Canada WT/TPR/S/112/Rev.1 
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IV. TRADE POLICIES IN SELECTED SECTORS 
(1) INTRODUCTION  
1. This chapter covers agriculture, textiles and clothing, steel and services, under which the 
focus is on telecommunications and audiovisual services, air and maritime transport, and banking and insurance.  These activities were chosen because of their economic importance, because they have 
historically been subject to interventions for various policy reasons, or both.  Although the Canadian 
economy is generally free from significant policy-ind uced distortions, such interventions detract from 
Canada's otherwise strong support for production based on comparative advantage, a principle that 
has served Canada well in most areas;  these policies have also create d barriers to trade and 
investment.  For these and other reasons, includi ng compliance with multilate ral rules, changes are 
under way in some of the sectors described below. 
2. The agriculture and related processing sector is an important generator of employment in 
Canada, export revenue, and value added.  An Agricultural Policy Framework is being developed to 
help the sector better respond to consumer demand and global competition, in parallel with Canada's efforts in the current round of WTO negotiations. Support payments increased in 2001, although assistance remains low by OECD standards.  The production of dairy products, chicken, turkey, eggs 
and broiler hatching eggs is "supply-managed" by pub lic sector agencies.  The system is dependent on 
import restrictions, which consist mostly of out-of-quo ta tariffs, often at over 200%;  in-quota access 
is in some instances reserved for imports co vered by certain preferential arrangements.  
3. The textiles and clothing sect or has traditionally benefited from import protection and 
adjustment assistance, reflecting the sector's economic  role as an employer for disadvantaged groups.  
The main trade measures are import quotas, affecting one half of the value of imports, and high 
tariffs.  Since 2000, these measures have be en gradually relaxed under WTO commitments. In 
particular, tariffs were further reduced, and a th ird phase of quota eliminations took place in 
January 2002.  Partly as a result of the liberalization, there has been faster import growth;  concurrently, some manufacturers successfully tapped the U.S. market as a source of growth.  Duty-free and quota-free access to the Canadian te xtiles and clothing sector has been granted to 
least developed countries with  effect from January 2003. 
4. In the steel industry, despite productivity gains in the industry, after a period of growth 
between 1997 and 2001 there was a decline in pr oduction and exports in 2001.  Imports increased 
considerably in 2000 but fell in 2001, and their sh are of total consumption declined from 44% to 
36.7%, staying around this level in 2002.  The number of anti-dumping investigation initiations 
concerning steel products increased, in 2000 and 2001.  In 2002, nine steel products were the subject 
of Canada's first safeguard investigation since the establishment of the WTO.  Determinations of serious injury were made on five products but as at  December 2002 the Government had yet to act on 
the recommended measures. 
5. The process of gradual reform of Canada's services sector has continued, spurred in part by 
the need to remain internationally competitive in the context of intensified North American market 
integration.  A liberal environment is provided for foreign commercial presence in the financial 
services industry.  Recent reform has brought a relaxation of the limits on individual ownership of 
large banks and insurance companies;  the range of operations that foreign bank branches may 
undertake has also been expanded.  Unlike the banking sector, which is mostly federally regulated, 
insurance companies are regulated at the provincial level, which may complicate market access.   WT/TPR/S/112/Rev.1 Trade Policy Review 
Page 94 
  
6. Competition appears to have incr eased further in the telecommun ications sector, and the cost 
of certain services has dropped.  There have been no major regulatory changes affecting market 
access or national treatment in telecommunications , and Canadian domestic ownership requirements 
remain in place for facilities-based carriers.  Ca nada also controls fore ign participation in the 
audio-visual industry, so as to support Canadian cultural content.  
7. In the airline industry, the main forms of suppor t are barriers to foreign ownership of airlines 
and to cabotage.  Recent policy developments includ e the ongoing review of legislation required to 
protect consumers from the potential effects of a domi nant carrier environment, and a new policy for 
charter services.  The individual share ownership limit in Air Canada was eliminated in late 2001.  
Gradual reform in the maritime transport sector ai ms to increase competition both among carriers and 
among ports, to shift the financial burden of po rt management from taxpayers to users, and to 
down-size and commercialize infrastructures in order to increase efficiency and lower costs in the 
ports system.  Conference operations were made su bject to greater competition.  Cabotage remains 
reserved for Canadian-flag ships.  
(2) AGRI-FOOD 
(i) Introduction 
8. The agri-food sector, which encompasses unprocessed, semi and fully processed farm 
products as well as certain services to agriculture,  is Canada's third largest employer, and one of its 
top five industries.1  The GDP share of the agriculture a nd agri-food processing industries was 4% 
in 2001, and distribution, food retail and food services contributed a further 4.3%.2  The share of 
agri-food output that Canada exports increased from  about 9% to about 16% between 1988 and 1996, 
and to 25% in 2001.  Canada is the world's third largest exporter of farm products.3  Access to world 
markets is thus important for Canadian agri-food pr oducers.  Imports have also increased, from about 
9% of domestic sales in 1988 to some 13% in 1996, and 15% in 2001. 
9. Exports of agri-food products (including fish) grew by 12% to exceed Can$30 billion for the 
first time in 2001.  After the United States, Asia (particularly Japan and China) is Canada's most 
important export market, followed by Latin America.  The share of processed consumer products such 
as fresh or frozen beef or pork, and frozen fries in total exports has increased, and the food and 
beverage processing industry has contributed signif icantly to the increase in agri-food exports in 
recent years.  In 2001, half of agri-food expo rts consisted of consumer products, up from 41% 
in 1998.  These consumer products account for two th irds of the value of exports to the United States, 
but only 23% of exports to other countries, which mostly purchase bulk products from Canada, such 
as wheat and oilseeds.  This could partly highlight si milarity of taste in Canada and the United States, 
integration of food distribution and marketing networks  in the two countries, or tariff escalation in 
export markets. 
10. As in other countries, Canada's agri-food sect or has been undergoing continuous change.  The 
2001 Census of Agriculture indicates that since 1996 the number of farms has declined almost 11%.4  
                                                      
1 According to the two-digit Standard Industrial Classification (SIC). 
2 See Government of Canada (undated).  Services to agriculture include distribution, retail, and food 
service industries up-stream of the agriculture and the agri-food industries. Ex amples include agri-food 
wholesale sector (which includes grain elevators), food supermarkets, and restaurants and taverns. See Agriculture and Agri-food Canada online information.  Available at: http://www.agr.gc.ca/cb/apf/pdf/Overview- 
e.pdf for more details. 
3 After the United States and France (WTO 2001). 
4 See Canadian farm operations in the 21st century [Online].  Available at:  http://www.statcan.ca/ 
english/agcensus2001/first/farmop/toc.htm. Canada WT/TPR/S/112/Rev.1 
 Page 95 
 
 
Farm operations with gross receipts below Can$100, 000 are showing the fastest rate of departure.  
New operators are still entering the sector, and farms that have remained in business since 1996 have 
generally expanded their production, with higher av erage crop area or livestock numbers per farm. 
11. The census showed that wheat is still the dominan t crop with nearly one third of the total field 
crop area.  However, legislative changes in 1995 that phased out subsidies under the Western Grain 
Transportation Act increased farmers' grain transpor tation costs, and have encouraged shifts to other 
products.   The area of land planted to oilseeds has increased most, and now accounts for 16% of 
national crop area.  Pulse crops (dry field peas, lentils, and beans), as well as potatoes and grain corn 
are also up noticeably.  Farmers also reported record levels of both beef cattle and hogs in 2001. 
12. Due to adverse weather conditions in some areas during the 2001 growing season, particularly 
drought, crop production in the August 2001-July 20 02 crop year declined for many farm operations.  
However, sales were supported both by strong carry-in stocks and by price increases caused by 
drought-induced shortages.  Farmers' net income incr eased in 2001 relative to the previous year and 
the 1996-00 five-year average, mainly because of  near-record programme payments, which reached 
Can$3.75 billion in 2001.5  The increase also reflected an accumulation of payments by the Canadian 
Wheat Board (see section (v) below) in that year.  
13. In June 2002, the Government announced a package of up to Can$8.2 billion in new spending 
over five years on the agri-food sector, with  a proposed 60/40 cost sharing between the 
Federal Government and the provinces.6  The new spending includes Can$5.2 billion in federal 
funding to implement the Agricultural Policy Fr amework (APF), a federal-provincial-territorial 
initiative being developed with the industry to help the sector increase profitability, meet consumer 
demands for food safety, food quality, and respect for the environment, and better respond to global 
competition.7 According to the authorities, a significant number of the measures will be "green box" 
measures.  Progress in the current round of WTO negotiations has been described by the Government 
as critical for the success of the APF.  Canada's objectives in these nego tiations are described in 
Chapter II. 
(ii) Main forms of support 
14. In the WTO, Canada committed to reducing its total Aggregate Measurement of Support 
(AMS) from Can$5.2 billion in 1995, and to Can$4.3 billion by 2000;  Canada's AMS is capped at 
that level thereafter.  Ca nada has notified the domestic support provided to producers only until 1999, 
thus precluding an analysis of current support.8  In 1999, notified total domestic support to producers 
was about Can$3.8 billion;  Can$ 1.75 billion was notified as "green box" measures and 
Can$939 million as support forming the Current Total AMS, much below Canada's legally binding 
WTO ceiling.  Aggregate domestic support within de minimis levels was Can$1.1 billion in 1999.  In total, Canada's trade-distorting domestic support, known as "amber" under WTO terminology, was 
thus Can$2 billion in 1999 ( de minimis  plus Current Total AMS). 
15. Canada's farm support is low in absolute terms in comparison with other OECD members;  at 
0.7% of GDP, total support to agriculture in Canada is about half the OECD average.
9  Since the 
                                                      
5 Provincial Farm Income Forecast for 2001 and 2002.  Available online at:  http://www.agr.gc.ca/ 
spb/fiap/publication/forecast/forcst_e.html. 
6 News Release, 20 June 2002.  Available online at:  http://www.agr.gc.ca/cb/news/2002/n20620ae. 
html. 
7 Further details available at http://www.agr.ca/puttingcanadafirst. 
8 WTO document G/AG/N/CAN/49, 22 November 2002. 
9 OECD (2002a).  WT/TPR/S/112/Rev.1 Trade Policy Review 
Page 96 
  
early 1990s, Canada has moved away from commod ity-specific support towards whole-farm income 
safety nets for farmers.  The Producer Support Es timate (PSE) relative to farm receipts decreased 
from 18% in 1999 to 17% in 2001 (Chart IV.1), compared with an OECD average of 31% in 2001.  
Expressed in value terms, the PSE was estimated at Can$6.1 billion for 2001.  Gross farm receipts, 
according to OECD estimates, were on average 22% higher than they would have been without any 
support in 1999-01, a considerable improvement from the 51% recorded in 1986-88. 
 
