Thank you, Madam Chair. It's nice to be back and to see all the committee members as well.
I'm pleased to be here today to address this committee and welcome your study on the proposed Canada-Ecuador free trade agreement negotiations.
Your study is timely, as government trade experts responsible for the various areas of free trade agreements are currently engaged in policy development work to propose chapters for planned negotiations.
Our team is also completing work on high-level negotiating goals, which should be presented to Parliament by the end of the month, so that you can provide your comments before the negotiations begin.
Let me now give some context on the possible launch of these negotiations.
At $116 billion in U.S. dollars, Ecuador's GDP represents roughly 3% of South America's gross domestic product. It's the only country on the Pacific coast of South America that Canada does not presently have a free trade agreement with, given that one or more such agreements are in force with Chile, Peru, Colombia and Panama.
Ecuador's current government under President Daniel Noboa Azin is among the most favourable to trade liberalization in the region. It also supports inclusive trade provisions in areas such as trade and gender, trade and indigenous peoples, and labour and the environment. It is notable that Ecuador is like-minded with Canada on issues such as human rights, the war in Ukraine and the centrality of the international rules-based order. It sees FTA's contribution to expanded economic prosperity as a means to advance its domestic social and security policies.
As you may be aware, Canada and Ecuador's trade officials undertook exploratory discussions through much of 2023 prior to taking a mutual decision to proceed towards the launch of negotiations. The exploratory discussions revealed a broad alignment in terms of approach and a strong willingness on both sides to show flexibility and advance negotiations quickly. In addition, both sides intend to carry out the negotiations in a largely virtual format, with minimal need for physical travel so as to approach the negotiations in a efficient and time-efficient manner.
Canada's objective is to negotiate a high standard, ambitious trade agreement with Ecuador. We will seek an agreement that provides Canadian firms with preferential access to the Ecuadorean market, as well as increased transparency and certainty for Canadian service providers and investors.
We will seek an agreement that reflects Canada's latest approaches, including in areas such as digital trade, inclusive trade, responsible business conduct, environment and labour. We will seek an agreement that ensures that the benefits are widely shared, including with traditionally under-represented groups such as women, indigenous peoples and small and medium-sized enterprises.
We know there is support for this agreement already. During the consultation process, we received positive feedback from stakeholders, including the agricultural and mining sectors.
We also heard from a number of provinces and territories, all of which supported the initiative as a way to create greater economic opportunities for Canadians and forge closer trade relationships with Ecuador.
In addition, we have heard concerns from stakeholders about certain provisions, such as investment. We are still thinking about how best to respond to those comments through our ongoing policy development work on our various chapter models for the free-trade agreement and through initiatives outside of the agreement.
It is in that same spirit that we welcome and consider your recommendations once you have completed your study.
In terms of economic impact, I will begin by noting that bilateral merchandise trade between Canada and Ecuador has been growing by 11% a year on average since 2010, reaching $1.3 billion in 2022. Nearly 40% of Canada's exports to Ecuador and nearly 90% of Canada's current imports from Ecuador are already duty-free. Preliminary analysis by the chief economist's office here at Global Affairs Canada has estimated that an FTA between Canada and Ecuador would generate modest but positive economic benefits for both countries. Canadian export gains are predicted in a wide variety of areas such as wheat, pulses and manufactured goods as well as in services trade.
Overall, preliminary estimates suggest that under an ambitious trade agreement, Canada's GDP could increase by about $83 million U.S. by 2030, while Ecuador's GDP could increase by approximately $49.3 million U.S. over the same time frame.
A particular area of interest as we head into negotiations relates to investment. As of 2022, Canada had the largest stock of foreign direct investment in Ecuador of any country at $2.6 billion, led by investments in the mining sector. Enforcement of investment chapter obligations through investor-state dispute settlement, ISDS, is a key interest for Canadian industry stakeholders.
In 2017, under a previous government, Ecuador gave notice of its intentions to terminate its 1997 foreign investment protection agreement, FIPA, with Canada. Termination became effective in 2018, although existing investments continue to be protected until 2033. However, we note that a recent ruling by Ecuador's constitutional court has found the inclusion of an ISDS mechanism in Ecuador's FTA with Costa Rica unconstitutional. Deliberations in Ecuador are ongoing regarding whether there are options that would allow it to move forward under certain conditions and this process will remain ongoing early in the months of our FTA negotiations.
Officials will explore options in this regard with Ecuador once negotiations begin, and we intend to base our position on Canada's latest investment agreement model, which includes clarifying that the parties maintain their right to regulate and preserve required policy flexibility in areas such as the environment, health, safety, indigenous rights, gender equality and cultural diversity.
In conclusion, Global Affairs Canada and the other departments working on our trade policy believe that, overall, a free trade agreement between Canada and Ecuador would be economically beneficial and would provide a means to support a government in the region that shares the same ideas and values.
I welcome comments and questions from the committee today, and look forward to reviewing the results of your work once your study has been completed.
