, accounting, architectural
services and engineering services. While the specific priority markets
and the nature and number of requests Canada made in each sector
differed somewhat, most involved requesting that our trading partners
improve their commitments for professional services through the
elimination of trade barriers related to, for example, temporary
entry regulations, investment and ownership limitations, and nationality
and citizenship requirements.
Where things stand
In every professional services subsector, there has been partial
improvement in the offers of some members, and in some cases our
requests were met. However, much work still remains to be done as
many members showed little or no improvement in their offers, or
they failed to make an offer altogether.
Where do we go from here?
The Government suggests that we pursue negotiations in professional
services by focusing on key subsectors for Canadian businesses and
by emphasizing the removal of restrictions that limit the cross-border,
commercial presence and temporary movement of people as methods
of service delivery. Other avenues to explore include developing
rules on regulatory transparency and encouraging mutual recognition
of credentials. Markets that the Government is proposing to focus
on are generally in Latin America, ASEAN and the European Union.
Feedback and Comments
-
Most participants emphasized the importance of the movement
of people for professional services. Whether it is for an accountant,
a lawyer, an architect or an engineer, the ability to enter
a foreign market to deliver services should be a key focus for
the Government.
-
Some contributors expressed the need to ensure that professional
credentials be recognized and that any efforts the Government
can make to facilitate this process should be pursued. Most
participants recognized that it was not the Government’s
role to pursue harmonization of professional credentials, however,
encouraging disciplines for transparency in regulatory regimes,
and for Mutual Recognition Agreements (MRAs) was thought to
be helpful.
-
One attendee felt that the pursuit of transparency and disciplines
on domestic regulation would be particularly helpful for SMEs
by arming them with as much information as possible before they
enter a market.
-
Some contributors expressed comfort with Canada’s own
professional services offer and the improvements contained therein,
and felt that it was the correct approach to encourage others
to meet our own level of openness.
Accounting services
-
The two issues that are key for Chartered General Accountants
(CGAs) are the recognition of competencies and the unrestricted
movement of people. It was noted that CGAs tend to move into
foreign markets along with their clients.
-
Similarly, other participants from the accounting profession
indicated that larger Canadian firms are generally having success
in accessing markets. Most problems that arise are due to differing
accounting standards and the movement of people. Some noted
that, in terms of this kind of movement, the Canada-U.S. border
is the most important.
Architectural services
-
Contributors from the engineering profession demonstrated a
wide range of interests for their priority markets. Most indicated
the United States and China as key priority markets, while others
highlighted countries in Latin America (Mexico, Chile, Costa
Rica), the Caribbean (St. Kitts, Barbados) and the European
Union. Other additions to the list of priority markets include
Australia, New Zealand, Poland, the Czech Republic, and to a
lesser degree, Malaysia.
-
Participants identified restrictions on forms of association;
the scope of practice rights; and the licensing and qualification
requirements and procedures contained in the domestic regulation
of foreign markets to be key barriers to trade in services.
Engineering services
-
Contributors from the engineering profession demonstrated a
wide range of interests for their priority markets. Most indicated
the United States and China as key priority markets, while others
highlighted Indonesia, Sri Lanka, India, Nepal and the Caribbean.
-
Most participants identified domestic regulation as the key
barrier to trade in services — specifically, the licensing
and qualification requirements and procedures for this profession
in foreign markets. One participant expressed frustration that
even if access to a particular market is gained at the federal
level, inconsistent practices at the sub-federal level of that
market are frustrating.
Legal services
-
Some feedback indicated that the balance between opening up
this sector domestically and pushing for opening in foreign
markets is key. Consequently, because of the issues of credentials,
qualifications and public protection, the sector would most
likely focus on exploring the liberalization of foreign legal
consultancy services. Other examples of services that could
be provided included advice to developing markets on setting
up legal systems and infrastructure, in addition to advice on
the creation and enforcement of laws. Brazil, India, Mexico
and a host of countries in Africa were cited as markets of potential
interest for this type of activity.
-
One participant representing the legal profession outlined
difficulties with conducting legal work in mainland China. Barriers
identified included national restrictions on lawyers who have
standing before Chinese courts; and the ability of foreign firms
to practice Chinese law, to hire local Chinese lawyers or to
associate with Chinese law firms. Notarization of documents
was also identified as being problematic, as the Chinese require
Chinese government and Consular endorsement. Finally, certain
models of practice for foreign firms, as set out in China’s
Lawyers’ Act, were deemed to be impractical or unworkable.
-
The United States was identified as the priority market for
this profession, followed by the European Union, Hong Kong,
Australia and New Zealand. Other contributors felt that China
and India should be added to the list.
-
Licensing and qualification requirements and procedures contained
in a foreign market’s domestic regulations were identified
as key barriers to market access. In addition, one participant
noted that, while law firms are generally partnerships, those
arrangements requiring joint liability can be problematic. Requirements
for the U.K. were cited as an example.