16. Federal and provincial government expenditures in support of the agri-food sector amounted 
to almost Can$6.2 billion in 2001/02 (Chart IV.2).10  The data reflect expenditures of different 
departments such as Agriculture and Agri-Food Canada, Health Canada, Transport, and Finance.  
They include charges associated with the day-to-day operations of the various programmes, any 
capital expenditure, and the expenses under the programmes themselves. 
17. Canada's "safety net" programmes include such programmes as the Net Income Stabilization 
Account (NISA), crop insurance (see below), and the income stabiliza tion programmes at the 
provincial level.  Most of these payments have been notified to the WTO as "amber".  Approximately Can$2.5 billion was paid out as income support an d stabilization by the Federal Government and the 
provinces in 2001/02.  The dairy subsidy (Can$28 million in gross payments in 2001/02), which is 
product-specific, was eliminated in February 2002. 
18. Payments under crop insurance programmes (Can$451 million in 2001/02) include 
government premiums paid to crop insurance funds and administration fees for the management of the 
programmes.  Such payments have been notified as  non-product-specific amber support.  Ad hoc and 
                                                     
 
10The data presented in this section draws mostly on Agriculture and Agri-food Canada (2002). 0326496128160
01020304050
a    Total support estimate (producer, general services, and consumer support) expressed at 1998 prices using U.S. GDP deflator .
b    Producer support estimate as a share of gross farm receipts.TSE a
US$ billionPSE b
%
Australia Canada U.S. EUChart IV.1
Estimates of support to agriculture by th e largest OECD agricultural exporters, 1986-01
1986-88
19981999
2000
2001
Source:   OECD (2002).PSETSECanada WT/TPR/S/112/Rev.1 
 Page 97 
 
 
cost reduction expenditures (e.g. artificial insemination, land rental assistance) are also generally 
notified as non-product-specific amber support. 
 
19. Grants and contributions are also disbursed towards food-aid and support paid to international 
agricultural organizations.  Also included in this  category is the forgiven ess of international aid 
debts.  Total payments under international de velopment and food aid programmes amounted to 
Can$327 million in 2001-02. 
20. Total payments under marketing and trade programmes amounted to Can$81 million in 
2001-02.  This category includes grants for activ ities related to product promotion, and product and 
market development.  It also take s into account debt service reduction and/or reduction of the foreign 
debt owed to the Canadian Wheat Board (C WB) and renegotiated at the Paris Club.  
21. Tax expenditures, including fuel tax rebate s, and property tax rebates, are extended 
exclusively by three provincial administrations (S askatchewan and Alberta, and to a lesser extent 
Quebec) and totalled about Can$430 million in 2001/02.  These are notified to the WTO to the extent that they provide support to agricultural producers. 
22. Other forms of assistance include loan defaults  under loan guarantee programmes such as the 
Agricultural Marketing Programs Act (AMPA) of  1997.  The AMPA provides producers with cash 01,0002,0003,0004,0005,0006,0007,000
1994/95 1995/96 1996/97 1997/98 1998/99 1999/00 2000/01 2001/02051015202530354045
Expenditure As % of agricultural GDP As % of agri-food GDPCan$ million
a
Source: Estimate.
Agriculture and Agri-Food Canada (2002), "Farm Income, Financial Conditions and Government Assistance",  
Data Book [Online].  Available at:  http://www.agr.gc.ca/spb/fiap/publication/databook/2002/db2002_e.htm.Chart IV.2
Government ex penditure in su pport of the a gri-food sector, 1994-02
Per cent 
aWT/TPR/S/112/Rev.1 Trade Policy Review 
Page 98 
  
advances at harvest, some of which is interest free.11  Financing assistance also includes the Farm 
Improvement and Marketing Cooperatives Loans Act and interest rebate programmes such as the 
Spring Credit Advance Program. 
23. Price support is relied upon mainly for milk in  the dairy sector, which is the most heavily 
supported agri-food activity.  Unlike output payments, price support does not weigh on budgetary 
expenditure, as it is mostly borne by consumers:  in 2001, the producer price for milk was close to 
double the world price.  The target price for industrial milk increased by 2.3% in February 2001, and 
3% in 2002.   Support prices for butter and skim milk powder were increased by 3.4% in February 
2001, and by 3% in February 2002.  According to the OECD, the dairy sector "stands out as one 
where there has been no progress towards market orientation".12  According to the authorities, there 
has been a modest increase in the dairy sector's market orientation following the removal of the dairy 
subsidy (see above) and the deregulation of the mark et for commercial export milk (see section (iv) 
below). 
24. In the case of table eggs, the price that grading stations pay producers is negotiated by the 
provincial commodity boards, while the national agency sets the price it pays the grading stations for industrial eggs (surplus to table eggs market) thro ugh a cost-of-production formula. In the case of 
chicken and turkey, the provincial boards negotiate li ve chicken and turkey prices with the processors, 
taking into account producer input costs, supp ly and demand, storage stocks, and the price of 
competing meats. 
(iii) Tariff quotas 
25. The production of dairy products, chicken, turkey, eggs and broiler hatching eggs is 
"supply-managed" by federal and provincial marketing boards and producer associations, with the 
objective of matching total supply to domestic de mand.  Producers must buy production quotas in 
order to participate in the domestic market.  Supply-managed commodities account for about 25% of 
total farm cash receipts. 
26. The effectiveness of the system is dependent on  import restrictions, which consist mostly of 
prohibitive out-of-quota tariffs unde r the tariff-quota system.  Under this mechanism, a generally low 
duty is levied on imports up to a certain quantity, while imports beyond that level are subject to 
another, often prohibitive, rate of duty.  In acc ordance with Canada's Ur uguay Round commitments, 
21 tariff quotas restrict imports of mainly supp ly-managed commodities – dairy products, eggs, 
turkeys, chickens and products thereof – and to a le sser extent beef, margarine, wheat and barley, and 
their products (Table IV.1). 
27. Since Canada's last Review in 2000, applied out-of-quota MFN tariffs have been reduced on 
about 60 tariff lines, mostly in cereal preparations (HS codes 19, 22 and 23), on average by 3%.  
Despite these reductions, tariffs re main in the 200-300% range for most dairy products. The out-of-
quota duty in 2002 ranged from 49% to 77% for wheat, and was 95% on barley.  The authorities noted that the fill rates of Canada’s tari ff quotas for wheat, barley, and barley products remain low due to 
the competitiveness of Canada as a producer and expo rter of these products, and that therefore these 
tariffs do not represent a barrier to trade.  They also noted that a number of wheat products imported 
in small packages face th e in-quota tariff without li mit, on an MFN basis.  
                                                     
 
11 For more details, see Agri-food Canada online information.  Available at:  http://www.agr.gc.ca/ 
progser/ampa_e.phtml. 
12 OECD (2002). Canada WT/TPR/S/112/Rev.1 
 Page 99 
 
 
Table IV.1 
Tariff quotas, fill rates and their respective administration methods, 2002 or latest available year 
Product descriptiona  Out-of-quota tariff, 2002 In-quota tariff, 2002 Final tariff quotab 2001 fill 
rate %  
1. "Historical importers":  importers' shares are allocated principally in relation to past imports  
 Concentrated/condensed milk/cream  12 (reserved for 
Australia) 100 
 0402.91.10 259% but not less than 78.9¢/kg. 2.84¢/kg.   
 0402.99.10 255% but not less than 95.1¢/kg. 2.84¢/kg.   
 Yoghurt   332 100 
 0403.10.10 237.5% but not less than 46.6¢/kg 6.5%   
 Powdered buttermilk  908 (reserved for 
New Zealand) 100 
 0403.90.11 208% but not less than 
Can$2.07/kg. 3.32¢/kg.   
 Cheese   20,412 (13,472 
reserved for EU) 100 
  
  
245.5% but not less than    
Can$3.53-5.78/kg. 2.84 - 3.32¢/kg.  0406.10.10, 0406.20.11, 0406.20.91, 
0406.30.10, 0406.40.10, 0406.90.11, 
0406.90.21, 0406.90.31, 0406.90.41, 0406.90.51, 0406.90.61, 0406.90.71, 
0406.90.81, 0406.90.91, 0406.90.93, 
0406.90.95, 0406.90.98     
 Ice cream   484 90 
 2105.00.91  277% but not less than 
$Can1.16/kg.  6.5%    
2. Licences or shares allocated to downstream users 
 Beef and veal  76,409 (35,000 
reserved for 
Australia, 29,600 
for New Zealand) 100 
 0201.10.10, 0201.20.10, 0201.30.10, 
0202.10.10, 0202.20.10, 0202.30.10 26.5% 0   
 Cream   394 100c 
 0401.30.10 292.5% but not less than 
Can$2.48/kg. 7.5%   
 Dry whey  3,198 100c 
 0404.10.21 208% but not less than 
Can$2.07/kg 3.32¢/kg.   
 Other products of  milk constituents    4,345  100 
 0404.90.10 270% but not less than 
Can$3.15/kg. 6.5%   
 Other dairy   70 100 
 1901.90.33 250.5% but not less than 
Can$2.91/kg. 6.5%   
 Broiler hatching eggs and chicks  7,949,000 dozen 146 
 0105.11.21 238% but not less than 30.8¢ each 0.86¢ each   
 0407.00.11 238% but not less than 
Can$2.91/dozen. 1.51¢/dozen   
3. "First-come, first-served":  no shares are allocated to importers.  Imports are permitted entry at the in-quota tariff rates  until 
such time as the tariff quota is filled;  then the higher tariff automatically applies.  The physical importation of  the good 
determines the order and hence the applicable tariff 
 Wheat   226,883 38c 
 1001.10.10, 1001.90.10 49%/76.5% Can$1.90/tonne   
 Barley   399,000  9c 
 1003.00.11, 1003.00.91 94.5%/21%  Can$0.99/tonne   
 Wheat products  123,557 109c 
 1101.00.10 Can$139.83/tonne Can$2.42/tonne   
 1103.11.10 Can$105.33/tonne Can$2.42/tonne   
   Table IV.1 (cont'd) WT/TPR/S/112/Rev.1 Trade Policy Review 
Page 100 
  
