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I have extracted the
Canadian entry from this report below...
CANADA
TRADE SUMMARY
The U.S. goods trade deficit with Canada was $32.5
billion in 2012, down $2.0 billion from 2011. U.S. goods exports in 2012
were $291.8 billion, up 3.9 percent from the previous year.
Corresponding U.S. imports from Canada were $324.2 billion, up 2.8
percent. Canada is currently the largest export market for U.S. goods.
U.S. exports of private commercial services (i.e.,
excluding military and government) to Canada were $56.1 billion in 2011
(latest data available), and U.S. imports were $28.0 billion. Sales of
services in Canada by majority U.S.-owned affiliates were $117.3 billion
in 2010 (latest data available), while sales of services in the United
States by majority Canada-owned firms were $68.9 billion
The stock of U.S. foreign direct investment (FDI) in
Canada was $319.0 billion in 2011 (latest data available), up from
$289.5 billion in 2010. U.S. FDI in Canada is led by the nonbank holding
companies, manufacturing, and finance/ insurance sectors.
The North American Free Trade Agreement
The North American Free Trade Agreement (NAFTA), signed
by the United States, Canada, and Mexico (“the Parties”), entered into
force on January 1, 1994. At the same time, the United States suspended
the United States-Canada Free Trade Agreement, which had entered into
force in 1989. Under the NAFTA, the Parties progressively eliminated
tariffs and nontariff barriers to trade in goods among them, provided
improved access for services, established strong rules on investment,
and strengthened protection of intellectual property rights. After
signing the NAFTA, the Parties concluded supplemental agreements on
labor and environment, under which the Parties are, among other things,
obligated to effectively enforce their environmental and labor laws. The
agreements also provide frameworks for cooperation among the Parties on
a wide variety of labor and environmental issues.
In 2012, Canada and Mexico became participants in the
Trans-Pacific Partnership (TPP) negotiations, through which the United
States and 10 other Asia-Pacific partners are seeking to establish a
comprehensive, next-generation regional agreement to liberalize trade
and investment. This agreement will advance U.S. economic interests with
some of the fastest-growing economies in the world; expand U.S. exports,
which are critical to the creation and retention of jobs in the United
States; and serve as a potential platform for economic integration
across the Asia-Pacific region. The TPP agreement will include ambitious
commitments on goods, services, and other traditional trade and
investment matters. It will also include a range of new and emerging
issues to address trade concerns our businesses and workers face in the
21st century. In addition to the United States, Canada and Mexico, the
TPP negotiating partners currently include Australia, Brunei, Chile,
Malaysia, New Zealand, Peru, Singapore, and Vietnam.
IMPORT POLICIES
Tariffs
Canada eliminated tariffs on all industrial and most
agricultural products imported from the United States on January 1,
1998, under the terms of the NAFTA. Canada has been phasing out the
remaining MFN tariffs on imported machinery and equipment and intends to
complete this process by 2015.
Agricultural Supply Management
Canada uses supply management systems to regulate its
dairy, chicken, turkey, and egg industries. Canada’s supply management
regime involves production quotas, producer marketing boards to regulate
price and supply, and tariff-rate quotas (TRQs). Canada’s supply
management regime severely limits the ability of U.S. producers to
increase exports to Canada above the TRQ levels and inflates the prices
Canadians pay for dairy and poultry products. One of the barriers facing
U.S. exports of dairy products is a 245 percent ad valorem tariff on
breaded cheese sticks. The United States is pressing for expanded
inquota quantities for these products.
Canada’s compositional standards for cheese entered into
force on December 14, 2008, and further restrict U.S. access of certain
dairy products to the Canadian dairy market. These regulations limit the
ingredients that can be used in cheese making, set a minimum for raw
milk in the cheese making process, and make cheese importers more
accountable for ensuring that the imported product is in full
compliance. The regulations also are applicable to cheese that is listed
as an ingredient in processed food.
Canada announced in 2008 its intention to implement the
Special Safeguard (SSG) under the WTO Agreement on Agriculture for
supply-managed goods. The SSG is a provision that would allow additional
duties to be imposed on over-quota trade when import volumes rise above
a certain level, or if prices fall below a certain level. Canada
continues to work on the details of this mechanism and monitor
over-quota trade, but has not established a timeframe for announcing the
SSG price and volume triggers.
