Canada Jumps on the Bilateral Bandwagon

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1 Canada Jumps on the Bilateral Bandwagon John W. Boscariol and Orlando E. Silva* Following in the footsteps of the United States and other major trading partners, the Canadian government has been actively pursuing a number of bilateral and regional free trade and investment protection treaties over the past several months. While the majority of Canadian business and investment activity remains with the United States, Canadian business has been increasingly looking abroad to developing and newly industrialized economies in Latin America, Asia, and the Middle East. These deals hold out the promise of increased market access and strengthened investment protection in these regions, while WTO Doha round negotiations continue to wallow. Regional and Bilateral Free Trade Agreements Latin America has become a recent hotspot for Canadian trade deals no surprise as Canadian trade with the region jumped 20 percent in 2006 to hit $19 billion. In the same year, Canadian investment in Latin America reached almost $100 billion. On a well-publicized visit to Bogota on July 17, 2007, Prime Minister Stephen Harper announced that free trade negotiations had been initiated between Colombia and Canada. This follows closely on the heels of U.S. bilateral agreements in the region. The United States has negotiated deals with Peru and Colombia that will grant U.S. exporters immediate duty-free access to the vast majority of those consumer and industrial products markets, including in many sectors of interest to Canada (e.g., wheat, high-quality beef, and processed food products). Despite calls from Canadian human-rights organizations, labour groups and politicians to postpone trade talks until Colombia s human-rights and democratic development issues have been addressed, Harper made it clear that he has no intention of linking trade policies solely with humanitarian and human-rights issues, arguing that a country such as Colombia cannot hope to advance and move toward peace and security without economic development. Recent developments in Canada s negotiation of bilateral and regional free trade agreements in Latin America and elsewhere include the following: June 7 - conclusion of free trade agreement with the countries of the European Free Trade Association, Iceland, Norway, Switzerland and Liechtenstein June 7 launch of negotiations towards a free trade agreement with the Dominican Republic June 7 launch of free trade negotiations with the Andean Community countries of Colombia and Peru July 19 launch of negotiations towards a free trade deal with the Caribbean Community ( CARICOM ) whose members are Antigua and Barbuda, The Bahamas, Barbados, Belize, Dominica, Grenada, Guyana, Haiti, Jamaica, Montserrat, Saint Lucia, St. Kitts and Nevis, St. Vincent and the Grenadines, Suriname, Trinidad and Tobago Canada continues to negotiate free trade deals with South Korea, Singapore, and the Central American Four countries of El Salvador, Guatemala, Honduras and Nicaragua. New Bilateral Investment Treaties With 23 Foreign Investment Promotion and Protection Agreements (FIPAs), known internationally as Bilateral Investment Treaties (BITs), already in force and more on the way, Canada is seeking to participate in the expanding network of BITs that exists worldwide. By the end of 2006, there were about 2,500 BITs, up from just 400 in In 2006 alone, approximately 75 BITs were concluded. While there is a general global trend in favour of greater openness to foreign investment, significant risks still exist for Canadians investing abroad. As foreign direct investment continues to grow, disputes between investors and States proliferate, with investors turning to these treaties as a means of pursuing claims arising from harmful government measures. The Globetrotter August

2 A BIT is an international treaty providing binding obligations on host governments regarding their treatment of foreign investors and investments. By setting out a range of obligations respecting non-discriminatory treatment, expropriation, transfer of funds, transparency, due process and dispute settlement, BITs aim to provide a more transparent and predictable climate for Canadian investors abroad. On November 14, 2006, Peru became the first country to sign a bilateral investment treaty based on Canada s newlydeveloped 2004 Model BIT. Canada is Peru s most important foreign direct investor in the mining sector and among the largest overall foreign investors with an estimated $2.9 billion of investment stock in Peru in More recently, Canada and Jordan concluded a BIT. On July 13, 2007, following a meeting in Ottawa with Jordan s King Abdullah, Prime Minister Harper announced the Jordan-Canada BIT and indicated that Canada is also commencing a study into the feasibility of a free trade agreement between the countries, with a view to beginning negotiations in Canada also recently concluded a BIT with India and is currently in the midst of negotiations with China. Exploratory discussions towards investment protection treaties are also being held with Vietnam, Indonesia and Kuwait. Canadians trading and investing abroad Canadian exporters and investors in markets abroad should be following these developments closely. There are significant opportunities available to stakeholders to make their views known and ensure that their interests are addressed during the negotiation of these free trade and investment protection treaties. An overview of the status of Canada s international trade and investment agreements in force and in the process of negotiation is set out in the tables below. Free Trade Agreements In Force Agreement Overview of Canada s International Trade and Investment Agreements and Ongoing Negotiations Date in Force Canada-Costa Rica Free Trade Agreement November 1, 2002 Canada-Israel Free Trade Agreement January 1, 1997 Canada-Chile Free Trade Agreement July 7, 1997 Agreements of the World Trade Organization (WTO) January 1, 1995 North American Free Trade Agreement (NAFTA) January 1, 1994 Canada-United States Free Trade Agreement January 1, 1989 Free Trade Agreements Discussions and Negotiations Start of Discussions or Country/Organization Consultations Andean Countries (Bolivia, Columbia, Ecuador, Peru, Venezuela) August 2002 Status of Negotiations Exploratory discussions held in May 2003; on June 7, 2007, Canada, Peru and Colombia announced the launch of free trade negotiations; on July 20, 2007, held first round of free trade negotiations. 8 The Globetrotter Volume 12, No. 1