-
Other barriers to services trade include problems with value
for service, protection of intellectual property, and transparency
of regulations. Technical barriers include incompatibility of
computer systems and electronic commerce infrastructures. China
was cited as an example of a market where all these barriers
are prevalent.
Research and Development Services
Background
Prior to and during the meetings, the Government of Canada provided
the following information to facilitate feedback from participants
and stakeholders:
What Canada requested
Canada made numerous requests in this sector and was generally
asking that its priority trading partners remove impediments such
as requirements to use a local partner to provide services, or requirements
for local hiring.
Where things stand
Many of the countries Canada made a request to in this sector have
yet to make an offer. However, a limited number of countries have
met our requests.
Where do we go from here?
Canada proposes to focus its efforts on achieving liberalization
in the social sciences and humanities subsector of R&D services.
With respect to this subsector, we will push for the removal of
restrictions on the cross-border and temporary movement of persons
as methods of delivering these services. Key markets of interest
are in Latin America, India, Africa and the Middle East.
Feedback and Comments
-
Feedback indicated that the top priority markets are the United
States, Japan, and the European Union. Some participants suggested
the addition of China as a priority country. Other suggested
additions included South Korea, Indonesia, Malaysia and Russia/Siberia
(not yet a member of the WTO).
-
Common barriers to trade highlighted by some participants included
state and local “buy America” provisions, which
restrict the ability of Canadian firms to supply R&D services
to local authorities; difficulty in securing local recognition
of qualifications for highly qualified personnel; and protection
for intellectual property — some Canadian firms are concerned
because they have found themselves under pressure, as part of
a normal commercial transaction, to provide the purchasing country
with underlying technical information.
-
One participant highlighted other barriers to trade, which
include Grain Safety Assurance Regulations applicable in the
European Union and Japan. A potential barrier to trade may also
be the Bio-safety Protocol that is applicable to the European
Union, Japan and other countries. There was also a suggestion
that an additional barrier to trade was the lack of market data
on potential markets, including information on opportunities,
contacts and the rules of engagement in that market.
Telecommunications Services
Background
Prior to and during the meetings, the Government of Canada provided
the following information to facilitate feedback from participants
and stakeholders:
What Canada requested
In its initial request to priority countries, Canada asked that
its priority trading partners improve their commitments for telecommunications
services, notably with respect to the reduction of discriminatory
measures and arbitrary and non-transparent processes for the approval
of operating permits and licences. Canada also requested that all
members adopt the pro-competitive regulatory principles of the reference
paper.
Where things stand
Many of the priority countries have submitted an offer for this
sector, some with partial improvements; however, some restrictions
remain.
Where do we go from here?
Federal trade officials are suggesting that for this sector, we
continue to press priority members to remove any remaining restrictions
on market access and national treatment that affect trade in these
services. Canada also proposes to encourage members to adopt the
regulatory principles of the reference paper.
Feedback and Comments
-
One participant commented that, for a number of reasons, there
are few Canadian telecommunications carriers who are interested
in foreign markets, so pursuing liberalization in this sector
makes little sense.
-
Other comments indicated support for the notion that telecom
companies may want to become active in the next five to 10 years,
and that liberalization in this sector generally is a positive
step for Canadian ICT firms that sell their products to foreign
telecommunications service providers.
-
In terms of priority markets identified, the United States,
Australia, Hong Kong, Taiwan and the European Union topped the
list. Suggested additions to the list include China, and to
a lesser degree of priority, the Sudan (note that the Sudan
is not a member of the WTO). Other priority countries of interest
include Panama, Switzerland, Japan, Korea and New Zealand.
-
Some common barriers to trade include restrictions on foreign
equity participation and geographical limitations maintained
by China on facilities-based international carrier competition.
-
Another barrier highlighted was the lack of transparency, predictability
and timeliness with respect to the awarding of operating permits
and licences that was experienced in some markets.
-
Some participants were concerned about the definition of communications
services and the possible overlap with the cultural services
industry.
-
Others observed that the telecommunications industry is often
consulted, but this has more to do with changes that we would
make to our own Canadian regulatory regime — especially
with respect to the issue of foreign ownership. Some participants
wanted to know if Canada’s own domestic “liberalization”
changes are a factor in or affected by the international services
trade negotiations.
Travel and Tourism Services
Background
Prior to and during the meetings, the Government of Canada provided
the following information to facilitate feedback from participants
and stakeholders:
What Canada requested
Canada made relatively few requests in this sector. Of the requests
that it did make, Canada asked that its priority trading partners
reduce the impediments faced by Canadian service providers abroad,
notably requirements for economic needs tests, citizenship requirements
to obtain certain types of licences, and restrictions on market
access for small and medium-sized hotels.
Where things stand
At this point in the negotiations, numerous offers have been made
in this sector, and several of the countries have met Canada’s
requests.