Product descriptiona  Out-of-quota tariff, 2002 In-quota tariff, 2002 Final tariff quotab 2001 fill 
rate %  
 1103.20.11 Can$98.6/tonne plus 7% 3.5%   
 1104.19.11 Can$106.5/tonne plus 7% 3.5%   
 1104.29.11 Can$113.4/tonne plus 7% 3.5%   
 1104.30.11 Can$98.6/tonne plus 7% 3.5%   
 1108.11.10 Can$237.9/tonne 0.95¢/kg.   
 1109.00.10 Can$397.3/tonne plus 14.5% 7.5%   
 1901.20.13 11.93¢/kg. plus 8.5% 4%   
 1901.20.23, 1902.11.10, 1902.19.11, 
1902.19.21, 1902.19.91, 1902.30.11, 
1902.30.20, 1904.10.10, 1904.20.10, 
1904.20.61, 1904.30.10, 1904.30.61, 1904.90.10, 1904.90.61, 1905.10.10, 1905.10.40, 1905.10.71, 1905.31.21, 1905.31.91, 1905.32.91, 1905.40.20, 1905.40.50, 1905.90.31, 1905.90.34, 1905.90.41, 1905.90.42,  1905.90.61  
 
 
 
0-16.27¢/kg. + 0 - 8.5%  
 
 
  0 - 4%   
 2302.30.10 Can$98.6/tonne plus 4% 0   
 Barley products  19,131 50c 
 1102.90.11 Can$213.8/tonne plus 8.5% 4%   
 1103.19.11, 1103.20.21, 1104.19.21, 
1104.29.21 Can$15.9-177.5/tonne + o – 8.5% 3 – 4%    
 1107.10.11 Can$157/tonne 0.31¢/kg.   
 1107.10.91 Can$160.1/tonne 0.47¢/kg.   
 1107.20.11 Can$141.5/tonne 0.31¢/kg.   
 1107.20.91 0 0   
 1108.19.11 Can$188.5/tonne 0.83¢/kg.   
 1901.90.11 Can$19.78/tonne plus 17% 8.5%   
 1904.10.30 12.6¢/kg. plus 8.5% 4%   
 1904.20.30 9.95¢/kg. plus 8.5% 4%   
 1904.20.63 9.95¢/kg. plus 6% 3%   
 1904.90.30 9.95¢/kg. plus 8.5% 4%   
 1904.90.63 9.95¢/kg. plus 6% 3%   
 2302.40.11 Can$106.9/tonne 0%   
4. Licences on demand 
 Margarine   7,558 15 
 1517.10.10 82.28¢/kg. 7.5%   
 1517.90.21 218% but not less than 
Can$2.47/kg. 7.5%   
5. Applied tariff (Personal cross-border purchases)  
 Fluid milk   64,500 n.a. 
 0401.10.10 241% but not less than Can$34.5/hl 7.5%   
 0401.20.10 241% but not less than Can$34.5/hl 7.5%   
6. Import shares allocated entirely to one state trading entity 
 Butter and other fat derived from milk  3,274 (2000 
reserved for New 
Zealand)  100c 
 0405.10.10 298.5% but not less than Can$4/kg. 11.38¢/kg.   
 0405.90.10 313.5% but not less than 
Can$5.12/kg. 7.5%   
7. Combination of methods  
 Eggs and egg products  21,370,000 dozen 94 
 0407.00.18 163.5% but not less than 
79.9¢/dozen 1.51¢/dozen   
 0408.11.10, 0408.19.10 
 0408.91.10, 0408.99.10  Can$1.52 – 6.12/kg. 6.63¢/kg or 8.5%   
 2106.90.51 Can$1.45/kg. 6.68¢/kg.   
 3502.11.10 Can$6.12/kg. 8.5%   
   Table IV.1 (cont'd) Canada WT/TPR/S/112/Rev.1 
 Page 101 
 
 
Product descriptiona  Out-of-quota tariff, 2002 In-quota tariff, 2002 Final tariff quotab 2001 fill 
rate %  
 3502.19.10 Can$1.52/kg. 6.63¢/kg.   
 Turkey, live, meat and products  5,588 99 
 0105.99.11, 0207.24.11, 0207.24.91, 
0207.25.11, 0207.25.91, 0207.26.10, 0207.27.11, 0207.27.91, 0209.00.23, 
0210.99.14, 1601.00.31, 1602.20.31, 
1602.31.12, 1602.31.93 154.5 – 169.5% but not less than  
0 - Can$6.18/kg. 0 - 7.5% but not less 
than  0 - 4.74¢/kg or more 
than 9.48¢/kg   
 Chicken, live, meat and products   39,844 164 
 0105.92.91, 0105.93.91, 0207.11.91, 
0207.12.91, 0207.13.91, 0207.14.21, 
0207.14.91, 0209.00.21, 0210.99.11, 
1601.00.21, 1602.20.21, 1602.32.12, 
1602.32.93 238 – 253% but not less than Can$ 
0– 6.74/kg. 0 - 7.5% + 0 - 
4.74¢/kg or more than 
9.48¢/kg   
8. No access allocated 0 n.a. 
 Milk, cream and buttermilk powder     
 0402.10.10 201.5% but not less than 
Can$2.01/kg 3.32¢/kg.   
 0402.21.11 243% but not less than 
Can$2.82/kg. 3.32¢/kg.   
 0402.21.21 295.5% but not less than 
Can$4.29/kg. 6.5%   
 0402.29.11 243% but not less than 
Can$2.82/kg. 3.32¢/kg.   
 0402.29.21 295.5% but not less than 
Can$4.29/kg. 6.5%   
 0403.90.91 216.5% but not less than 
Can$2.15/kg. 7.5%   
 0405.20.10 274.5% but not less than 
Can$2.88/kg. 7%   
 Chocolate ice cream, mixes and doughs containing butter, food preparations containing dairy products  
 1806.20.21 265% but not less than 
Can$1.15/kg. 5%   
 1806.90.11 265% but not less than 
Can$1.15/kg. 5%   
 1901.20.11 246% but not less than 
Can$2.85/kg. 4%   
 1901.20.21 244% but not less than 
Can$2.83/kg. 3%   
 1901.90.31 267.5% but not less than 
Can$1.16/kg. 6.5%   
 1901.90.51 267.5% but not less than 
Can$1.16/kg. 6.5%   
 1901.90.53 250.5% but not less than 
Can$2.91/kg. 6.5%   
 2106.90.31 212% but not less than 
Can$2.11/kg. 5%   
 2106.90.33 212% but not less than 
Can$2.11/kg. 5%   
 2106.90.93 274.5% but not less than 
Can$2.88/kg. 7%   
 2202.90.42 256% but not less than 
Can$36.67/hl 7.5%   
 2309.90.31 205.5% but not less than 
Can$1.64/kg. 2%   
n.a. Not applicable. 
a In-quota HS Codes. 
b Tonnes unless otherwise specified. 
c Marketing year 2000-01 (1 August to 31 July). 
Sources:  WTO Secretariat, based on Canada’s Consolidation of the Customs Tariff 2002, and on data from the Import and Export 
Control Bureau, and the Department of Foreign Affairs and International Trade.  WT/TPR/S/112/Rev.1 Trade Policy Review 
Page 102 
  
28. For certain products with high out-of-quota rates,  free-trade partners and, for some products, 
partners receiving unilateral prefer ential tariff treatment, benefit from significant margins of tariff 
preference.  For example in the case of wheat and barley, operators from certain free-trade partners 
(notably Chile, Mexico and the United States) can pot entially ship to Canada unlimited quantities duty 
free (subject to origin requirements), and are therefor e not  affected by the tariff-quota system.  In the 
case of bovine meat, all imports enter duty free from Chile, Commonwealth Caribbean countries, 
Costa Rica, Mexico, and the United States compared with an MFN tariff of 27% (however, bovine 
meat may not be imported from Chile or Mexico du e to SPS concerns, see Chapter III(2)(vii)).  All 
imports of margarine enter duty free  when originating in Chile or Me xico (but not the United States), 
while the MFN tariff is 218% but not less than Can$2.47 per kg. 
29. Five of Canada's 21 tariff quotas  include reserved access in favou r of three trading partners at 
the in-quota rate (Table IV.1).  In addition, the entire quota for fluid milk is reserved for personal 
cross-border purchases (i.e. in practice from the United States).  Accordingly, importers must ensure 
that their supplies originate in the countries with rese rved access to the extent of the guaranteed share, 
which limits the available access for all other WTO Members. 
30. The in-quota volume scheduled under the WTO Agreement on Agriculture is in many cases 
small.  Moreover, for certain dairy products, such as  skim milk powder, there is no in-quota access 
commitment at all:  Canada  specified in-quota an d out-of-quota rates of duty but no quota volumes 
(see Table IV.1, item 7).  The authorities have noted that, in practice, the products affected do in some 
cases enter Canada at the in-quota rate under su pplementary import permits, for example when 
temporary domestic shortages occur, or when th e imported products are destined for re-export. 
31. There have been no major changes in tariff-quota administration since the last Review of 
Canada in December 2000.  Tariff quotas are administered in a variety of methods, such as first-come, 
first-served at the border, licences on demand, and on the basis of the past performance of the 
applicants, their market share or on the basis of equal share.  Some are restricted to downstream users 
(e.g. dry whey, concentrated or condensed milk – see Table IV.1).  Hatching eggs and chicks are 
allocated to federally registered ha tcheries on the basis of the number of chicks hatched by them in a 
12-month period preceding the allocation.  The entire tariff quota for butter is allocated to the Canadian Dairy Commission. 
32. Overall, Canada’s tariff quotas have been characterized by high fill rates.  However, tentative 
estimates by the WTO Secretariat suggest that, for a number of dairy and poultry products subject to 
tariff quotas, imports account for less than 5% of domestic consumption.
13  This could change if 
Canada's proposal for tariff-quotas to provide duty-free access for a common minimum percentage of 
current consumption on a pr oduct basis is successful.14 
(iv) Export support 
33. Export subsidies were scheduled by Canada under the WTO Agreement on Agriculture for 
11 product groups comprising cereals, oilseeds , dairy products, and vegetables, and were made 
subject to distinct reduction commitments.  Cana da's latest WTO export subsidy notification was 
made in March 2001 for the year 1999/00.15  As in the three previous years, Canada notified no 
subsidies for any of the scheduled products, with the exception of dairy products. 
                                                      
