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Backgrounder: Canada’s Free Trade, Double Taxation, Labour Cooperation and Environment Agreements with Colombia
21 November 2008
CANADA-COLOMBIA FREE TRADE AGREEMENT
On November 21, 2008, the Governments of Canada and Colombia signed the Canada-Colombia Free Trade Agreement. Once implemented, this agreement will open up new opportunities for Canadian business in Colombia—by removing barriers to trade and investment—and will help address the social dimensions of trade liberalization. Once in force, the FTA will provide several benefits to Canadians and Colombians.
Colombia is a dynamic emerging market with 44 million people and an economy with high growth potential. Its GDP growth rate was 7.5% in 2007 with forecasted growth rates of 4.7% for the next five years. Colombia’s sound macroeconomic policy and improved security under its current leadership have generated favourable economic conditions which have led to an increasing number of Canadian investors and exporters entering the Colombian market. In 2007, two-way merchandise trade between Canada and Colombia totalled more than $1.1 billion, with hundreds of Canadian companies doing business with Colombia. Colombia is an investment destination for over 50 Canadian companies, principally in the mining, oil exploration, and manufacturing sectors.
Canadians will benefit from better market access through the elimination of tariffs on goods. Colombia will immediately, or over a 5- to 10-year period, eliminate tariffs on 98 percent of current Canadian exports. Products that will enjoy immediate duty-free access to Colombia, once the agreement is implemented, include wheat, barley, lentils, peas, beef, as well as paper products and machinery and equipment. Colombia will also eliminate the use of their price band mechanism on selected products, including wheat, barley and pork.
Canadian importers and consumers will also benefit from the elimination of tariffs immediately or over a 3- to 7-year period on most imports from Colombia. Colombian manufacturers, exporters and producers will also benefit from increased trade with Canada and expand their export potential into the North American market. Top imports to Canada from Colombia include coffee, bananas, coal and fuel.
The FTA will provide enhanced market access for service sectors of interest to Canada, including infrastructure, mining, energy and professional services. Canada and Colombia have agreed to comprehensive disciplines in the FTA for the financial services sector, including banking, insurance and securities. Both countries will encourage their domestic professional bodies to enter discussions regarding the negotiation of mutual recognition agreements. Priority will be accorded to the engineering profession. The FTA also includes a comprehensive chapter on government procurement that will give Canadian suppliers a guaranteed ability to bid on a broad range of goods, services and construction contracts carried out by Colombia’s central government entities. It will also ensure that practices remain transparent and fair for suppliers.
Two-way investment flows between Canada and Colombia will be promoted through reciprocal commitments. The FTA will lock in market access for Canadian investors and provide them with greater stability, transparency and protection for their investments. Obligations are included to ensure the free transfer of capital related to investment, to protect against unlawful expropriation, and to provide for non-discriminatory treatment of Canadian investments. Canadian investors will also have access to international arbitration to resolve disputes.
CANADA-COLOMBIA LABOUR COOPERATION AGREEMENT
The Labour Cooperation Agreement (LCA) includes enforceable obligations and associated penalties, and sets a new standard with respect to the labour provisions of Canada’s free trade agreements. Canada and Colombia have committed to ensuring their laws respect the International Labour Organization (ILO)’s Declaration on Fundamental Principles and Rights at Work of 1998, which covers the right to freedom of association and to collective bargaining, the abolition of child labour, the elimination of compulsory labour and the elimination of discrimination. Moreover, the parties committed to providing protections for occupational safety and health, as well as minimum employment standards such as minimum wages and overtime pay. Migrant workers will have the same legal protections as nationals with respect to their working conditions. Failure to respect ILO principles and enforce domestic laws is subject to penalties for violations. Any penalties accrue to a special cooperation fund to help strengthen conformity to enhance and enforce workers’ rights.
The Labour Cooperation Agreement continues to respect provincial jurisdiction on labour matters, but provides Canada with the ability to immediately use the dispute resolution process. Canada is also offering its resources and expertise to help Colombia fully implement this agreement and has announced a $1 million labour-related cooperation program to that effect.
CANADA-COLOMBIA ENVIRONMENT AGREEMENT
The Agreement on the Environment commits the parties to pursue high levels of environmental protection, effectively enforcing their domestic laws and policies, and not derogate from these laws in order to increase trade or investment. The Agreement further encourages the use of voluntary practices of corporate social responsibility and reaffirms the parties’ international commitments under the Convention on Biological Diversity.
Colombia has some of the most diverse biological resources in the world, and Canada is committed to working with Colombia to help protect and conserve these resources in a manner that respects, preserves, and maintains the traditional knowledge, innovations and practices of indigenous and local communities.
CANADA-COLOMBIA DOUBLE TAXATION CONVENTION
The Double Taxation Convention between Canada and Colombia eliminates double taxation for individuals and companies from one country doing business or earning income in the other. The Convention complements Canada's efforts to extend such treaties to countries, with which Canada has -- or expects to have -- significant commercial relations.
Canada already has double taxation conventions with more than 80 countries. The Canada-Colombia Double Taxation Convention is patterned to a large extent on the Model Tax Convention on Income and on Capital prepared by the Organisation for Economic Co-operation and Development.
For more detailed information, and for the complete text of the agreements between Canada and Colombia, please visit: http://www.international.gc.ca/trade-agreements-accords-commerciaux/agr-acc/andean-andin/index.aspx.
