Regional and Bilateral Agreements
Canada-Costa Rica Free Trade Agreement
Backgrounder - Summary of the Canada-Costa Rica Free Trade Agreement
Market Access for Goods
Tariff Elimination
Taking into account the difference in the levels of development and size of the two economies, Canada will liberalize its market more quickly than Costa Rica. Costa Rica will eliminate its tariffs immediately on some 67% of its tariff lines, and over a period of up to 14 years for the remaining goods, while Canada will provide immediate duty free access for some 86% of its tariff lines, the remaining goods being subject to tariff elimination over a period of up to 8 years. This agreement will give Canadian exporters an advantage over their principal competitors in the Costa Rican market, as well as level the playing field with Costa Rica's trading partners already benefiting from preferential market access.
Industrial Sectors
Tariffs on most originating industrial goods traded between Canada and Costa Rica will be eliminated upon implementation of the Agreement. This includes some key Canadian export products such as automotive goods, including trucks and parts, pre-fabricated buildings and some construction products such as steel structures. More broadly, the items in this category include most fish and fish products; assorted products of the chemical and allied industries; raw hides and leather; wood pulp; glass products; most metals and their related products such as tools; a large majority of machinery including electrical, electronic and telecommunications equipment; varied types of transport equipment; and a large majority of scientific and medical equipment.
Some Canadian tariffs, such as those on certain plastics products, will be eliminated over 4 years while tariffs on other goods such as textiles, apparel and footwear will be eliminated over 7 years. In the case of Costa Rica, tariffs on some products will be eliminated over 7 years; this includes most textiles, apparel and footwear as well as some products like plastics, paper and metal. Industrial products for which Costa Rica will eliminate tariffs over 14 years include some specific plastics products and most wood and furniture products.
Agricultural Sectors
This agreement will achieve market access gains for 94% of Canada's dutiable agri-food exports to Costa Rica. These gains include immediate tariff elimination for some products and gradual tariff elimination over either 7 or 14 years for most others. In addition, for a number of agri-food product categories excluded from tariff elimination, Costa Rica is providing either a duty free bilateral tariff rate quota (TRQ), as in the case of pork, or improved access to existing seasonal global tariff rate quotas, as in the case of onions and certain pulse crops.
Among those agri-food products of export interest to Canada for which tariffs are being eliminated are the following: 1) apples, cranberries, blueberries, lentils, buckwheat, chickpeas, canary seed, barley flour, canola seeds, maple syrup, wine, and whiskey in the immediate tariff elimination category; 2) frozen french fries, certain dry beans and dry peas in the 7 year phase out category; and 3) flour, canola oil, margarine, honey, breakfast cereals, pasta, mineral waters and beer in the 14 year phase out category.
Under the Agreement, both countries have agreed to exclude dairy, poultry, egg and beef products from tariff reduction. In addition, Costa Rica will exclude from tariff reduction a number of import sensitive agri-food products, including potatoes and some fresh and frozen vegetable products.
Free Trade Zones
As is common in some Central and South American countries, Costa Rica has an extensive Free Trade Zones (FTZs) regime, which has the effect of subsidizing Costa Rican manufacturers on condition of export. For those goods currently being shipped to Canada from FTZs, Canada will defer the start of tariff reductions until the subsidy is fully eliminated and has not been replaced by measures having an equivalent effect. This includes products such as textiles, apparel, footwear, plastics, rubber and leather articles. For goods originating outside FTZs, tariff reductions will follow the negotiated tariff elimination schedule.
Safeguards
As in other free trade agreements, Canada and Costa Rica have agreed to include bilateral safeguard provisions in the unlikely event they are necessary. In the case of injurious import surges the safeguard measures will allow countries to take safeguard actions twice on any product, with an appropriate delay between actions, over the transition period, for a maximum of 3 years on each occasion. For most products, the transition period for both countries is 7 years. However, for those products on which Costa Rica will eliminate its tariffs over 14 years, the transition period will cover the duration of the tariff elimination.
For some agricultural, textiles and apparel products, Canada and Costa Rica will be able to resort to special safeguards to guard against import surges during the phase-out period. For textiles and apparel products, the special safeguards provisions are based on those included in the North American Free Trade Agreement (NAFTA) and Canada-Chile Free Trade Agreement (CCFTA).
