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Backgrounder: Canada’s Free Trade, Labour Cooperation and Environment Agreements with Panama
On August 11, 2009, Canada concluded negotiations on Free Trade, Labour Cooperation and Environment Agreements with Panama.
ABOUT THE CANADA-PANAMA FREE TRADE AGREEMENT (FTA)
Once implemented, the Canada-Panama free trade agreement (FTA) will provide commercial benefits to Canadian and Panamanian business. Benefits include:
Better market access through elimination of tariffs on goods
Panama will eliminate tariffs on over 90 percent of current imports from Canada immediately on implementation of the FTA. Products that will enjoy immediate duty-free access to Panama include frozen potato products, pulses (beans and lentils), malt, agreed volumes of high-quality beef and certain pork products, fish and other seafood, certain forest products, and manufactured goods such as machinery and flight simulators. Remaining tariffs will be eliminated within a range of 5-10 years with a small number of sensitive products subject to longer phase-out periods and some agricultural goods excluded from liberalization.
Canada will immediately eliminate tariffs on over 99 percent of current imports from Panama. Remaining tariffs will be eliminated within 15 years, with the exception of tariffs on certain sugar products and over-access imports of dairy, poultry and eggs, which are excluded from tariff reductions.
Enhanced market access for service providers
The FTA will provide enhanced market access for service sectors of interest to Canada, including information and communication technology, environment, and energy services (crude petroleum, hydrocarbons, and natural gas). Canada and Panama have also reached agreement on comprehensive disciplines for the financial services sector, including banking, insurance and securities. Both countries will also encourage their domestic professional bodies to engage in discussion regarding the negotiation of mutual recognition agreements.
Promotion of two-way investment between Canada and Panama
The FTA, which includes key provisions found in the 1998 Canada-Panama Foreign Investment Promotion and Protection Agreement, will lock-in market access for Canadian investors and provide them with greater stability, transparency and protection for their investments. Legally-binding 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. In addition, investors will have access to binding international arbitration to resolve disputes.
Improved access to government contracts
The FTA will give Canadian and Panamanian suppliers improved market access in the area of government procurement. It guarantees Canadian suppliers the right to bid on a broad range of goods, services and construction contracts carried out by Panama’s federal government entities, including the Panama Canal Authority. It will also ensure that practices remain transparent and fair for suppliers.
Maximized opportunities through trade-related cooperation
To help maximize the benefits of the FTA, Canada and Panama have agreed to a chapter on trade-related cooperation. The chapter aims to help identify and facilitate possible areas for trade-related cooperation.
The FTA, once implemented, will contribute to Panama’s economic development by creating new market opportunities for exports of Panamanian goods and services, and by providing a positive environment for Canadian direct investment. The FTA also recognizes Panama's developing economy through longer tariff elimination periods for Panama than for Canada.
Ensuring that social progress goes hand-in-hand with trade
The Agreement encourages the Parties to promote internationally-recognized corporate social responsibility standards, practices and principles with respect to businesses operating within their territories or subject to their jurisdictions. These principles cover issues such as labour, the environment, human rights, community relations and anti-corruption.
The FTA also preserves the rights of Canada and of Panama to each regulate and set policy in the public interest, including in the areas of health, public education, culture and environmental protection.
ABOUT THE CANADA-PANAMA AGREEMENT ON LABOUR COOPERATION
The Labour Cooperation Agreement (LCA) includes enforcement obligations and associated penalties and maintains the strong labour provisions established in the recently negotiated LCAs with Peru and Colombia.
Through this LCA, Canada and Panama commit to ensuring that their laws respect the International Labour Organization (ILO) 1998 Declaration on Fundamental Principles and Rights at Work. To further protect workers, Canada and Panama have also committed to protections for occupational health and safety and to minimum employment standards such as minimum wage and hours of work. Migrant workers will have the same legal protections as nationals in their working conditions. The agreement also includes a clause to prevent either country from weakening or reducing its domestic labour protections to encourage trade or investment.
Canada and Panama are obligated to respect the LCA, which includes an open and robust complaints and dispute resolution process. Failure to respect ILO principles and to enforce domestic laws is subject to penalties. If those obligations are not respected, the offending country may be required to pay up to $15 million annually into a cooperation fund, which will be used to resolve issues identified through the dispute resolution process.
ABOUT THE CANADA-PANAMA AGREEMENT ON THE ENVIRONMENT
The Canada-Panama Agreement on the Environment commits the parties to pursue high levels of environmental protection, to enforce their domestic environmental laws effectively, to put in place environmental assessment procedures, and to ensure that they do not relax their environmental laws in order to encourage trade or investment.
The Agreement reaffirms both countries’ commitments under the United Nations Convention on Biological Diversity to strengthen the protection of biological diversity and to respect, preserve and maintain traditional knowledge, innovations and practices of indigenous and local communities. Panama has a rich diversity of biological resources, and Canada is committed to working with Panama to help protect and conserve these resources in a manner that respects the interests of indigenous peoples and local communities.
Both countries have committed to addressing matters that arise under the Agreement in a cooperative manner, through consultations and the exchange of information. If these fail to resolve the matter, either country may request consultations at the ministerial level. Furthermore, either country may request the establishment of an independent Review Panel if it considers that the other country is persistently failing to effectively enforce its environmental laws. This provision is in keeping with Canada’s recent efforts to strengthen its environment agreements.
