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WTO Publishes Trade Policy Review Of Canada

by Mike Godfrey,, Washington

23 March 2007

The World Trade Organisation this week published its Trade Policy Review (TPR) of Canada, in which it stated that the country's trade regime remains open, but some barriers persist.

The outward-looking orientation of Canada’s trade regime has facilitated the economy’s successful adjustment to a number of external shocks, and helps explain Canada’s good economic performance during the last four years, according to the WTO Secretariat report.

However, the report noted that productivity growth has been relatively slow, significant trade barriers still protect certain agricultural activities, and foreign investment restrictions remain in some areas such as telecommunications, audiovisual, and air transport.

The report stressed that reform in these sectors could lower costs to Canadian taxpayers and consumers while increasing productivity and competition in the domestic market.

It revealed that annual average GDP growth between 2002 and 2005 was just below the economy's potential of 3%. This overall positive performance was underpinned by sound macroeconomic policies. On the fiscal front, Canada has posted federal surpluses since its last Review.

The provinces have also practiced fiscal discipline, resulting in a combined provincial surplus of 1% of GDP in fiscal year 2005/06. Canada has made progress in reducing its federal debt burden, with the debt-to-GDP ratio falling to 35% in 2005/06, from almost 44% in 2002/03.

Commenting on the country's trade relations with developing nations, the WTO observed that:

"Canada grants at least MFN (Most Favoured Nation) tariff treatment to all WTO Members. The simple average applied MFN tariff declined slightly, from 6.8% in 2002 to 6.5% in 2006. Around 53% of all tariff items entered Canada duty free in 2006. This same year, the average applied tariff on agricultural products (WTO definition) was 22.4%, compared with 3.8% on other products. Supply-managed agricultural products receive the highest tariff protection. There is tariff escalation between semi-processed and fully processed products. Under remission orders, tariff reductions are granted on specific goods used for certain purposes."

The report continued:

"Canada grants tariff preferences unilaterally, according duty-free and quota-free treatment to virtually all imports from least developed countries except Myanmar. Canada also grants tariff preferences in the context of free-trade agreements with Chile, Costa Rica, Israel, and Mexico and the United States, as well as to Australia and New Zealand on a handful of products. As for many other WTO Members, Canada's participation in preferential trade agreements and negotiations raises concerns about resources being distracted away from the multilateral trading system."

"Internal taxes are applied equally to imported and domestic products except for wine produced from Canadian-grown grapes, which is exempt from federal excise duties, and for initial production volumes of beer made by domestic brewers, which are subject to lower excise duties than imported beer."

The WTO Secretariat went on to state that:

"Canada seeks to stimulate economic activity and the competitiveness of its economy through tax measures. Another focus of support is stimulating innovation. Federal corporation tax was reduced from 28% in 2000 to 21% in 2004. Various tax credits are offered at both the federal and provincial/territorial levels."

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