Rules of origin
Canada's objective was to seek rules of origin that are clear, as simple as possible and leave little room for administrative discretion, while reflecting sectoral concerns, overall consistency with Canada's position in the Free Trade Area of the Americas (FTAA) negotiations and ensuring that the benefits of the Agreement are for goods substantially produced in Costa Rica or Canada. Using the rules of origin in the CCFTA and in the Central America-Chile Free Trade Agreement as a basis, Canada and Costa Rica agreed to clearer and more liberal rules of origin that will provide greater certainty for exporters and help prevent disputes over the interpretation and application of the rules of origin. The rules range from liberal rules of origin for fish and marine products, that take into consideration the commercial realities of global sourcing and aquaculture, to rules of origin for agricultural and agri-food products, chemical and plastic products and textiles and apparel that closely follow those of the NAFTA. In all instances and for all goods, the interests, both domestic and export, of both countries were taken into consideration.
Trade facilitation
The Canada-Costa Rica Free Trade Agreement (CCRFTA) is precedential in that it represents the first bilateral free trade agreement containing innovative stand-alone provisions on trade facilitation. Canadian exporters to Costa Rica will benefit from the increased efficiency of trade procedures and the reduction, simplification and modernization of border-related requirements, procedures and formalities. Canada has been a leading proponent at the World Trade Organization (WTO) for binding rules and disciplines on trade facilitation. Achieving trade facilitation provisions in a bilateral agreement should assist our efforts in securing such disciplines multilaterally in the WTO and regionally in the FTAA.
Customs procedures
The Chapter on Customs Procedures provides efficient and effective customs procedures which will facilitate trade while also ensuring that the Parties play by the rules. The text covers subjects such as the certification of origin, administration and enforcement, advance rulings, review and appeal of advance rulings and origin determinations, uniform regulations and cooperation. The text will ensure customs practices designed to provide effective verification procedures together with transparent and predictable border processes. The Parties have also laid the foundation to future cooperation between the two customs administrations to allow for the sharing of experiences and expertise as well as to ensure that the agreed customs procedures will be implemented appropriately and will remain effective. The closer relationship established between the two customs administrations will also contribute to further cooperation in the implementation of the customs-related business facilitation measures agreed in the context of the FTAA.
Sanitary and phytosanitary measures
Both Parties have agreed that bilateral Sanitary and Phytosanitary (SPS) issues would continue to be subject to the WTO Agreement on the Application of Sanitary and Phytosanitary Measures, and that there was no need for new rules under the FTA. Canada's position that the WTO dispute settlement procedures continue to apply to SPS issues, as opposed to those established in this Agreement, was respected. Finally, it was agreed that a Committee on Sanitary and Phytosanitary measures would be created, with the objective of providing Canada and Costa Rica with a regular forum for consultations, including dispute avoidance and technical cooperation.
Investment and services
Both Canada and Costa Rica are currently engaged in services negotiations at the WTO and in the FTAA process. In addition, a Foreign Investment Protection Agreement (FIPA) between Canada and Costa-Rica came into force in September 1999 and, as it currently stands, constitutes an adequate framework to govern the bilateral investment relationship. Given this context, the services and investment provisions in the Canada-Costa Rica FTA are aimed at establishing some principles to further facilitate bilateral investment and trade in services. Provisions include: a statement on joint cooperation in regional and multilateral trade fora; a procedure to exchange information on measures affecting investment and trade in services; a call to regulatory bodies in both countries to cooperate with a view to achieving mutual recognition for the licensing and the certification of professional service providers; statements taking note of the existence of the FIPA and of existing WTO rights and obligations with respect to the recognition of qualification and licensing requirements; and a review process 3 years after the entry into force of the agreement of developments related to trade in services.
Temporary entry
The provision on temporary entry in the FTA recognizes the important link between the movement of business people and trade in goods and services, and foreign investment. The article states that the existing and future immigration laws and regulations of Canada and Costa Rica continue to apply and obliges the Parties to facilitate the temporary entry for intra-company transferees, business visitors, after-sales service suppliers, and certain family members. A review of the article is to occur in 3 years and, in one year, the Parties will exchange detailed information on current temporary entry requirements to promote the mobility of business people and foster bilateral trade and investment.
Government procurement
After careful examination by each country, it was agreed that the two countries will continue to cooperate in regional and multilateral fora with the aim of achieving further liberalisation and transparency in government procurement. The text developed by the two Parties recognizes this understanding.
Antidumping
Canada and Costa Rica agreed to provisions that are intended to promote mutual objectives that go beyond WTO obligations, and that are important to both Parties from the perspective of regional negotiations like the FTAA and multilateral positions at the WTO. These objectives, which are already contained in Canadian law, include provisions for an examination of the public interest, the possibility of imposing duties less than the full margin of dumping, a transparent and predictable duty assessment regime and an assessment of the conditions of competition with respect to the dumped products and the domestic like products. The Parties also agreed to reiterate the importance of transparency and procedural fairness in the conduct of antidumping investigations.