The Canadian Wheat Board
The United States has had longstanding concerns about the
monopolistic marketing practices of the Canadian Wheat Board. Canada
passed the Marketing Freedom for Grain Farmers Act in 2011 to transition
the Canadian Wheat Board from a crown corporation to a commercial entity
over a five-year period. The legislation allowed Western Canadian
farmers to sell wheat on the open market beginning August 1, 2012.
Since the changes brought about by the Marketing Freedom
for Grain Farmers Act are important to stakeholders involved in
U.S.-Canada trade of grains and oilseeds, several not for profit
associations from both the United States and Canada created a task force
in order to provide information to facilitate the marketing of grain and
seed between the United States and Canada.
Restrictions on U.S. Grain Exports
Canada has varietal registration requirements for wheat
and barley. Canada eliminated a portion of the varietal controls in 2008
by no longer requiring that each registered variety of grain be visually
distinguishable based on a system of Kernel Visual Distinguishability (KVD).
This KVD requirement limited U.S. export access to Canada’s grain market
because U.S. varieties are not visually distinct and cannot be
registered for use in Canada. While this policy change is an
improvement, it will take years before U.S. wheat varieties are able to
complete the necessary field trials to determine whether they will be
registered for use in Canada. In the meantime, due to “grown in Canada”
requirements, U.S. wheat, regardless of quality, will continue to be
sold in Canada as “feed” wheat at sharp price discounts compared to
Canadian varieties. U.S. members of the task force described above would
like to have a working group established to look at issues concerning
varietal declarations and foreign origin. Legislation to amend the
Canada Grains Act is currently under consideration in the Canadian
Parliament.
Restrictions on U.S. Seeds Exports
Canada’s Seeds Act prohibits the sale, advertising for
sale in Canada, or importation into Canada of seed varieties that are
not registered in the prescribed manner. In order to apply for seed
varietal registration, which is a long and cumbersome process, the
applicant must reside permanently in Canada. This poses a trade barrier
for the many U.S. seeds that are not one of the registered Canadian
varieties. Wheat and barley seeds, among others, are covered under
the Seeds Act.
Personal Duty Exemption
On June 1, 2012, Canada increased the cross-border
shopping limit for tax-free imports of goods purchased in the United
States. Canadians who spend more than 24 hours outside of Canada can now
bring back C$200 worth of goods duty-free (the previous limit was C$50).
Canada raised the duty-free limit for trips over 48 hours to C$800, an
increase from a C$400 limit for stays of up to one week and a C$750
limit for stays longer than seven days. The United States provides
similar treatment for its returning travelers, but with a much more
generous limit of $200 of duty-free goods after visits of less than 24
hours. However, the United States will continue to press Canada on the
lack of parity in the personal duty exemptions for day shoppers. Canada
currently provides no duty-exemption for returning residents who have
been out of Canada less than 24 hours.
Wine and Spirits
Most Canadian provinces restrict the sale of wine and
spirits through province-run liquor control boards. Market access
barriers in those provinces greatly hamper exports of U.S. wine and
spirits to Canada. These barriers include cost-of-service mark-ups,
listings, reference prices, labeling, discounting, distribution and
warehousing policies. As noted above, Canada increased its personal duty
exemption limit in June 2012. However, Canadian tourists still face high
provincial taxes on personal imports of U.S. wines and spirits upon
their return to Canada from the United States, which inhibit their
purchases of U.S. alcoholic beverages.
SOFTWOOD LUMBER
On January 23, 2012, the United States and Canada signed
an agreement to extend the Softwood Lumber Agreement (SLA) for an
additional two years, until October 13, 2015. The SLA entered into force
on October 12, 2006 and was set to expire after October 12, 2013. The
2006 SLA settled extensive litigation and resulted in the revocation of
U.S. antidumping and countervailing duty orders on softwood lumber from
Canada. The SLA is designed to create a downward adjustment in Canadian
softwood lumber exports to the United States through the imposition of
Canadian export measures when U.S. demand is low. The SLA also provides
for binding arbitration to resolve disputes regarding interpretation and
implementation of the agreement. Under the SLA, arbitration is conducted
under the rules of the LCIA (formerly the London Court of International
Arbitration). The bilateral Softwood Lumber Committee, established
pursuant to the SLA, meets to discuss a range of implementation issues
and Canadian provincial assistance programs for softwood lumber
industries. The Softwood Lumber Committee last met in October 2012, in
Quebec City.