13 Such products include butter, cream, powdered whey, cheese, ice cream, milk powder, yoghurt, eggs, 
and turkey.  Shares based on consumption and import volumes.  More rigorous estimates of imports as a share 
of domestic consumption would require consumption data not available to the Secretariat. 
14 WTO document G/AG/NG/W/63, 28 November 2000. 
15 WTO document G/AG/N/CAN/41, 14 March 2001. Canada WT/TPR/S/112/Rev.1 
 Page 103 
 
 
34. The issue of whether Canada provides dairy export subsidies in excess of commitment levels 
has been under legal challenge at the WTO since 1997.  A panel examined the pricing system 
whereby the Canadian Dairy Commission delivered permits to provincial marketing boards for the 
sale of milk to dairy processors and exporters at  prices below the levels otherwise available in 
Canada.  The Panel found in 1999 that this system constituted an export subsidy and, thus, concluded 
that dairy exports provided through Special Milk Cla sses 5(d) and (e) were subject to Canada's export 
subsidy reduction commitments.16 
35. To comply with the recommendations of th e Panel, the Special Milk Class 5(e) was 
eliminated and exports under 5(d) were restricted to Canada's export subsidy commitment levels.  In 
addition, Canada introduced a ne w category of milk for export pr ocessing known as commercial 
export milk (CEM).  Under contracts concluded in  advance of production, Canadian producers can 
sell any quantity of CEM to Canadian processors fo r export processing on terms and conditions freely 
negotiated between the producer a nd the processor.  About 40% of producers have chosen to produce 
and sell CEM since it became available in August 2000. 
36. The original Panel reconvened in 2001 to consider a new complaint that Canada's new 
mechanism was WTO-inconsistent.  The  Panel c oncluded in 2001 that Canada, through the CEM 
scheme and the continued operation of Special Milk Class 5(d), had been providing export subsidies for cheese  in excess of its quantity comm itment levels specified in its Schedule.
17  Canada appealed 
and the Appellate Body partially re versed the Panel's findings, but declared itself unable to complete 
the analysis of all the claims against Canada.18 
37. The United States and New Zealand requested a se cond Article 21.5 panel regarding this case, 
which was established by the DSB on 18 December 2001.  This Panel found that the CEM scheme 
and the continued operation of Speci al Milk Class 5(d) constituted export subsidies in excess of the 
quantity commitments in Canada's  Schedule, a finding that was confirmed by the WTO Appellate 
Body in December 2002.19 
(v) State trading and other marketing arrangements 
38. Canada's two main state-trading enterprises operating in the agriculture sector are the 
Canadian Wheat Board (CWB) and the Canadian Da iry Commission (CDC).  The CWB, Canada's 
largest state-trading enterprise by sales, groups over 100,000 producers of wheat, durum, and barley 
in Western Canada. Producers in Western Canada  wishing to sell wheat or barley for human 
consumption, domestically or for export, must do so through the CWB.   Individual producers 
determine the volume offered for sale to the CWB.   However, the CWB may prorate the total volume 
offered across all producers.  There are penalties if the producer delivers less than or more than a 
certain percentage of the contract volume.  
39. The CWB has exclusive authority to export all wheat, durum wheat, and barley, and markets 
domestic milling-quality wheat and malting barley produced in Western Canada.  The CWB therefore 
accounts for almost all of Canada's wheat and barley exports.  Of the 25 to 30 million tonnes of wheat 
or barley produced annually in Canada, on average 60% to 70% has been exported by the CWB.  
Marketing to over 70 countries world-wide, the CWB is the world's largest wheat and barley 
exporting organization.  On average the CWB has about 20% of the world market share in wheat, 
65% of durum wheat, 30% of malting barley, and 15% of feed barley.  The value of its export sales (Can$4.2 billion in 2000-01) makes the CWB one of Canada’s top five exporters.  CWB's largest 
                                                     
 
16 WTO documents WT/DS103/R, 17 May 1999 and WT/DS103/AB/R, 13 October 1999. 
17WTO document WT/DS103/RW, 11 July 2001. 
18 WTO document WT/DS103/AB/RW, 3 December 2001. 
19 WTO documents WT/DS103/RW2, 26 July 2002, WT/DS103/AB/RW2, 20 December 2002. WT/TPR/S/112/Rev.1 Trade Policy Review 
Page 104 
  
export markets for wheat in 2000-0 1 were Iran (1.65 million tonnes ), the United States (1.45 million 
tonnes), Algeria (1.35 million tonnes), and Mexico (1.16 million tonnes).20 
40. The CWB administers a number of support programmes on behalf of the Government of 
Canada;  these include advance payment programmes for wheat and barley, and the leasing of hopper cars to transport Prairie grain.  Costs associated with these activities have been notified as "amber" 
subsidies in Canada’s WTO domestic support notification.
21  The Government of Canada guarantees 
the CWB's initial payments to producers.  This may involve direct financial transfers from the 
Government when the producer pool accounts go into deficit.  This has not occurred since the 1990/91 
crop year. 
41. Under Canada’s export credit guarantee prog rammes, the Government guarantees repayment 
to the CWB of the principal and interest of all cred it receivables.  Sales to sovereign buyers take place 
under the Credit Grain Sales Program, whilst sales to private importers take place under the Agri-food 
Credit Facility.  During 2000-01, credit sales tota lled Can$521 million, representing 12.3% of total 
sales, down from Can$703 million, or 15.6%, of sales in the previous year. 
42. In some cases overdue accounts ar e rescheduled or the principal owed by a debtor country is 
reduced.  At 18 September 2002, the balance receivable under the Credit Grain Sales Program was 
Can$6.75 billion.  Of this amount, Can$5.7 billion represented receivables for which payments of 
principal and interest had been rescheduled over periods ranging from five to 25 years under terms 
agreed to by the Government of Canada.  The forg iveness or reduction of the debt owed to the CWB 
and renegotiated at the Paris Club, is accounted fo r as grants and contributions in Canada's Public 
Accounts. 
43. Federal government guarantees allow the CWB to  borrow money to finance its operations at 
"lower rates of interest than any private sector company of comparable size and credit worthiness".22  
This results in savings for western Canadian farmers.  Certain WTO Members have noted the 
preferential financing conditions enjoyed by the CWB, considering that government backing conferred the CWB an unfair competiti ve advantage in world wheat markets.
23 
44. The CDC has, among other things, the power to "purchase any dairy product and package, 
process, store, ship, insure, import, export or sell  or otherwise dispose of any dairy product purchased 
by it".24  The CDC has a de facto monopoly on the importation of butter under the tariff quota system 
(see section (iv) above).  For 2000/01 as for previous years, the entire import quota for butter was 
allocated to the Canadian Dairy Commissi on to resell to further processors.  
45. The CDC, acting as the representative for th e Federal Government, chairs a provincial 
government/industry committee where national productio n targets for industrial milk production are 
agreed.  The CDC, in consultation with the industry , supports market prices for butter and skim milk 
powder through a target return for producers and a target processor margin.  These targets are 
supported by programmes that remove surplus supp lies of these products from the market and (until 
2002) by a direct federal government payment to prod ucers.  The price of a milk quota is determined 
in 1 kg. increments of butterfat production/day;  in 2000/01, it ranged from Can$9,700 to Can$18,750 
per dairy cow depending on the province.  Production quotas therefore represent a large initial investment in establishing a dairy farm that serves the domestic market.   
                                                     
 
20 Canadian Wheat Board online information.  Available at:  http://www.cwb.ca. 
21 WTO document G/AG/N/CAN/43, 14 June 2001. 
22 Canadian Wheat Board online information.  Available at:  http://www.cwb.ca/aboutcwb/general/ 
general.htm. 
23 WTO document WT/TPR/M/78, 5 February 2001. 
24 WTO document G/STR/N/2/CAN,  19 August 1996. Canada WT/TPR/S/112/Rev.1 
 Page 105 
 