Competition policy
Canada was seeking to negotiate a more comprehensive framework on competition policy that would build and expand upon what had been negotiated in the CCFTA, NAFTA and the Canada-Israel Free Trade Agreement (CIFTA). It was also the intention of Canada and Costa Rica to agree on a model that could serve as a the basis of a competition policy chapter within the FTAA, by providing a benchmark for countries in the design, implementation and application of competition law and policy and for cooperation among competition authorities.
The FTA's competition policy chapter includes an obligation on Parties to adopt or maintain a law proscribing anti-competitive activities, including cartels, abuse of dominance and anti-competitive mergers. It also includes an obligation to establish or maintain an impartial and independent competition authority to ensure the effective application and enforcement of such laws. In addition, the framework provides that Parties are to ensure that competition laws are transparent and applied in a non-discriminatory manner, that certain minimum procedural guarantees are in place and that an appeal or review process is available. Finally, the framework includes mechanisms to promote cooperation and coordination of investigations, such as notification, consultations and exchange of information, as well as a recognition of the importance of technical assistance initiatives related to competition policy.
Culture
The preservation and promotion of cultural identity is of great importance to Canada and, in all international trade agreements, our aim is to ensure that Canada maintains the maximum flexibility to pursue its domestic cultural policy objectives. The cultural exemption agreed to in the Canada-Costa Rica FTA is modeled after the one included in the CCFTA and the CIFTA. Both Parties also agreed to include preambular language recognizing the ability of states to preserve, develop and implement cultural policies for the purpose of strengthening cultural diversity.
Institutional provisions and dispute settlement
The institutional provisions of the CCRFTA includes a mechanism for the effective resolution of State-to-State disputes and provides a framework for the overall management of the Agreement.
A Free Trade Commission, comprised of each Party's Trade Ministers or their designees, is established to supervise the implementation of the Agreement and to oversee its future development. Management of the day to day operation of the Agreement, including supervision of the various committees, is the responsibility of the Free Trade Coordinators appointed by each Party.
As for State-to-State dispute settlement, the CCRFTA establishes a dispute resolution mechanism based on that found in NAFTA Chapter 20. The first step involves consultations between the Parties, followed, if necessary, by the selection of a Panel to rule on the dispute based on the arguments presented by the Parties and the obligations contained in the Agreement. The Parties are expected to implement Panel decisions failing which the complaining Party may suspend concessions. The procedure for suspending concessions is based on that found in the WTO and involves a determination of non-compliance and a determination of what constitutes an appropriate level of suspension of concessions.
Parallel Accords
Environment cooperation
Canada and Costa Rica have developed an environmental side agreement which will promote a strong and ongoing environmental partnership based on meaningful environmental commitments. The Canada-Costa Rica Agreement on Environmental Cooperation (CCRAEC) complements the trade agreement and provides a framework for bilateral cooperation on environmental issues. The CCRAEC commits the Parties to ensure their laws provide for high levels of environmental protection and to effectively enforce those environmental laws. It also commits the Parties to ensure that environmental laws are promptly published and that, to the extent possible, proposed environmental laws are made available in advance for public comment. Parties are also to ensure the availability of private access to remedies and to ensure that administrative, quasi-judicial and judicial proceedings are fair, open and equitable.
The CCRAEC will be implemented through government to government cooperation and will undertake cooperative activities to promote the achievement of the objectives of the agreement. The Parties will seek to inform and, where possible, involve the public in activities undertaken pursuant to the agreement, as well as make public reports prepared with respect to such activities. The agreement provides that any citizen or non-governmental organization resident in either country may submit a written question to either Party regarding that Party's commitment to effectively enforce its environmental laws. Parties will acknowledge all questions in writing and will provide a response in a timely manner. Summaries of both the question and the response will be made public.
Labour cooperation
The Canada-Costa Rica Agreement on Labour Cooperation (CCRALC) provides a framework for dealing with labour issues in the context of the CCRFTA and demonstrates Canada's commitment to promoting and protecting workers' rights in the context of trade liberalization in the Americas. This is achieved through a set of enforceable obligations, a cooperative work program and a mechanism (public communication process) designed to ensure the effective enforcement of domestic labour law related to ten labour principles and rights, including those related to the 1998 International Labour Organization (ILO) Declaration on the Fundamental Principles and Rights at Work.
The cooperative work program aims at promoting the achievement of the objectives of the CCRALC and may include, among others, seminars, training sessions, joint research projects and technical assistance. The public communication process is designed to allow the public to raise concerns about the effective application of labour law in the other country. For principles and rights related to the 1998 ILO Declaration, this process can lead to ministerial consultations and an independent third-party review.
Updated on September 20, 2001
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