Canada Jumps On The Bilateral Bandwagon

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.

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 Columbia 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.

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 1989. 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.

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 newly-developed 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 2006.

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 2008.

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.

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.

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.

Members of McCarthy Tétrault’s International Trade and Investment Law Group are available to assist on any matters concerning the negotiation of these agreements, as well as other international trade and investment issues.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.