Legal Briefing

Canadian international trade and investment priorities: Budget 2010 and the Throne Speech

The In-House Lawyer Logo

Canada | 01 May 2010

On 4 March 2010, the federal government announced its budget for 2010 (Budget 2010). Several of the measures proposed by the government relate to international trade and investment. Included in the budget are commitments to:

  • eliminate a large number of custom tariffs on manufactured goods;
  • continue the negotiation of international trade and investment agreements;
  • enhance border efficiency; and
  • fund specific industries to strengthen their position in the international market.

In addition, the Speech from the Throne (Throne Speech), which outlines the government’s agenda for the coming year and was issued the day before Budget 2010, made several references to international trade and investment-related matters. Not all of these issues were mentioned in Budget 2010, but they nevertheless indicate policy directions that the government will take.

Tariff Reduction for Manufacturers

In Budget 2010 the government commits to eliminating remaining customs tariffs on machinery, equipment and goods imported for further manufacturing in Canada. This commitment is expected to reduce both cost and paperwork for manufacturers. 1,160 such tariffs had been eliminated by 5 March 2010 and a further 381 will gradually be eliminated by 1 January 2015. The government claims that this elimination will cause Canada to become a ‘tariff-free zone for manufacturers’ and will liberalise $5bn (€3.69bn) of imports. [The currency in this article is in Canadian dollars unless otherwise stated.] Moreover, the government expects that these tariff eliminations will save Canadian manufacturers $300m (€221.26m) annually in duty and will create 12,000 jobs.

Industry-Specific Measures

In Budget 2010 the government has pledged $7.2m (€5.26m) to Fisheries and Oceans Canada to support the new Catch Certification Office, which, similar to a pre-existing program in the EU, will issue export permits to Canadian exporters to certify to international buyers that fish and seafood products have been legally harvested in Canada.

Budget 2010 pledges $75m (€54.8m) over the next three years to the cattle processing industry to facilitate the purchase of new, cost-effective equipment for use in cattle processing plants. More than half of that amount is to fund the development and commercialisation of technologies for the removal of specific risk materials, and the subsequent use and handling of those materials.

The Throne Speech commits the government to assisting the forestry industry in developing new markets and to continuing to support the supply management (the management of price through production and import controls) of poultry and dairy products.

Foreign ownership restrictions on Canadian satellites are to be removed. The government believes this will contribute to a competitive Canadian marketplace and will encourage foreign investment. The government claims that the removal of barriers to foreign ownership will allow Canadian business to establish ‘strategic global relationships’ and, consequently, to participate more fully in foreign markets. In the Throne Speech the government suggests that foreign ownership restrictions in the uranium industry would also be reduced. However, no further detail is provided in Budget 2010.

Finally, Budget 2010 will provide $8m (€5.84m) over two years to the International Science and Technology Partnerships Program. This program is to fund research and development projects jointly undertaken by Canada, with such partners as China, India and Brazil.

Border Efficiency

The efficiency and security of the Canadian border receives attention from the government in Budget 2010. Among the infrastructure projects to which the government commits funds, the Windsor-Detroit international crossing, a critical gateway to Canada for US trade, will receive $10m (€7.31m) over the next three years.

In addition, Budget 2010 commits $87m (€63.56m) over the next two years to more general border efficiency endeavours, such as the upgrade of vehicle and cargo scanning equipment, and the upgrade of information systems used in border service operation. To maximize the flow of goods across the border to the US, while protecting national security against the threat of terrorism, the government also commits to more effective co-ordination of the Partners in Protection and NEXUS programs with US authorities, and to ensuring that fees ‘more closely reflect costs’. To a similar purpose, Budget 2010 will provide $37.9m (€27.69m) over the next two years to develop a ‘comprehensive air cargo security program’ in conjunction with Canada’s major trading partners.

International Agreements

Budget 2010 contains some limited discussion of Canada’s ongoing negotiation of international trade and investment agreements. While it stresses Canada’s intention to push forward in the Doha round of World Trade Organisation negotiations, in the Throne Speech the government expresses disappointment with the results of those negotiations. As a consequence, the government has committed to pursuing bilateral free trade agreements, such as the Comprehensive Economic and Trade Agreement, which is currently being negotiated with the EU, and exploratory talks with India, as well as implementing recently concluded agreements with Colombia, Panama and Jordan. Similarly, the Throne Speech commits to implementing free trade agreements that have been completed with Peru and the European Free Trade Association.

The Throne Speech further suggests that the government will continue to build on the procurement agreement recently completed with the US, giving Canadian suppliers access to US state and local government procurements, though no further mention is made of this in Budget 2010. The government also announced an investment of $8m per year on an ongoing basis towards the environmental restoration of the Great Lakes, pursuant to Canada’s obligations under the Canada and US Great Lakes Water Quality Agreement.

Conclusion

Budget 2010 and the Throne Speech propose several changes to laws affecting international trade and investment, such as the elimination of tariffs on importation of machinery for manufacturing in Canada and focused bilateral free trade agreements with key markets. As details of the implementation of these government priorities emerge, it would be prudent to keep a critical and close watch on how the government proposes to act on its international trade and investment agenda, and what laws and regulations it intends to put in place to breathe life into its plan. Given the high cost and beneficial impact of these policies, strategic intervention during the policy and legal implementation of the priorities may be warranted.