 
46. For chicken, turkey, eggs and broiler hatching eggs, national producer agencies set the annual 
production quota in collaboration with provincia l marketing boards and industry participants. 
(3) TEXTILES AND CLOTHING  
(i) Introduction 
47. Canada's textiles sector in 2001 accounted for 1.3% of Canadian manufacturing GDP and 
2.5% of manufacturing employment.25  Clothing accounted for a further 2% of total manufacturing 
GDP and 4.4% of manufacturing employment.  Clothing production takes place mostly in Quebec 
(55% of employment in 2001), and Ontario (28%).  Th e clothing industry and, to a lesser extent, the 
textiles industry are characterized by small size d establishments, a heavy reliance on women and 
immigrant workers, low levels of workforce education, and a high degree of out-sourcing. 
48. Partly reflecting these specificities, the Canadian  textiles and clothing (T&C) industries have 
benefited from a variety of import protection m easures and adjustment assistance over the past 
quarter-century.  The main measures are reviewed in this section, as well as recent market 
developments. 
49. After a substantial contractio n during 1990-95, employment in the T&C increased during 
1995-00 mainly due to the general economic expansion in North America (Table IV.2).  In 2001, both 
employment and shipments declined by nearly 5.2% .  Imports continued to advance, resulting in a 
further increase in the share of domestic consumption that is met by imports.  Over 1995-01, this 
share increased considerably for both textiles and cl othing.  Canada's largest clothing suppliers are 
China and the United States with shares of 24% an d 15% of total imports, respectively.  The only 
least developed country (LDC) in Canada's top te n suppliers is Bangladesh, with 3% of overall 
Canadian imports of clothing. 
50. The continuing loss of market share by domestic textiles and clothing manufacturers is being 
offset somewhat by their emphasis on export market development.  In 2001, exports amounted to 
one half of all textiles shipments, nearly twice the rate recorded in 1995.  The United States continues 
to be Canada's main export market, accounting for so me 93% of Canadian textiles exports.  In 2001, 
Canada's textiles trade deficit fell to Can$2.8 billion, with the United States accounting for 31% of the 
deficit. 
51. Clothing exports more than doubled over 1995-01.  The United States is the destination of 
96% of Canadian clothing exports.  According to the authorities, this heavy export reliance poses a 
limited problem for Canadian suppliers once U.S.  import quotas are fully dismantled, because 
Canadian suppliers concentrate on niche markets th at are not in direct competition with products 
currently subject to quota in the United States. Over all, Canada continues to have a substantial trade 
deficit in clothing of Can$2.9 billion in 2001. 
(ii) Trade policy developments 
52. The textiles and clothing industries are facing growing international competitive pressures, 
direct and indirect, as Canada continues to gradually liberalize trade in these sectors.  Trade policy 
commitments include lower MFN tariffs under GATT 1994, under a ten-year schedule that will end in 
January 2004 (Table IV.3). While these tariffs w ill remain in 2004 on average twice the level of 
                                                      
25 Canada's manufacturing sector accounts for 15% of total employment, and 17% of total value added 
(See Statistics Canada at http://www.statcan.ca/english/lgdb/econ41.htm).  Tariffs in manufacturing average 
around 7% (see also Charts III.1 and III.3). WT/TPR/S/112/Rev.1 Trade Policy Review 
Page 106 
  
Canada's average tariffs, it is possible that they will not suffice to protect the industry from import 
competition, given that import unit values for thes e types of products frequ ently represent a small 
fraction of their retail price. 
Table IV.2 
Textiles and clothing industries, selected indicators 1990-01 
 1990 1995 1999 2000 2001 
Employment (No. of workers)      
- Textiles 35,300 28,100 53,300 54,700 48,300 
- Clothing 103,400 81,100 70,744 93,152 88,267 
Shipments (Can$ billion)      
- Textiles 5.0 5.6 6.4 6.4 6.8 
- Clothing 6.8 6.6 6.8 7.4 7.0 
Value added (Can$ billion)      
- Textiles 2.1 2.5 3.1 .. .. 
- Clothing 3.6 3.5 3.8 .. .. 
Importsa (Can$ billion)      
- Textiles 2.9 4.8 6.3 6.5 6.2 
- Clothing 2.4 3.3 4.7 5.3 5.9 
Exportsa (Can$ billion)      
- Textiles 1.0 2.1 3.2 3.4 3.5 
- Clothing 0.2 1.2 2.7 3.0 3.0 
Exportsb/shipments      
- Textiles 16% 25% 43% 46% 45% 
- Clothing 5% 20% 40% 41% 42% 
Importsb/consumptionc      
- Textiles 36% 49% 57% 59% 63% 
- Clothing 31% 41% 54% 55% 59% 
.. Not available. 
a Exports and imports calculated by HS. 
b Exports and imports calculated by NAICS (SIC for 1990 data). 
c Shipments plus imports minus exports. 
Source: WTO Secretariat, based on information from Industry Canada. 
Table IV.3 
Average tariff rates for textiles and clothing, 2000 and 2002 
(Per cent) 
Category MFN U.S. Mexico GPT LDCT CIATa CTb 
Textiles (321)        
1998 11.1 0.0 5.7 9.7 8.5 0.0 5.7 
2000 10.0 0.0 2.2 8.8 7.0 0.0 2.2 
2002 9.2 0.0 0.2 8.2 6.5 0.0 0.2 
2004 8.5c 0.0 0.0 8.2d 0.0e 0.0 0.2 
Clothing (322)        
1998 17.2 0.0 8.9 16.1 14.5 0.1 8.8 
2000 16.1 0.0 5.3 15.1 13.3 0.0 5.2 
2002 15.1 0.0 1.5 14.2 12.5 0.0 1.5 
2004 14.0c 0.0  14.2d 0.0e 0.0  
a Canada-Israel Agreement tariff. 
b Chile tariff. c Estimated. d Assuming no further reduction. 
e LDC Market Access Initiative, 1 January 2003. 
Source:  WTO Secretariat, based on data provided by the Government of Canada. Canada WT/TPR/S/112/Rev.1 
 Page 107 
 
 
53. Duty remission programmes of 1998 remain in  place, allowing eligible clothing 
manufacturers to import certain quantities of clothing  or fabrics duty free to complement product lines 
they make in Canada.  Products covered include outerwear fabrics, shirting fabrics, outerwear 
clothing, blouses, shirts and co-ordinates.  They are designed to help Canadian clothing and fabric 
manufacturers face the pressures of increased import competition.  Only producers who received 
benefits in 1995 under the predecessor Orders are eligible.  Remission totalled Can$32 million 
in 2001.  These duty remission programmes expire on 31 December 2004.  
54. Since the 1960s, tariffs have been complemented by import quotas, which are being 
progressively dismantled over a ten-year period until 31 December 2004 under the WTO Agreement 
on Textiles and Clothing (ATC).  In January 2001, Canada communicated the list of textile and 
clothing products that were integrated into WTO rules on 1 January 2002, as part of the third phase of 
integration foreseen by the ATC.  This corresponded to 18.2% of 1990 import volumes.  The products 
selected for integration consist of made-up textile  products (7.8%), clothing products (3.8%), fabrics 
(1.12%), and tops and yarns (5.5%).26  The authorities noted that none of the partially liberalized or 
combined quotas were readjusted, which also provided further access to the Canadian market.  
Nevertheless, as was the case with  the first two phases, the most se nsitive clothing products have been 
left for the end of the implementation period.  In contrast with clothing, imports of yarns and made-up 
textiles under quota accounted for less than 5% of total imports in 1990, and over 85% of fabrics were 
imported free of quota that year.  Under the ATC, Canada is committed to integrating all remaining 
products by 31 December 2004, thus removing all import quotas on these products by that date.  
55. In early 2002, following China's WTO accession, Canada notified the WTO of the quota 
arrangements for 2002 set out in its bilateral restraint agreement with the Chinese Government.27  A 
similar procedure was followed with Chinese Taipei.28  Restrictions on imports of underwear from 
Costa Rica were to be eliminated upon entry into fo rce of the bilateral free -trade agreement between 
the two countries.29 
56. In 1999, some Can$2.2 billion of clothing imports entered under quota, accounting for 52% of 
total clothing imports, down from 61% in 1994.  In 2001, this share declined to 49%, with restrained imports valued at Can$2.8 billion.  Between 1994 and 1999, clothing imports from all sources grew 
by 48%, or at an annual average of 8.1%.  Over  the two years 2000-01, the corresponding average 
annual growth rate accelerated to 13.4%. 
57. This acceleration reflected an increase in the va lue of clothing imports under quota, by nearly 
Can$500 million:  7% in 2000 and 12% in 2001 (Chart IV.3).  Another import growth factor was an 
expansion of imports of products that were never under quota, by over Can$400 million (37% in 2000 
and 13% in 2001).  Imports of products for which quotas  had been freed (e.g. tailored, collared shirts 
and working gloves) also expanded fast, by Can$200 million.  Imports from Mexico continued to 
advance considerably (by Can$130 million) or 36%, but imports from U.S. suppliers stagnated at 
around Can$660 million. 
 
                                                     
 
26 WTO document G/L/459, 31 July 2001.  See also DFAIT online information.  Available at:  
http:///www.dfait-maeci.gc.ca/~eicb/textile/ WTO%20ATC-e.htm. 
27 WTO document G/TMB/N/62/Add.3/Corr.1, 15 March 2002.  See also the administrative 
arrangements with China WTO document G/TMB/N/440, 14 June 2002. 
28 WTO document G/TMB/N/62/Add.4/Corr.1, 25 January 2002. 
29 Canada-Costa Rica Free Trade Agreement, Annex III.1. [Online].  Available at:  http://www.dfait-
maeci.gc.ca/tna-nac/3.1-e.asp. WT/TPR/S/112/Rev.1 Trade Policy Review 
Page 108 
  
 
58. In early 2002, Canada was restraining imports of textiles or clothing products from 40 trading 
partners including 32 WTO Members.30  Countries subject to restrain ts include six least developed 
countries.  Most exports from LDCs to Canada in 1999 were clothing products.  These LDCs generally have low overall quota utilization rates,  except for some products, where imports from 
Bangladesh and, to a lesser extent, from Cambodi a have utilization rates above 90% (Table IV.4).  
Low utilization rates may be the result of supply problems that prevent partner countries from filling 
their quota.  Imports are likely to grow through the implementation of duty-free and quota-free access 
for LDCs as of January  2003. 
59. In general, the quota system is likely to be most limiting on exporters with high quota 
utilization rates.  Table IV.4 lists those combina tions of products and partner countries for which 
exports may expand most once quotas are abolished in 2005.  Suppliers in some of these countries 
may also displace other suppliers once the quota system is dismantled. 
                                                     