On July, 18, 2012, a tribunal issued its finding in an
SLA dispute regarding the apparent underpricing of timber in the
interior of British Columbia. At issue was whether British Columbia was
justified in selling increasing amounts of publicly-owned timber in its
interior - most of which was used to make softwood lumber products - at
salvage rates. While the tribunal acknowledged the dramatic increase in
the amount of timber sold at salvage prices, and reviewed a number of
actions by British Columbia that the United States had explained helped
account for that increase, the tribunal did not find a conclusive link
between the increase and actions taken by British Columbia. British
Columbia has issued an update with regard to its timber pricing systems
and the United States will be monitoring the resulting pricing closely.
Canada continued to collect duties in 2012 resulting from
a 2011 arbitration award under the SLA. A tribunal convened under the
LCIA found that certain provincial assistance programs in Quebec and
Ontario provide benefits to the Canadian softwood lumber industry in
breach of the SLA, and Canada has imposed additional export charges to
collect $59.4 million as compensation for this breach. Canada began
collecting the additional charges on March 1, 2011.
DOMESTIC SUPPORT MEASURES
Aerospace Sector Support
Canada released a comprehensive review of its aerospace
and space programs in November 2012. The review offered 17
recommendations intended to strengthen the competitiveness of Canada’s
aerospace and space industries and guide future government involvement
in both sectors. Recommendations called on the Canadian government to
create a program to support large-scale aerospace technology
demonstration, co-fund a Canada-wide initiative to facilitate
communication among aerospace companies and the academic community,
implement a full cost-recovery model for aircraft safety certification,
support aerospace worker training, and co-fund aerospace training
infrastructure.
The review also recommended that the Canadian government
continue funding the Strategic Aerospace and Defense Initiative (SADI).
The SADI provides repayable support for strategic industrial research
and pre-competitive development projects in the aerospace, defense,
space, and security industries, and has authorized over $827 million to
fund 26 advanced research and development (R&D) projects since its
establishment in 2007.
The Canadian federal government and the Quebec provincial
government announced aid to the Bombardier aircraft company in 2008 not
to exceed C$350 million (federal) and C$117 million (provincial) to
support research and development related to the launch of the new class
of Bombardier CSeries commercial aircraft. According to the Public
Accounts of Canada, the federal government has disbursed C$203 million
dollars to Bombardier from April 2008 through March 2012. The United
States continues to express its concerns to the government of Canada
that any launch aid associated with the C-Series must be consistent with
Canada’s international trade obligations.
The United States also has expressed concern over the
possible use of Export Development Canada (EDC) export credit financing
to support commercial sales of Bombardier CSeries aircraft in the U.S.
market. The United States continues to urge the government of Canada to
refrain from distorting market competition in accordance with the
purpose and principals of the OECD Aircraft Sector Understanding (ASU).
Canada committed approximately $3.25 million per year
from 2009 to 2013 to support the Green Aviation and Research and
Development Network and provides additional funding to the National
Research Council’s Industrial Research Assistance Program to support R&D
in Canada’s aerospace sector.
Risk Management Programs for Canadian Pork Producers
Canada provides an array of business risk management
programs for its pork producers. The AgriStability program provides
financial assistance to producers when income falls below 70 percent of
a producer’s limited historical reference margin1,
at a compensation rate of 70 percent. This reflects adjustments to the
program that will be effective as of April 2013. The AgriInvest program
aims to cover small income declines by providing matching government
funds based on producer contributions. It is essentially a
producer-government savings account. Both AgriStability and AgriInvest
are cost-shared 60/40 by the federal and provincial governments,
respectively.
Provincial governments also provide significant subsidies
in the form of price stabilization programs and preferential loans and
loan guarantees. Quebec’s Farm Income Stabilization and Insurance
Program (ASRA) provides direct payments to hog farmers. The ASRA program
is designed to guarantee a positive net annual income. One-third of the
premium comes from producer participants and two-thirds comes from the
Quebec government.