SUMMARY OF OTHER FREE TRADE AGREEMENTS
Recently entered into force
EFTA: The Free Trade Agreement (FTA) between Canada and the European Free Trade Association (Norway, Liechtenstein, Switzerland and Iceland) came into force on July 1, 2009, marking Canada’s first new FTA in six years. Canadian exporters immediately benefit from the elimination of duties on all Canadian industrial merchandise exports. Tariffs will also be eliminated or reduced on selected Canadian agricultural exports such as durum wheat, frozen french fries, beer and canola oil. Services are not included in the FTA.
PERU: The Canada-Peru Free Trade, Labour Cooperation and Environment Agreements came into force on August 1, 2009. Canadian exporters can now compete on a more level-playing field with their American competitors, who have enjoyed preferential access to the Peruvian market since the entry-into-force of the U.S.-Peru Trade Promotion Agreement on February 1, 2009. Products that will enjoy immediate duty-free access to Peru include wheat, barley, lentils, peas and selected boneless beef cuts, and a variety of paper products, machinery and equipment. The FTA will also provide enhanced and more secure market access in service sectors that are of interest to Canada, including mining, energy and professional services.
Signed/Concluded FTAs (Not yet in force)
COLOMBIA: The Canada-Colombia Free Trade, Labour Cooperation and Environment Agreements were signed on November 21, 2008. Legislation to implement these agreements (Bill C-23) is currently before Parliament. Once implemented, the FTA with Colombia will stimulate the growth of our commercial relationship and help level the playing field for Canadian business vis-ŕ-vis competitors who have or are seeking preferential market access in Colombia. The FTA will also promote a more stable and predictable investment environment in Colombia.
JORDAN: On June 28, 2009, Canada and Jordan signed a Free Trade Agreement, a Labour Cooperation Agreement, and an Agreement on the Environment. Upon implementation, this FTA will eliminate tariffs on the majority of Canadian exports to Jordan, directly benefiting Canadian exporters. Key Canadian sectors that will benefit from this immediate duty-free access include forestry, manufacturing, and agriculture and agri-food. Jordan fully reopened its market to Canadian beef and cattle in February 2009, and this FTA will give Canadian beef producers competitive advantages in a market the Canadian Beef Export Federation estimates to be worth $1 million. Implementation legislation is targeted for introduction in Parliament in the fall of 2009.
Upcoming Agreements
EUROPEAN UNION: On May 6, 2009, Canada and the European Union launched negotiations toward a comprehensive economic and trade agreement. Once concluded, an agreement could provide a $12 billion boost to the Canadian economy.
INDIA: In January 2009, Canada and India agreed to initiate exploratory talks toward a comprehensive economic agreement.
OTHERS: FTA negotiations are ongoing with several countries, including South Korea, the Central America Four, or CA4 (El Salvador, Guatemala, Honduras and Nicaragua), the Caribbean Community, Singapore and the Dominican Republic.
Facts on current trade and investment
| Panama |
|
| Two-way merchandise trade | $149.1 million (2008) |
| Canadian merchandise exports | $127.9 million (2008) |
| Canadian merchandise imports |
$ 21.2 million (2008) |
| Canadian direct investment, stock | $111 million (2006)* |
| Two-way commercial services | $13.4 million (2006)* |
| Trade Canadian commercial services exports | $ 5.9 million (2006)* |
| Canadian commercial services imports | $ 7.5 million (2006)* |
| * Latest year for which official data is available |
Canadian merchandise exports to Panama: include machinery, vehicles (including diesel trucks), electrical and electronic equipment, aerospace (primarily flight simulators), pharmaceuticals, pulses (primarily lentils) and frozen potato products.
Canadian service exports to Panama: include financial services, engineering and other professional services, information and communication technology services.
Canadian merchandise imports from Panama: include mineral fuels and oils, fruits and nuts, fish and seafood products, spices, coffee, and mineral ores (primarily silver ores and concentrates).
Canadian direct investment in Panama: includes banking and financial services, construction and mining.
What an FTA would mean:
- Removal of barriers that limit Canadian participation in growing markets;
- Elimination of tariffs on Canadian exports to help make Canadian goods more competitive in a range of sectors, including on fish and seafood products, construction materials and equipments, frozen potato products, pulses (beans, lentils), beef and beef products, most pork products, malt, forest products, flight simulation and training equipment;
- A level playing field for Canadian business vis-ŕ-vis their competitors who are benefiting from preferential market access terms;
- Enhanced market access for Canadian service providers in areas such as information and communication technology services, environmental services, taxation, and energy services (Crude Petroleum, Hydrocarbons, and Natural Gas);
- Secure and predictable environment for investors; and
- Lower prices and improved choice for consumers.
Results for Canadians:
- New market opportunities
- New partnerships
- New customers
- New investors
- New links in supply and production chains
- New choices for consumers
In keeping with Canada’s approach to FTA negotiations, Canada has addressed the social dimensions of economic integration through the negotiation of provisions on labour and the environment. The Canadian government has also consulted with stakeholders.
The Canadian Parliament will need to review and approve the FTA for it to enter into force. After the FTA undergoes a careful legal review in English, French and Spanish, the text will be submitted to Parliament and made public.