3 Country/Organization Caribbean Community and Common Market (CARICOM) Central America Four (CA4) El Salvador, Guatemala, Honduras and Nicaragua. Start of Discussions or Consultations January 19, 2001 September 28, 2000 Status of Negotiations Domestic consultation in 2001; on July 19, 2007, CARICOM and Canada launched free trade negotiations. Informal meetings in May 2006, after ten rounds of negotiations could not yield an agreement; another informal meeting took place in July At this point, there is no date set for future negotiations. Dominican Republic November 2002 European Free Trade Association (Iceland, Norway, Switzerland and Liechtenstein) Free Trade Area of the Americas (FTAA) Republic of Korea (South Korea) October 9, 1998 December 1994 November 19, 2004 Singapore June 5, 2000 Domestic consultation in 2002; Negotiations were launched June 7, First negotiating meeting between Canada and the Dominican Republic was held on July 9, 2007; first full round of negotiations will be held in October 2007 in Santo Domingo. On June 7, 2007, Canada and the EFTA countries announced the conclusion of a free trade agreement. Negotiations in stalemate since late 2005; Brazil and other Latin American countries at odds with United States over domestic farm subsidies; no date set for resumption of talks. Tenth round of negotiations took place on April 23-26, Multiple rounds of negotiations in ; Canada continues to negotiate a free trade agreement with Singapore during Canada s Bilateral Investment Treaties Country Date Status Argentina April 29, 1993 In force (OECD-based). Armenia March 29, 1999 In force (NAFTA-based). Barbados January 17, 1997 In force (NAFTA-based). China Under negotiation. Most recent negotiation round held in February Costa Rica September 29, 1999 In force (NAFTA-based). Croatia January 30, 2001 In force (NAFTA-based). Czech & Slovak Federal Republic (currently binds both the Czech Republic and the Slovak Republic) March 9, 1992 In force (OECD-based). Ecuador June 6, 1997 In force (NAFTA-based). The Globetrotter August

4 Country Date Status Egypt November 3, 1997 In force (NAFTA-based). El Salvador May 31, 1999 Signed but not yet in force. Hungary November 21,1993 In force (OECD-based). India N/A On June 16, 2007, it was announced that Canada had concluded a BIT with India. Indonesia N/A As of 2007, exploratory discussions are being held. Jordan N/A On July 13, 2007, following a meeting in Ottawa with Jordan s King Abdullah, Prime Minister Harper announced that Canada had concluded a BIT with Jordan and indicated that Canada is also commencing a study into the feasibility of a free trade agreement between the countries, with a view to beginning negotiations in Kuwait N/A As of 2007, exploratory discussions are being held. Latvia July 27, 1995 In force (NAFTA-based). Lebanon June 19, 1999 In force (NAFTA-based). Panama February 13, 1998 In force (NAFTA-based). Peru June 20, 2007 In force (based on Canada s 2004 Model BIT). Philippines November 13, 1996 In force (NAFTA-based). Poland November 22, 1990 In force (OECD-based). Romania February 11, 1997 In force (NAFTA-based). South Africa November 27, 1995 Signed but not yet in force. Thailand September 24, 1998 In force (NAFTA-based). Trinidad and Tobago July 8, 1996 In force (NAFTA-based). Ukraine July 24, 1995 In force (NAFTA-based). Uruguay June 2, 1999 In force (NAFTA-based). USSR (Russia is continuing state) June 27, 1991 In force (OECD-based). Venezuela January 28, 1998 In force (NAFTA-based). Vietnam N/A As of 2007, exploratory discussions are being held. Trade and Investment Cooperation Agreements (TICA) TICA Partner Southern Cone Common Market (MERCOSUR) Brazil, Argentina, Paraguay and Uruguay. June 16, 1998 Republic of South Africa September 24, 1998 Andean Community (Bolivia, Colombia, Ecuador, Peru and Venezuela) May 31, The Globetrotter Volume 12, No. 1

5 Trade and Economic Cooperation Agreements (TECA) TECA Partner The Kingdom of Norway December 3, 1997 Confederation of Switzerland December 9, 1997 Australia November 15, 1995 Republic of Iceland March 24, 1998 Memorandum of Understanding on Trade and Investment (MOUTI) MOUTI Partner Central America (Costa Rica, El Salvador, Guatemala, Honduras and Nicaragua) March 18, 1998 Other Key Initiatives Partner Date Initiated Status Japan January 19, 2005 European Union May 17, 2005 A Canada-Japan Economic Framework for the promotion and liberalization of bilateral trade and investment; Japan and Canada are currently working towards completion of joint study. Negotiations for a trade and investment enhancing agreement (TIEA) were launched in 2005; in May 2006, Canada and the EU jointly decided, given linkages to the WTO talks, to pause the TIEA negotiations until the results of the WTO Doha Round of negotiations are known. * John W. Boscariol, McCarthy Tétrault LLP, (416) , jboscari@mccarthy.ca. John is the Vice-Chair of the International Law Section. Orlando E. Silva, McCarthy Tétrault LLP, (416) , osilva@mccarthy.ca. Orlando is a Member-At-Large of the International Law Section. The Globetrotter August

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