 
30 The countries are:  Bangladesh;  Brazil;  Bulgaria;  Cambodia;  China;  Costa Rica;  the 
Czech Republic;  the Dominican Republic;  Hong Kong, China;  Hungary;  India;  Indonesia;  Jamaica;  Laos;  
Lebanon;  Lesotho;  Macao;  Malaysia;  Mauritius;  Myanmar;  Nepal;  Pakistan;  Democratic People's Republic 
of Korea;  the Philippines;  Poland;  Qatar;  Republic of Korea;  Romania;  Singapore;  Slovak Republic;  South Africa;  Sri Lanka;  Swaziland;  Syria;  Taiwan;  Thailand;  Turkey;  United Arab Emirates;  Uruguay;  
and Viet Nam. 0.00.61.21.82.43.0Chart IV.3                                            
Imports of clothin g, 1994 , and 1999-01
Can$ billion
Products under 
quota in 1994   
and 1999-2001Products under quota 
in 1994 but freed of 
quota b y 1999Other products not 
subject to quotas in 
1994 -2001aImports from the 
United States
a
  
Source :Imports from unrestricted suppliers other than the United States  and Mexico or from restricted suppliers for products not 
subject to restrictions.
WTO Secretariat, based on data provided by Canadian authorities.1994
1999
Imports from
Mexico(% change over preceding year presented)(53)
(35)(56)
(663)(20)2000
2001(7)(12)
(25)(18)(8)(-7)
(33)(40)(37)(13)Canada WT/TPR/S/112/Rev.1 
 Page 109 
 
 
Table IV.4 
Clothing restraint levels with utilization rates exceeding 90%, by country, 2001 
Country Agreement No. Product description Unit Adjusted 
restraint level Utilization rate 
(%) 
U.A.E. 08 Athletic wear No. 10,000 94 
Bangladesh 01A Jackets No. 1,766,315 90 
 02 Winter outerwear No. 455,110 100 
 05 Trousers, overalls and shorts  No. 3,845,869 100 
 05A Of which:  trousers, MBWG No. 875,981 93 
 09 Underwear No. 8,505,054 95 
Rep. of China 01A Jackets No. 1,736,921 98 
 04B Dresses No. 2,853,692 97 
 07/08A Woven shirts and blouses No. 12,633,133 90 
 07/08B Woven shirts and similar articles No. 3,961,292 100 
 05 Trousers, overalls and shorts No. 18,127,607 98 
 09 Underwear No. 6,050,768 98 
 10 Sleepwear and bathrobes No. 5,516,143 98 
 11 Sweaters No. 3,418,933 95 
 13 Foundation garments No. 2,538,557 99 
 14 Babies garments No. 939,838 91 
 31A Combed wool fabric Kg. 298,754 99 
 43 Hosiery Pairs 9,732,850 98 
Hong Kong, China 05 Trousers, overalls and shorts No. 7,212,881 95 
 05A Of which:  trousers MBWG No. 5,800,271 100 
 07/08A Woven shirts, and blouses, MBWG No. 11,695,879 98 
 09 Underwear No. 10,860,327 99 
 10A Sleepwear, MBWG No. 470,683 95 
 11 Sweaters No. 10,851,946 100 
 11A Of which:  sweaters, MB No. 1,755,728 94 
Indonesia 05A Trousers, MBWGC No. 3,339,311 92 
 09 Underwear No. 2,185,950 94 
India 00A Clothing Sq. Mt. 40,355,719 92 
 08A Shirts, blouses No. 9,999,999 90 
 09 Underwear No. 9,550,060 100 
South Korea 11 Sweaters No. 8,779,690 90 
 43 Hosiery Pairs 24,512,464 96 
Laos 07/08A Woven shirts, blouses, MB No. 180,435 92 
Sri Lanka 05 Trousers, overalls and shorts No. 1,394,249 100 
Macao 00A All clothing Sq. Mt. 8,592,000 92 
 11 Sweaters No. 979,607 92 
Malaysia 09 Underwear No. 9,528,120 94 
Philippines 05 Trousers, overalls and shorts No. 2,747,007 94 
 07/08A Shirts, T-shirts, sweatshirts No. 3,303,371 90 
Pakistan 08A Shirts, blouses, MB No. 8,271,702 96 
 41A Bed sheets No. 1,332,478 99 
 41B Pillowcases No. 1,195,577 92 
Thailand 09 Underwear No. 2,889,809 100 
 34A Nylon fabric Kg. 102,575 96 
Turkey 05A Trousers, MBWG No. 966,625 99 
Taiwan 01A Jackets, brushed  No. 295,736 97 
 08A Shirts and blouses No. 3,844,558 95 
 13 Foundation garments No. 45,820 93 
 43 Hosiery Par 4,763,252 90 
Viet Nam 00A All clothing No. 2,575,221 93 
Note: MB:  men and boys;  WG:  women and girls;  C:  children. 
Source:  DFAIT online information.  Available at:  http://www.dfait-maeci.gc.ca/~eicb/reports/brx02-dec01.pdf. 
 
 
  WT/TPR/S/112/Rev.1 Trade Policy Review 
Page 110 
  
60. In June 2002, the Canadian Government announced an initiative to provide 48 countries 
eligible for the Least Developed Country Tariff (L DCT) with duty-free and quota-free access to the 
Canadian market for all products (except those under the supply-management system) as of January 
2003.31  As most of Canada's remaining quantitative re strictions are in place on textiles and clothing 
products, and since most LDCs' exports to Canada already consist of textiles and clothing products, 
these products should be the main beneficiaries of this initiative.  Quotas are currently in place on 
imports of certain clothing products from Bangladesh, Myanmar32, Cambodia, Laos, Lesotho, and 
Nepal.  Approximately one half of Canada's im ports of clothing from LDCs are under quota.  
However, only quotas from Bangladesh  are filled annually (Table IV.4). 
61. The Canada Customs and Revenue Agency was allocated Can$10.9 million to implement and 
administer the new initiative for LDCs.  These resour ces were to be used to ensure compliance with 
the new rules of origin regime, and to address potential illegal trans-shipment. 
62. In June 2002, the Minister of Industry announ ced a strategic framework aimed at increasing 
the international competitiveness of the Canadian cl othing and textile industries. Focussed primarily 
on best practices, marketing initiatives, and e-comm erce, this initiative is de signed to help Canadian 
firms take advantage of global clothing and textile  opportunities.  The initiative will be implemented 
over the next four years with federa l funding of up to Can$33 million. 
63. Foreign direct investment plays a minor role in the domestic clothing industry, but the 
Government encourages FDI as a means of preserving  employment in the sector.  For example, in  
February 2001, China Worldbest Group Ltd announced an investment of Can$45 million in a knit and 
dye plant in Drummondville (Quebec).  This invest ment will result in the creation of 380 permanent 
jobs over two years.  The company is receiving pr ovincial financial assistance of Can$3 million from 
Investissement Québec for capital investment, a re payable financial contribution of Can$10 million 
from Economic Development Canada  for the regions of Québec, as well as technical and financial 
support from Drummondville to develop the required in frastructures.  The Prime Minister of Canada  
pointed out that this investment constituted a gateway to the North American market.33 
(4) STEEL  
64. The Canadian steel industry accounted for some 0.5% of GDP, and provided employment for 
some 28,000 workers in 2001.  Although its contribution to GDP and employment is relatively 
modest, the Canadian steel industry has sizeable sp illover effects on other sectors of the economy, 
particularly coal, gas, electricity, iron  ore, limestone, zinc, and other metals.34  The value of shipments 
was Can$9.3 billion in 2001.  Seventeen production plants owned by 14 companies across five 
provinces (Alberta, Manitoba, Ontario, Quebec, and Saskatchewan) produce carbon and stainless steel 
in flat and long products;  a fu rther 20 production facilities produce pipes and tubes, wire and wire 
products.35  The provincially-owned Sydney Steel Corporation, in Nova Scotia, was closed in 2001;  it 
is being demolished and its assets liquidated. 
 
                                                      
31 See DFAIT online information.  Available at http://www.dfait-maeci.gc.ca/tna-nac/ldc-dis02-e.asp. 
32 Myanmar (Burma) is excluded from Canada's LDC Tariff.  
33 Investissement Québec Press Release, 15 February 2001 available online at:  http://investquebec. 
com/en/int/presse/communiques_archives_res.jsp?id=172&The_id=74. 
34 See, for example, the Canadian Steel Producers Association online information.  Available at 
http://www.canadiansteel.ca/industry/info.htm. 
35 More detailed information on Canadian steel producers and products is available online at:  
http://www.canadiansteel.ca/industry/factsheets/cdnproducts.htm. Canada WT/TPR/S/112/Rev.1 
 Page 111 
 