Ontario established a price protection program similar to
ASRA, called the Ontario Risk Management Program (ORMP), in June 2011.
The support level directly relates to the cost of production (a greater
cost of production translates into a greater support level). The program
offers producer support of 40 percent from the Ontario government. The
federal government does not participate, because of trade related
concerns.
The United States will continue to raise these issues
with Canada, including in the U.S.-Canada Consultative Committee on
Agriculture.
Ontario Feed-In Tariff Program
In December 2012, a WTO panel found that Canada breached
its obligations under the General Agreement on Tariffs and Trade
1994, due to particular local-content requirements in Ontario’s Green
Energy and Green Economy Act of 2009 (“Green Economy Act”) that treat
imported equipment and components less favorably than domestic products
(see Canada - Certain Measures Affecting the Renewable Energy Generation
Sector (WT/DS412) and Canada - Measures Relating to the Feed-In Tariff
Program (WT/DS426)). On February 5, 2013, Canada appealed the panel
reports in both disputes to the WTO Appellate Body. Japan and the
European Union each brought the dispute in 2011 against certain
provisions of Ontario’s feed-in tariff program that require the use of
renewable energy generation equipment made in Ontario, to the exclusion
of competing products, including clean energy equipment manufactured in
the United States. The United States participated in the dispute as a
third party.
A Texas-based renewable energy firm initiated an
investor-state claim under NAFTA chapter 11 against Canada in July 2011,
claiming the Green Economy Act violates Canada’s obligations under the
NAFTA to provide investors with fair and equitable treatment.
Port Hawkesbury Paper Mill
The United States is investigating the nature and extent
of assistance provided by the Province of Nova Scotia to the Port
Hawkesbury paper mill following a bankruptcy settlement that resulted in
the sale of the mill to a Canadian firm. Provincial assistance provided
through the settlement has made possible the continuation of significant
productive capacity that otherwise would not exist.
GOVERNMENT PROCUREMENT
Canada is a signatory to three international agreements
relating to government procurement (the WTO Agreement on Government
Procurement (GPA), the NAFTA, and the 2010 United States-Canada
Agreement on Government Procurement). The agreements provide U.S.
businesses with access to procurement conducted by most Canadian federal
departments and a large number of provincial entities. However, U.S.
suppliers have access under trade agreements to procurement of only
seven of Canada’s Crown Corporations.
INTELLECTUAL PROPERTY RIGHTS PROTECTION
Canada has been included since 2009 on the Special 301
Priority Watch List. The 2012 report cited concerns related to Canada’s
copyright laws, border enforcement, and failure to implement the World
Intellectual Property Organization (WIPO) Internet Treaties, which
Canada signed in 1997. Canada’s enforcement against trade in counterfeit
goods remains insufficient. On June 29, 2012, Canada adopted
the Copyright Modernization Act. The Act will come into force following
additional legislative procedures and regulatory action. The United
States urges Canada to enact further legislation to give customs
officers ex officio authority to take action against counterfeit and
pirated goods.
Canada, the United States and other key trading partners,
signed the Anti-Counterfeiting Trade Agreement (ACTA) in October 2011.
Canada has yet to ratify the agreement, but introduced domestic
legislation to meet its ACTA commitments. ACTA establishes an
international framework that will assist parties in efforts to
effectively combat the infringement of intellectual property rights, in
particular, the proliferation of counterfeiting and piracy, which
undermines legitimate trade and the sustainable development of the world
economy.
U.S. stakeholders also have expressed strong concerns
about Canada’s current administrative process for appeals of the
regulatory approval of pharmaceutical products, and limitations in
Canada’s trademark regime. In addition, recent decisions by Canadian
courts regarding pharmaceutical patents have raised concern in the U.S.
pharmaceutical industry. In November 2012, one U.S. pharmaceutical
company formally served a notice of intent to submit a claim to
arbitration under NAFTA Chapter 11, stemming from a Canadian court’s
decision invalidating the company’s patent. Also in November 2012, the
Supreme Court of Canada held that another U.S. pharmaceutical company’s
patent covering a major pharmaceutical product was void.
