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Canadian Governments Agree Internal Trade Deal

by Mike Godfrey,, Washington

19 April 2017

Canada's federal, provincial, and territorial governments have signed a new free trade agreement, which will reduce internal barriers to trade, investment, and worker mobility.

The Canadian Free Trade Agreement (CFTA) will enter into force on July 1, and replace the existing Agreement on Internal Trade (AIT), which has been in place since 1995. Negotiations began in December 2014. Trade within Canada represents about one-fifth of Canada's GDP, or CAD385bn (USD286.9bn) annually, and accounts for nearly 40 percent of all provincial and territorial exports.

The CFTA establishes free trade rules that will apply across the Canadian economy. In contrast to the AIT, the CFTA's rules will apply automatically to almost all areas of economic activity in Canada, with any exceptions being clearly identified. It will cover most of the service sector, and coverage will be extended to the energy sector for the first time.

In addition, the CFTA will be better aligned with Canada's commitments under international trade agreements. The intention is to reduce compliance costs for Canadian firms that do business both at home and internationally.

The CFTA commits parties to establish a working group that will assess options for further liberalizing trade in alcohol, and triggers future negotiations on financial services.

The governments have also agreed to establish a regulatory reconciliation process to address regulatory differences across jurisdictions that act as a barrier to trade. The CFTA will introduce a mechanism to promote regulatory cooperation.

Brad Duguid, Chair of the Internal Trade Renewal Negotiations, said: "The new Canadian Free Trade Agreement represents an important step forward for Canada's economic union. By supporting a modern, open, and competitive economy, the agreement will help create new opportunities across the country. Businesses can look forward to new markets for their products and services, consumers will enjoy more choice and convenience, and the Canadian economy will benefit from more innovation and growth."

Corinne Pohlmann, Senior Vice-President of National Affairs and Partnerships at the Canadian Federation of Independent Businesses, commented: "The new negative list approach … brings a greater level of transparency that will make an enormous difference in the way small businesses will be able to trade. It brings CFTA in line with the Comprehensive Economic and Trade Agreement (CETA) with Europe. Prior to this new strategy, it was possible for European companies to have better access to Canadian trade opportunities than a business in a neighboring province."

TAGS: compliance | tax | investment | small business | business | free trade agreement (FTA) | value added tax (VAT) | energy | financial services | trade treaty | agreements | Canada | trade | European Union (EU) | services | Europe

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