Contributing Lawyers

Canada

Cyndee Todgham Cherniak

United States

Susan Kohn Ross

Australia

Andrew Hudson



Canada - EFTA FTA Implementing Legislation Receives Royal Assent in Canada

On April 29, 2009, the Canada- European Free Trade Association Free Trade Agreement Implementation Act received royal assent in Canada.  As a result, the Canada - EFTA FTA (CEFTA) will be in effect.

The CEFTA was signed in Davos, Switzerland on January 28, 2008.  Steps were taken in the EFTA countries (Norway, Liechtenstein, Switzerland and Iceland) so that the FTA would come into effect on January 1, 2009 (if the Canadian implementing legislation has passed more quickly - but was delayed due to the 2008 federal election and prorogation of Parliament (twice)).  But, all have been waiting for the Canadian implementing legislation to receive royal assent so that the benefits under the CEFTA can start to flow.

The CEFTA is Canada's fifth free trade agreement (after the North American Free Trade Agreement (NAFTA), Canada-Chile Free Trade Agreement (CCFTA), Canada-Israel Free Trade Agreement, Canada-Costa Rica Free Trade Agreement).

The CEFTA is a different model than Canada's previous free trade agreements.  The CEFTA is significantly shorter and less comprehensive than the NAFTA or the CCFTA.  It appears at first glance that the CEFTA is even less comprehensive than the Canada-Costa-Rica Free Trade Agreement.  The CEFTA covers:

  • trade in goods (tariff elimination and reduction, prohibition of import and export restrictions)
  • rules of origin (in an Annex)
  • customs measures (in an Annex)
  • technical barriers to trade (follows WTO TBT Agreement and other previous agreements between Canada and EFTA countries)
  • sanitary and phyto-sanitary measures (follows WTO SPS Agreement)
  • temporary entry
  • trade in services (no new commitments - will undertake discussions on further liberalization under the WTO GATS Agreement within three years)
  • competition law and policy
  • antidumping (follows WTO Anti-Dumping Agreement)
  • emergency safeguards
  • government procurement (follows WTO Agreement on Government Procurement)
  • dispute settlement
  • institutional provisions
  • exceptions and safeguards

To view a copy of the text of the CEFTA, please go to the following link - http://www.international.gc.ca/trade-agreements-accords-commerciaux/agr-acc/efta-agr-acc.aspx?lang=en

Two of the most contentious areas of the negotiations were the elimination of reduction schedules for: (1) tariffs on ships, boats and other floating structures; and (2) fishery products.  The shipbuilding and fisheries industries are the industries with the greatest overlap between Canada and the EFTA countries.

Article 10 of the CEFTA sets out the general rule that tariffs on imports of most goods into Canada from the EFTA countries (and tariffs on imports from Canada into the EFTA countries) will be eliminated immediately upon the coming into force of the CEFTA. The exceptions to the general rules are set out in Article 10 and Annexes, E, F, G and H.

Annex E sets out the agreement on tariff reductions on ships, boats and floating structures.  Most importantly, Annex E provides one-way protection to the Canadian shipbuilding industry which gets immediate full access to the EFTA Countries' markets and maintains certain protection in the Canadian market from imports from the ETFA countries.  The phase-out schedule for imports into Canada from the EFTA countries is 15 years for some ships, boats and floating structures and 10 years for certain other ships, boats and floating structures.  In the case of the 15 years reduction schedule, the tariffs will be reduced in 13 equal installments starting 3 years after the CEFTA comes into effect. In the case of the 10 years reduction schedule, the tariffs will be reduced in 8 equal installments starting 3 years after the CEFTA comes into effect.  To review Annex E, please click on the following link - http://www.international.gc.ca/assets/trade-agreements-accords-commerciaux/pdfs/EFTA-AnnexE-en.pdf

Annex F sets out a short list of goods falling in H.S. Chapters 25-97 that are excluded from coverage of the CEFTA.  This is a negative list because all goods in H.S Chapters 25-97 receive the benefit of immediate reciprocal tariff elimination unless the good appears on the Annex F excluded list. To review Annex F, please click on the following link - http://www.international.gc.ca/assets/trade-agreements-accords-commerciaux/pdfs/EFTA-AnnexF-en.pdf

Annex G sets out a list of agricultural goods covered by H.S. Chapters 1-24 that benefit from immediate tariff relief.  Annex G identifies the immediate reduction to zero percent tariffs on a country by country basis.  This is a positive list because if the good is on the list, then the tariffs are immediately eliminated as indicated.  If a good is not on the list, then the tariffs are not being eliminated immediately. To review Annex G, please click on the following link - http://www.international.gc.ca/assets/trade-agreements-accords-commerciaux/pdfs/EFTA-AnnexG-en.pdf

Annex H sets out a list of fish and marine products that will benefit from immediate tariff relief.  This list is a positive list because if the fish or marine product is on the list, the tariffs are eliminated as indicated.  If the fish or marine good is not on the list, then the tariffs remain in place. To review Annex H, please click on the following link - http://www.international.gc.ca/assets/trade-agreements-accords-commerciaux/pdfs/EFTA-AnnexH-en.pdf

Canada's Globe and Mail Newspaper reports that the benefits of the CEFTA include:

  • removal of tariffs in all non-agricultural sectors including aluminum and cosmetics, prefabricated buildings, coldwater shrimp and apparel products.
  • removal or staged reduction of tariffs on some Canadian agricultural and food products such as durum wheat, frozen French fries, beer and Canadian crude canola oil.
  • duty-free access to markets in Canada and the four European countries for most industrial goods, fish and other marine products.

The news release reports Canada's trade with EFTA Countries is significant:

"The EFTA countries are significant economic partners for Canada.  Taken together, this group represents Canada's eight largest merchandise export destination. In 2006, two-way merchandise trade was valued at $10.7 billion, while two-way investment reached more than $22 billion."

Canada has not entered into bilateral investment treaties (called Foreign Investment Promotion and Protection Agreements) with any of the EFTA countries.  Canada has income tax treaties with Iceland (June 19, 1997), Switzerland (signed May 5, 1997), and Norway (new treaty signed July 12, 2002).  Canada does not have an income tax treaty with Lichtenstein.

The United States has not signed a free trade agreement with the EFTA countries.  The rules of origin will determine whether goods manufactured at a Canadian manufacturing plant of a U.S. company will qualify for the preferential tariff eliminations and reductions when goods are sent to an EFTA country.  There may be important opportunities for U.S. businesses with activities in Canada.

Cyndee Todgham Cherniak, the author of this blog article, has reviewed over 75 free trade agreements for the Asian Development Bank and written a lengthy report on free trade agreements.  She teaches a course at Case Western Reserve University School of Law on NAFTA and bilateral trading arrangements.

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