SERVICES BARRIERS
Telecommunications
Canada maintains a 46.7 percent limit on foreign
ownership of suppliers of facilities-based telecommunications services,
except for submarine cable operations. This is one of the most
restrictive regimes among developed countries. Canada also requires that
at least 80 percent of the members of the board of directors of
facilities-based telecommunications service suppliers be Canadian
citizens. As a consequence of these restrictions on foreign ownership,
U.S. firms’ presence in the Canadian market as wholly U.S.-owned
operators is limited to that of a reseller, dependent on Canadian
facilities-based operators for critical services and component parts.
These restrictions deny foreign providers certain regulatory advantages
only available to facilities-based-carriers (e.g., access to unbundled
network elements and certain bottleneck facilities). This limits those
U.S. companies’ options for providing high quality end-to-end
telecommunications services, since they cannot own or operate their own
telecommunications transmission facilities.
Canada amended the Telecommunications Act in June 2012 to
rescind foreign ownership restrictions to carriers with less than 10
percent share of the total Canadian telecommunications market.
Foreign-owned carriers are permitted to continue operating if their
market share grows beyond 10 percent provided the increase does not
result from the acquisition of, or merger with, another Canadian
carrier. Canada announced in March 2012 that it would cap the amount of
spectrum that large incumbent companies could purchase at the next
spectrum auction in an effort to facilitate greater competition in the
sector. Canada has announced it will hold the next 700 MHz spectrum
auction on November 13, 2013, to be followed by the 2500 MHz spectrum
auction within a year.
In 2009, a cell phone service provider with significant
U.S. financial backing was permitted to acquire wireless spectrum rights
in Canada. This represented a rare new entry into a telecom sector
dominated by several large Canadian-owned firms. The provider has since
faced numerous legal challenges from its competitors, who claim that the
company violates the Canadian ownership requirements in
the Telecommunications Act, because a foreign conglomerate controls a
majority of its debt. Canada’s Federal Court of Appeal ruled in the
provider’s favor in June 2011, securing the company’s right to operate
in Canada. An appeal against this decision was filed to the Supreme
Court of Canada; however, the Supreme Court announced it would not hear
the case in April 2012.
Canadian Content in Broadcasting
The Canadian Radio-television and Telecommunications
Commission (CRTC) imposes quotas that determine both the minimum
Canadian programming expenditure (CPE) and the minimum amount of
Canadian programming that licensed Canadian broadcasters must carry
(Exhibition Quota). Large English language private broadcaster groups
have a CPE obligation equal to 30 percent of the group’s gross revenues
from their conventional signals, specialty and pay services. The
Exhibition Quota for all conventional broadcasters is fixed at 55
percent Canadian programming as part of a group, with a 50 percent
requirement from 6 p.m. to midnight.
Specialty services and pay television services that are
not part of a large English language private broadcasting group are
subject to individual Canadian programming quotas (time or expenditure
or both), which vary depending upon their respective license conditions.
For cable television and direct-to-home broadcast
services, more than 50 percent of the channels received by subscribers
must be Canadian programming services. Non-Canadian channels must be
pre-approved (“listed”) by the CRTC. Canadian licensees may appeal the
listing of a non-Canadian service that is thought to compete with a
Canadian pay or specialty service. The CRTC will consider removing
existing non-Canadian services from the list, or shifting them into a
less competitive location on the channel dial, if they change format to
compete with a Canadian pay or specialty service.
The CRTC also requires that 35 percent of popular musical
selections broadcast on the radio should qualify as “Canadian” under a
Canadian government-determined point system.
INVESTMENT BARRIERS
General Establishment Restrictions
Under the Investment Canada Act (ICA), the Broadcasting
Act, the Telecommunications Act, and standing Canadian regulatory
policy, Canada screens new or expanded foreign investment in the energy
and mining, banking, fishing, publishing, telecommunications,
transportation, film, music, broadcasting, cable television, and real
estate sectors.
The ICA has regulated foreign investment in Canada since
1985. Foreign investors must notify the government of Canada prior to
the direct or indirect acquisition of an existing Canadian business of
substantial size. Canada reviews the acquisition by non-Canadians of
existing Canadian businesses and the establishment of new Canadian
businesses in designated types of business activity relating to Canada’s
culture, heritage, or national identity where the federal government has
authorized such review is in the public interest.