 
65. About a third of the steel produced in Canada is directly exported, and as much as 80% of the 
steel made is ultimately exported as a component of  manufactured products.  According to Canadian 
steel industry data, imports in 2001 represente d around 36.7% of domestic consumption (in volume 
terms).  The main trading partner is the United States.  In 2001, imports from the United States 
totalled 56% of all Canadian steel imports, while Cana da's steel exports to the United States amounted 
to 94%, by volume, of steel exports.36 
66. During the 1990s, the Canadian steel industry was restructured, resulting in a 15% reduction 
in employment.  During that decade, many steelm akers closed inefficient or unprofitable facilities, 
exited some lines of business, and invested in new plant and equipment totalling Can$4.9 billion.  
Almost all this investment was directed to new or upgraded finishing facilities.  The crude 
steelmaking capacity of the industry increased only marginally over the period, whereas the 
production capacity for value-added products, lik e plate, hot rolled and cold rolled sheet, and 
corrosion-resistant sheet products, was augmented.  Consequently, the manufacturing value added per 
production worker increased. 
67. The industry's restructuring was handled by the firms involved, with the exception of Algoma 
Steel in Ontario, which was restructured under the provisions of the Companies' Creditors 
Arrangement Act (CCAA).  Financial assistance to this firm was provided by the federal, provincial 
and municipal governments.  The assistance was approximately Can$22 million, shared on a 50% 
basis between the federal government and the province.37  According to Canadian steel industry data , 
the restructuring effort produced productivity gain s of around 14% a year between 1993 and 1999.38  
Between 1992 and 1999 Canada's shipments of steel increased by 22% while apparent consumption of 
steel increased by 74%, and imports rose by 195%.  The import share of the Canadian steel market 
rose from 22% to 36%;  the market share of imports from the United States rose from 14% to 19% 
over the same period.  
68. After a period of growth between 1997 and 2000, there was a decline in Canadian production 
and exports of steel in 2001.  Imports, however, have been falling by more than exports.  In 2001, 
while exports contracted by 8.5% in volume with respect to the previous year, imports fell by 30% 
(Table IV.5).  Also, although domestic production and consumption fell in 2001 (by 7.9 and 14.6%, 
respectively), the share of the domestic market su pplied by domestic producers rose to some 64%, 
while the share held by imports fell from 44% to 36% in the previous year. 
69. The contraction in imports in 2001 was not evenly spread across supplying countries.  Imports 
from the United States fell by less than the average in 2001 (by 10% in volume terms), and the share 
of the Canadian market supplied by U.S. imports rose to 21% in 2001 up from 19.6% in 2000.  
Imports from Eastern Europe, Russia, some Central Asian countries, as well as from Chinese Taipei, 
India, Indonesia, Korea, Japan, and Hong Kong, Ch ina, were the most affected, falling by over 50%, 
while imports volumes from the EU fell by 21%. 
                                                      
36 Canadian Steel Producers Associat ion online information.  Availa ble at:  http:// www.canadiansteel. 
ca/industry/factsheets/cdneconomy.htm. 
37 Details of the Federal Government's assistance to Algoma Steel and the community of Sault Ste. 
Marie, Ontario is available online at:  http://www.strategis.ic.gc.ca/SSG/fn01080e.html. 
38 Canadian Steel Producers Associat ion online information. Availabl e at:   http://www.canadiansteel. 
ca/industry/factsheets/quickfacts.htm. WT/TPR/S/112/Rev.1 Trade Policy Review 
Page 112 
  
Table IV.5 
Main indicators of the Cana dian Steel Industry, 1997-02 
 1997 1998 1999 2000 2001 2002a 
Production – (million tonnes) 15.5 15.8 16.1 16.5 15.2 8.2 
Shipments - Finished (million tonnes) 14.5 14.1 15.0 14.9 14.2 7.9 
Domestic shipments (million tonnes) 9.7 9.3 10.2 9.9 9.6 5.0 
Value of shipments (Can$ billion) 10.3 10.6 10.5 10.5 9.3 5.1 
Domestic consumption (million tonnes) 15.4 16.1 16.3 17.8 15.2 7.9 
Imports (million tonnes) 5.7 6.7 6.1 7.9 5.6 2.9 
Imports (US$ billion) 4.0 4.6 4.9 5.5 5.1 .. 
Exports (million tonnes) 4.8 4.7 4.7 5.0 4.6 2.9 
 of which, exports to the United States 4.0 4.2 4.2 4.0 4.4 2.6 
Exports (US$ billion) 2.9 3.0 3.5 3.9 3.4 .. 
Share of imports in total consumption (%) 37.0 41.9 37.5 44.4 36.7 36.9 
Note:  All quantity figures (i.e. tonnes) are for finished steel products, save for production data, which is for crude steel. 
.. Not available. 
a Data for the first six months. 
Source:  Statistics Canada. 
 
70. Anti-dumping investigation initiations concerning steel products increased during the  period 
under review.  In calendar years 2000 and 2001, 37 out of 46 new investigations dealt with products 
of the steel industry (Chapter III).39  A total of 23 countries were affected by the investigations.40  In 
all cases individual market shares were small, betw een 0.1% and 4.4% of total consumption.  Imports 
from the United States were not subject to new i nvestigations during the period.  Provisional duties 
were applied in most cases, ranging from 2.47% to 96%, but in 40% of the cases where provisional 
duties were applied, no final duties were levied .  At the end of 2001, 64 definitive duty orders 
covering steel products from 32 countries were in place.  These duties represented some 70% of total 
anti-dumping duties in place. 
71. Following the decision of the Government of the United States in March 2002 to impose 
safeguard measures on imports of nine steel products, Canada (throug h the CITT) launched a 
safeguard investigation into imports of  steel products from all countries.41  Canada was principally 
concerned about the possible diversion of foreign steel into the Canadian market.  On 4 July 2002, the 
CITT determined that:  flat-rolled carbon and alloy steel discrete plate;  fl at-rolled carbon and alloy 
steel cold-rolled sheet and coil;  carbon and alloy steel concrete reinforcing bars;  welded and 
seamless carbon and alloy tubular steel standard pipe;  and carbon and alloy steel angles, shapes and 
sections, were being imported into Canada from all sources in such incr eased quantities since the 
beginning of 1996, and under such conditions, as to be a principal cause of serious injury to domestic 
producers of like or directly competitive goods.  It also determined that imports from the United 
States of these products, except for carbon and allo y steel concrete reinforcing bars, accounted for a 
substantial share of total imports of goods of the same kind and were contributing importantly to the 
serious injury.42  Imports from Mexico, Israel, and Chile we re found not to account for a substantial 
                                                      
39 More information is available online at:  http ://www.ccra-adrc.gc.ca/customs/business/sima/monthly-
e.html. 
40 Brazil, Bulgaria, China, Chinese Taipei, FYR of Macedonia, India, Indonesia, Italy, Japan, Korea, 
Latvia, Luxembourg, Malaysia, Moldova, New Zealand, Poland, Portugal, Russian Federation, Saudi Arabia, South Africa, Thailand, Ukraine, Yugoslavia, F.R. 
41 Department of Finance, Press Release 2002-025, 22 March 2002, "Canada Calls for Investigation on 
Steel Imports", [Online].  Available at http://www.fin.gc.ca/news/02/02-025ehtml. 
42 Under NAFTA rules or under the FTAs with Chile and Israel, if Canada takes a WTO global 
safeguard action, it is required to exclude imports from the United States, Mexico, Chile, and Israel, unless Canada WT/TPR/S/112/Rev.1 
 Page 113 
 
 
share of total imports of goods of the same kind, and not to contribute importantly to serious injury. 
No injury was found in the case of imports from all sources.  The CITT found no injury in the case of 
imports from all sources of:  flat-rolled carbon and alloy steel hot-rolled sheet and coil flat-rolled 
carbon and alloy steel corrosion-resi stant sheet and coil;  carbon and alloy hot-rolled steel bars;  and 
carbon and alloy steel cold-drawn and finished bars and rods.  The CITT sent its determination to the 
Governor on 19 August 2002, for possible action.43 
72. Canada has administered a monitoring programme  for imports of carbon and specialty steel 
products since September 1986, when these products were added to the Import Control List.  The 
grounds for this decision were the results of an inquiry conducted by the Canadian Import Tribunal, 
the predecessor to the CITT, which found that globa l excess capacity, as well as the prevalence of 
subsidization and dumping threatened to injure th e Canadian steel industry, and recommended import 
monitoring.  The steel import-monitoring programme is based on the provisions of the Export and 
Import Permits Act, and has been renewed every three years, most recently in August 2002.    
73. Pursuant to the steel import-monitoring progr amme, individual import permits are required 
for each shipment of carbon and specialty steel produ cts;  these permits are issued by the Department 
of Foreign Affairs and International Trade and must  be presented at the time of customs clearance.44  
Permits are not required when:  the value of imports is less than Can$5,000;  the importer is a vehicle 
manufacturer;  or the goods are of Canadian origin , returning to Canada after having been exported 
without any processing abroad.  The programme does  not limit the quantity of carbon and speciality 
steel products that may be imported into Cana da.  The issuance of the permits is automatic.45  
(5) TELECOMMUNICATION AND AUDIOVISUAL SERVICES  
(i) Introduction 
74. Since Canada's previous Review in 2000, there have been no major regulatory changes 
affecting market access or national treatment to Cana da's telecommunications or audiovisual services.   
75. Industry Canada has responsibility for telecommun ications policy and international submarine 
cable licensing under the Telecommunications Act of 1993.  It is also responsible for spectrum policy 
and management of radiocommunication services under the Radiocommunication Act.  The Canadian 
Radio-television and Telecommunications Commission  (CRTC) is responsible for the regulation and 
supervision of telecommunications and broadcasting services in Canada and, in collaboration with the 
Competition Bureau, for ensuring that major suppli ers do not engage in anti-competitive practices.  
The CRTC is an independent federal agency with quasi-judicial status. 
(ii) Telecommunications services 
76. In 2001, telecommunications services contri buted about 2.6% to GDP.  The sector's GDP 
share has increased steadily in the last four years.46  Trade data for 2001 from Statistics Canada show 
that exports of telecommunication s services amounted to Can$1.06  billion, while imports reached 
                                                                                                                                                                     
imports from each account for a substantial share of total imports and contribute importantly to the serious 
injury caused by imports.  
43 More information is available online at:  http://www.citt.ga-ca/Safeguard/index_e.htm.  
44 Import permits are required for steel products with HS headings 7206-7302, 7304-7306, 7308, 7312-
13 and 7317. 
45 More information on this programme is available online at:  http://www.dfait-maeci.gc.ca/~eicb/ 
steel/steel-e.htm. 
46For indicators of telecommunication services, see for example Industry Canada (undated). WT/TPR/S/112/Rev.1 Trade Policy Review 
Page 114 
  
Can$1.23 billion.  The stock of foreign direct investment in communications services, which include 
telecommunications, postal, and c ourier services, doubled between 199 7 and 2001, to Can$8.5 billion.  
77. The facilities-based "incumbent carriers" (the  former telephone monopolies, including the 
local companies (ILECs), the independent companies,  and the former overseas monopoly Teleglobe) 
constitute the largest segment of Canada's telecommunications industry, with 67% of revenues in 
2001 (Chart IV.4).  However, approximately 65% of the increase in total revenues in 2001 was 
attributed to the wireless service providers, whic h account for 20% of tota l revenues.  Competition 
also comes from competitive facilities-based ca rriers, and from nearly 500 resellers.  
 