Where do we go from here?
Canada proposes to focus on the countries that have not met our
requests, and will place particular emphasis on the removal of restrictions
affecting the ability of tourism service providers to establish
a presence in a foreign market.
Feedback and Comments
-
Some participants provided comments that point to their interest
in trade development for this sector rather than trade liberalization
or facilitation. For example, comments included inquiries as
to whether the negotiations could do anything to facilitate
“cultural” tourism for the aging baby boomer segment
of the population.
-
Other participants felt that the Government should also focus
on inbound investment and movement of tourists into Canada instead
of only looking at the barriers we face in external markets.
Discussion centred around the importance of related issues such
as visas, immigration rules, transportation and security. The
U.S. Visit Program was cited as an example of a barrier to incoming
tourists that could add three minutes to a border crossing.
At land borders, those three minutes could result in a delay
of two to four hours. This delay was perceived as unacceptable
to tourists coming into British Columbia.
-
Some feedback centred around the restrictions maintained by
Canada such as regulations requiring citizenship or residency
for tour guides. The rationale for these types of regulations
included the use of this sector as a seasonal employment generator
and an important outlet for Aboriginal skills and expertise.
There was also discussion about foreign investment limitations
in the air transportation infrastructure. Some participants
indicated they would like to see the limit increased from 29%
to 49%.
Input on Educational and Health-Care
Services
Background
The Government has no commitments in either health services or,
educational services. Further, we would like to underline the message
that we will maintain and preserve the ability of all levels of
Government to regulate and set policy in areas of importance to
Canadians, and that we will not negotiate our health, public education
or social services. Further, we will maintain the flexibility to
pursue our cultural policy objectives. However, within Canada, businesses
that do export their expertise in these sectors identified some
barriers to trade.
Feedback and Comments
-
Some participants shared concerns about Canada’s visa
requirements. One particular stakeholder who provides educational
services abroad via establishing a presence in a foreign market
or using e-commerce technology, commented that they are encountering
significant difficulties in providing these services domestically
because almost 60% of their potential clientele cannot obtain
visas or experience serious delays. Australia was singled out
as an example to follow with the recent introduction of greater
flexibility in its policies on student visas, which brings the
benefit of generating revenues from foreign student fees.
-
Other participants indicated that Chile’s performance
and commercial presence requirements relating to businesses
providing education services are also problematic.
- One participant representing the chiropractic profession indicated
that issues around recognition of credentials created difficulties
in entering the U.S. and Australian markets.
Real Estate, Distribution and Transportation
Services
-
Sectoral consultations for real estate services or distribution
services did not occur in these meetings due to limited interest
from the business community.
-
Separate consultations were undertaken for transportation
services - Contact Transport Canada
for a copy of their report.
The Way Forward
Beginning with the feedback provided through this consultation
exercise, federal trade officials will begin the process of fine-tuning
Canada’s services trade negotiating strategy with respect
to the sectors in which we intend to negotiate. The guidance, concerns
and questions raised by stakeholders in these sessions form a solid
base, to which feedback obtained throughout the summer and fall
will be added. Consultations will be ongoing in a variety of forums,
and the Government of Canada will continue to work closely with
its provincial colleagues and municipal organizations, NGO groups
and other stakeholders to ensure that Canada’s interests are
correctly identified and diligently pursued in the international
trade arenas.
Ongoing Consultations
Despite the timely nature of this particular series of consultative
meetings, it is worth noting that the formation of Canadian positions
and negotiating strategies is an ongoing process. The speed with
which the GATS negotiations and other WTO discussions take place
is difficult to predict, and Canadian positions and strategies will
continue to evolve throughout the negotiating process.
These meetings are part of a broader ongoing consultative process.
Ongoing consultations are conducted through the Sectoral Advisory
Groups on International Trade (SAGITs), through formal consultations
with provincial representatives, through consultations with Parliamentary
Committees such as the Standing Committee on Foreign Affairs and
International Trade (SCFAIT), through Web site dissemination of
information and solicitation of views, and through additional multi-stakeholder
consultations.
The views of Canadian stakeholders are invited on a continuing
basis. We welcome the views of anyone who did not have the opportunity
to participate in the workshops. By visiting the Consultations
Web page, Canadians can provide input on specific service industries
discussed in this round of consultations.
For general information on the GATS negotiations, governmental
contacts on different issues relevant to the negotiations, and an
opportunity to comment on the negotiations, We
want to hear from you!
1. Postponed until fall
2004.
2. Not all of the messages
conveyed to the Government, nor all of the market access barriers
to trade in services that were identified, can be addressed through
trade agreements such as the GATS. Regardless, the Government of
Canada is interested in learning about all of the difficulties and
concerns of Canadians, and wishes to reflect and share that input
with other Government officials who are working to address these
issues in other forums.
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