On December 7, 2012, Canada issued new rules to
supplement its guidelines for investment by foreign state-owned
enterprises (SOE), including the stipulation that future SOE bids to
acquire control of a Canadian oil-sands business will be approved on an
“exceptional basis only.”
The threshold for review of investments/acquisitions by
companies from World Trade Organization (WTO) Member States was $330
million. Canada amended the ICA in 2009 to raise the threshold for
review to $1 billion over a four-year period. The new thresholds will
come into force once regulations are drafted and published; however
future bids by foreign SOEs will remain subject to the current $330
million threshold. Industry Canada is the reviewing authority for most
investments, except for those related to cultural industries, which come
under the jurisdiction of the Department of Heritage. Foreign
acquisition proposals under government review must demonstrate a “net
benefit” to Canada to be approved. The ICA sets time limits for the
reviews. Once an application for review is received, the Minister has 45
days to determine whether or not to allow the investment. A 30-day
extension is permitted if the investor is notified prior to the end of
the initial 45-day period. Reviews of investments in cultural industries
usually require the full 75 days to complete.
The ICA was amended in June 2012 to allow the Industry
Minister to disclose publicly that an investment proposal does not
satisfy the net benefit test and publicly explain the reasons for
denying the investment so long as the explanation will not do harm to
the Canadian business or investor. Another amendment allows the Industry
Minister to accept security payment from investors when found by a court
to be in breach of their ICA undertakings. Canada also introduced
guidelines that provide foreign investors with the option of a formal
mediation process to resolve disputes when the Industry Minister
believes a non-Canadian investor has failed to comply with a written
undertaking.
Under the ICA, the Industry Minister can make investment
approval contingent on meeting certain conditions such as minimum levels
of employment and research and development. Since the global economic
slowdown in 2009, some foreign investors in Canada have had difficulties
meeting these conditions. Canada blocked a $38.6 billion hostile
takeover by an Australian company in 2010 of Potash Corp. of
Saskatchewan as not being of “net benefit” to Canada under the ICA. This
was only the second time an investment has been blocked since 1985. The
United States has long expressed concerns that Canada’s net benefit test
is overly broad, lacks transparency, and has the potential to extend
into every sector of the Canadian economy and to implicate issues
unrelated to national security, such as competitiveness and
protectionism.
OTHER BARRIERS
Cross-Border Data Flows
The strong growth of cross-border data flows resulting
from widespread adoption of broadband-based services in Canada and the
United States has refocused attention on the restrictive effects of
privacy rules in two Canadian provinces - British Columbia and Nova
Scotia. These two provinces have laws mandating that personal
information in the custody of a public body must be stored and accessed
only in Canada unless one of a few limited exceptions applies. These
laws prevent public bodies such as primary and secondary schools,
universities, hospitals, government-owned utilities, and public agencies
from using U.S. services when personal information could be accessed
from or stored in the United States.
The Canadian federal government is consolidating
information technology services across 63 email systems under a single
platform. The request for proposals for this project includes a national
security exemption which prohibits the contracted company from allowing
data from going outside of Canada. This policy precludes some new
technologies such as “cloud” computing providers from participating in
the procurement process. The public sector represents approximately
one-third of the Canadian economy, and is a major consumer of U.S.
services. In today’s information-based economy, particularly where a
broad range of services are moving to “cloud” based delivery where U.S.
firms are market leaders, this law hinders U.S. exports of a wide array
of products and services. The United States will continue seeking to
work with Canadian authorities to identify means of addressing this
issue.
Container Size Regulations
Canada announced in its 2012 budget that it would repeal
standardized container size regulations for food products. The Canadian
government has stated that these regulations do not provide a food
safety benefit and that the elimination of such regulations would remove
an unnecessary barrier for the importation of new products from
international markets. The timeline for implementing the new regulations
continues to be extended, however, and the regulations have not been
repealed to date. The Canadian Food Inspection Agency announced in
November 2012 its plans to launch formal consultations in 2013 as part
of the regulatory amendment process. Existing regulations for food
container sizes will remain in force until the review process is
complete.
FOREIGN TRADE BARRIERS
Under the Agristability and Agrinvest programs, “margin”
refers to a producer’s allowable revenue less allowable expenses. The
historical reference margin is calculated as the average program margin
in three of the past five years, with the highest and lowest years
dropped.
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