I appreciate the opportunity to appear once again before this committee to talk about the Canada-EFTA agreement, this time in the context of Bill C-2. As you know, the Canada-EFTA agreement was the first treaty tabled in Parliament under the new treaties in Parliament policy back in February of 2008.
This committee studied the agreement and your careful review culminated in a positive conclusion. Today, I will briefly highlight some of the benefits of the Canada-EFTA FTA, as well as discuss generally the implementing legislation, Bill C-2. My colleagues and I will then be available to answer your questions.
The Canada-EFTA agreement is a big achievement for Canada. It's our first free trade agreement signed with European countries. It will provide Canadian businesses access to some of the wealthiest and most sophisticated economies in the world, as well as a platform to tap into European value chains.
The EFTA states are already significant economic partners with Canada and include some of the wealthiest and most sophisticated markets in the world, ranking among countries with the highest GDP per capita in the world. Taken as one, the EFTA countries are the world’s seventeenth-largest merchandise trader and Canada’s fifth-largest merchandise export destination in 2007.
Canada and the EFTA countries saw $12.9 billion in two-way merchandise trade in 2007, with Canadian exports at $5.2 billion and imports at $7.7 billion. Canada exported agrifood products worth more than $89 million to EFTA countries, while importing approximately $130 million in agricultural products. In addition, two-way direct investment was some $28.4 billion in 2007.
Norway saw the largest increase in Canadian exports in dollar terms in 2007. Also in 2007, the value of Canadian merchandise exports to Switzerland grew by 33%, driven mainly by gold exports. In fact, in 2007 Canada exported more to the EFTA countries than to the South America 10—that being Argentina, Bolivia, Brazil, Chile, Colombia, Ecuador, Paraguay, Peru, Uruguay, and Venezuela—combined.
The implementation of the Canada-EFTA Free Trade Agreement will build significantly on these already impressive numbers. While the Canada-EFTA FTA is a goods-only agreement, it is worth recalling that both Switzerland and Norway are significant investors in Canada. On a single country basis, Switzerland was the fifth largest foreign direct investor in Canada in 2007, while Norway was the eleventh largest foreign direct investor that year.
In terms of the benefits of this agreement, Canadian exporters and producers are expected to benefit considerably through the reduction or elimination of tariffs under the Canada-EFTA agreement. Specific benefits include the immediate elimination of duties on all industrial goods, the only exception being those for Canadian ship tariffs. These include numerous small tariffs, which impose not only an administrative burden on Canadian exporters, but also what our private sector has called an unnecessary tax on the intra-firm trade; the elimination or reduction of tariffs on certain agricultural products; prohibitions on the use of agricultural export subsidies by the EFTA countries for products exported to Canada and covered by the free trade agreement; a level playing field with the European Union exporters in EFTA markets with respect to tariffs on a significant number of processed agrifood products. Immediate benefits will include an estimated $5 million in duty savings on Canadian agricultural exports annually.
The EFTA countries are also closely integrated with EU markets through their membership in the European Economic Area, and the Canada-EFTA FTA will help Canadian companies to expand commercial ties, both with the EFTA countries themselves, and with the European Union more broadly.
In addition to that, there are other benefits.
The parties commit in the preamble to sustainable development and respect for labour rights; Canada's cultural exemption is maintained under this Agreement;
Canadian supply management programs for dairy, egg, and poultry products are fully protected under this FTA. Over-quota tariffs for these products are not covered and are therefore not subject to any reductions, nor are they subject to the dispute settlement provisions of the Canada-EFTA FTA.
As members of this committee will recall, the issue of ships has been a key issue in this process. I can assure you that government officials consulted extensively with Canadian marine industry stakeholders during the negotiations and explored with industry representatives how shipbuilding sensitivities could best be addressed in the FTA. Reflective of the input received from industry stakeholders, which was often contradictory, the Canada-EFTA FTA includes the following ship-specific provisions. First, there will be a 15-year phase-out for Canada's most sensitive shipbuilding products, the longest industrial phase-out Canada has ever obtained in an FTA. Second, there will be a 10-year phase-out for all other sensitive shipbuilding products. Third, there will be an initial bridging period of three years as part of both these phase-out periods during which tariffs will be maintained at the MFN level.
Finally, repairs and alterations on Canadian ships undertaken in EFTA countries will be subject to tariffs upon re-entry into Canada, in accordance with the tariff phase-out schedule.
The agreement also includes rules of origin for ships that were renegotiated in Canada's favour at the request of industry stakeholders. And there is no obligation--I repeat, no obligation--to modify the government's buy-Canada procurement policy for ships.
Briefly, implementation of the Canada-EFTA FTA is to be achieved in Bill C-2 through a number of general provisions and through amendments to three pieces of legislation: the Canadian International Trade Tribunal Act, the Customs Act and the Customs Tariff.
These legislative amendments provide for the agreed-upon Canadian tariff reductions and related mechanisms such as customs verification and emergency action measures. These include various administrative provisions in clauses 9 to 15 pertaining to the implementation of the Canada-EFTA FTA and the bilateral agreements generally, including provisions that support the operation of a joint committee and the arbitral tribunals. Clauses 16 to 37 will amend the Canadian International Trade Tribunal Act, the Customs Act, and the customs tariff in accordance with Canada's new rights and obligations under the Canada-EFTA FTA.
There was originally an expectation, with our EFTA partners, that the Agreement would come into effect on January 1, 2009. While our colleagues at the EFTA Secretariat have told us that they have taken the necessary steps to implement the Agreements, circumstances did not allow Canada to meet this deadline.
Mr. Chairman, I and my colleagues--assuming they arrive in due course--will be pleased to answer any detailed questions on the EFTA. I will introduce them as they arrive.
Thank you.