78. Under the Telecommunications Act, all teleco mmunications facility-based common carriers 
must be Canadian-owned and controlled, and incorp orated under the laws of Canada or a province.47 
The Act specifically requires that facilities-based te lecommunications services  providers can have no 
more than 20% of their voting shares held by non-Canadians and that the company must be Canadian 
controlled.  The Canadian Telecommunications Common Carrier Ownership and Control Regulations 
require that holding companies can have no more than 33.3% non-Canadian voting shareholders.  The 
combined maximum foreign ownership of voting shar es is therefore 46.7%, 20% direct plus 26.7% 
(one third of the remaining 80%) indirect.  Th ese provisions do not apply to the ownership or 
operation of international submarine cables, nor to satellite earth stations , which can be foreign-
owned. 
79. As a result of the above restrictions, foreign participation in most basic telecommunications 
services stems mainly from resale-based services, and satellite services;  the authorities have noted, 
                                                      
47 The Telecommunications Act is available online at:  http://laws.justice.gc.ca/en/T-3.4/94898.html. 2001
Revenues
Can$ 32.8
 BillionResellers, Satellite and Other Telecommunications
Wireline Incumbent
Carriers-Incumbent
Local Exchange Carrier
(ILEC):
•Major Telephone
Companies
•Independent TelephoneCompanies
•Incumbent Overseas CarrierWireline Competitive
Service Providers:
•Alternative providers of
long-distance services
(APLDS)
•Competitive localexchange carrier (CLEC)
•Competitive pay
telephone service
providers (CPTSP)
•Other licensedinternational service
providers
Wireless Service ProvidersCan$ 1.6 Bn.
Can$
21.8
Bn.Can$ 
2.7
Bn.
Can$ 6.6 Bn.Chart IV.4
Telecommunications Service Industry Key Players
Source: Industry Canada.Canada WT/TPR/S/112/Rev.1 
 Page 115 
 
 
however, that foreign participation does occur through minority holdings of Canadian companies, 
such as Telus, AT&T Canada, and Call-Net.  Several WTO Members have asked about prospects for 
liberalizing the limitation on fo reign ownership and control.48  The authorities stated, in the context of 
the previous Canadian Review, that these restrictions are necessary for reasons of national security 
and economic, social, and cultural well-being. 
80. Teleglobe's monopoly on overseas (non-U.S.) te lecommunications services was abolished in 
1998.  According to the Competition Bureau, the result has been a continuous decrease in the cost of 
overseas telephone calls for Canadian consumers.49  Since 1998, the CRTC has issued over 
240 licences for the provision of international teleco mmunication services (facilities-based providers, 
and resellers).  Market share for Teleglobe, measured  as a percentage of outgoing minutes, fell to 16% 
in 2000, down from 24% in 1998.  The CRTC does not regulate Teleglobe's pricing and agreements 
with third parties or other aspects of its operations. Providers of international services are subject to 
the same limitations on foreign ownership as pr oviders of domestic services.  There were 109 
facilities-based providers and 131 resellers of intern ational services licensed with the CRTC in 2002. 
81. Since 1998, Telesat's exclusive rights on satellite  facilities have been a bolished.  Since 2000, 
any satellite, domestic or foreign, can provide te lecommunications services (but not broadcasting 
services – see below).  Includin g Telesat's satellites, there are now  50 satellites approved for fixed 
satellite service in Canada. 
82. In November 2000, the CRTC established a na tional revenue-based contribution collection 
mechanism effective 1 January 2001, whereby companies would contribute a percentage of their 
revenues that are considered to be contribution-eligible (Decision 2000-745).  The purpose of the 
contribution is to fund local telephone service in high-cost areas in Canada (i.e. rural and remote 
areas).  This mechanism was to be reviewed and finalized during 2002.50  The authorities have 
indicated that, aside from subsidies to fund services  in high cost areas, cross-subsidies have been 
eliminated in the telecommunications industry, and that the competitive services offered by the 
incumbent operators are not being subsidized by other monopoly or near-monopoly service offerings. 
83. Following Decision 97-9 capping the price charge d for local telephone services for a four-
year period starting in January 1998, the CRTC concluded in early 2002 that pricing rules were still 
needed to protect customers.  In May 2002, CRTC issued new rules to determine the local telephone 
rates to residential and business customers, as we ll as competitors, by the five current incumbent 
Canadian local telephone companies.51  The new pricing rules for local phone service took effect in 
June 2002 for four years. 
84. As part of the WTO basic telecommunications negotiations, concluded in February 1997, 
Canada made commitments to end all basic teleco mmunications monopolies, and to remove foreign 
ownership restrictions in some areas.52  As a result, Canada ended Teleglobe's monopoly on overseas 
facilities-based telecommunications services and Telesat's monopoly on fixed satellite services. 
Traffic routing restrictions were removed for all international services, as  well as for all satellite 
services, except for fixed satellite services between Canada and points in the United States.  The latter 
were liberalized in March 2000. 
                                                      
48 WTO document WT/TPR/M/78, 5 February 2001. 
49 Competition Bureau (2000). 
50 See:  Telecom Decision CRTC 99-16 available online at:  http://www.crtc.gc.ca/archive/Decisions/ 
1999/DT99-16.htm; and Decision CRTC 2000-745, at:  http://www.crtc.gc.ca/archive/Decisions/2000/DT2000-
745e.htm. 
51 TELUS, SaskTel, MTS, Be ll Canada, and Aliant.  
52 WTO document GATS/SC/16/Suppl.3, 11 April 1997. WT/TPR/S/112/Rev.1 Trade Policy Review 
Page 116 
  
(iii) Audiovisual services 
85. Canada maintains a number of regulations that af fect foreign participation in the audio-visual 
sector, so as to foster Canadian cultural content an d diversity (Box IV.1).  These have been described 
in previous Reviews.  This section focuses on the measures applied to radio and television services or to their broadcasting.  Canada specifically excl uded from its WTO commitments telecommunications 
services supplied for the transmission of services regulated under the Broadc asting Act, where such 
services are intended for direct reception by the public. 
86. The review of all direct acquisitions over  Can$5 million (Can$50 million for indirect 
acquisitions) of all broadcasting companies is mandatory under the Investment Canada Act.
53  Under 
the Broadcasting Act, foreign ownership of a broa dcasting company is limited to 20% of voting 
shares (maximum 33.3% in the case of a parent corporation).54  In  practice, broadcasting companies 
include television (including cable television), ra dio, satellite services su ppliers, but not internet 
service providers. 
87. Under Canada's ownership and control regulation s, no broadcasting licence may be granted to 
a non-Canadian.  This restriction concerns all broa dcasting companies, including wireline, wireless, 
satellite companies, and cabl e television companies.   
88. Under the Broadcasting Act, each broadcasti ng undertaking must make no less than 
predominant use of Canadian creative and other resources in the creation and presentation of 
programming unless the nature of the service (e.g. specialized or foreign la nguage content) renders 
that use impracticable.   Among the measures relating to content, th e CRTC requires that for Canadian 
conventional, over-the-air broadcasters, Canadian programming make up 60% of television broadcast 
time, and 50% during the evening hours.  For other services, such as specialty television and pay-TV, 
the required percentage of Canadian content varies according to the nature of the service, but is 
generally less than the requirement for conventional television.  The CRTC also requires that 35% of 
"popular" musical selections broa dcast on radio should qualify as "Canadian" under a government-
determined points system.  For French-language radio,  65% of vocal popular music must be in French.  For cable TV, the majority of channels received by the subscriber must be Canadian. 
89. The authorities have indicated that under th e current policy, broadcasting, distribution 
undertakings can access foreign programming serv ices from any satellite provider, Canadian or 
foreign;  prior to December 2001, broadcasting undertakings had to make use of Canadian satellite 
facilities to carry (i.e. receive and/or distribute to  Canadians) all Canadian programming services.  
However, foreign programming services, in order to be distributed, must be approved for carriage by 
the CRTC and "listed" on the List of Eligible Sate llite Services.  At the end of 2002 there were some 
94 foreign programming services available to Canadian  distributors.  Canada does not allow the use of 
foreign satellites for the distribution of broadcas t programming services directly to the home.  
90. The CRTC carries out market impact assessments before deciding whether to issue licences to 
new (Canadian) services, including specialty services.  The Commission’s general policy precludes the addition of new non-Canadian satellite services th at can be considered either totally or partially 
competitive with Canadian specialty or pay televisi on services. The CRTC may also remove existing 
non-Canadian services from the list if they become  competitive with a Canadian pay or specialty 
services.  However, the authorities have stated that the CRTC is not disposed to remove a non-
Canadian service from the list even if it subse quently licenses a competing Canadian service. 
                                                     
 
53 For a definition of broadcasting companies under the Investment Canada Act, the text of the Act is 
available online at:  http://laws.justice.gc.ca/en/i-21.8/75574.html. 
54 The Act is available online at:  http://laws.justice.gc.ca/en/b-9.01/7954.html. Canada WT/TPR/S/112/Rev.1 
 Page 117 
 
 
Box IV.1  The International Instrument on Cultural Diversity  
The Canadian Federal Government's commitment to "develop a new approach internationally to support the diversity 
of cultural expression in countries around the world" was first articulate d in the Speech from the Throne in 
September 1999.  Previously, the House of Commons Standing Committees on Canadian Heritage and Foreign Affairs and International Trade, as well  as the Cultural Industri es Sectoral Advisory Group on International Trade 
(SAGIT), a group of private sector leaders that is part of the Federal Government's advisory system on international 
trade, had devoted attention to Canada's ability to pursue cultural policy objectives in the context of economic 
integration. 
In a study conducted at the request of the Minister for International Trade, SA GIT had identified the need for a new 
international rules-based approach to manage the interface between cultural policy objectives and trade obligations.  
Specifically, the study argued that a policy relying solely on  exemptions for cultural indu stries in trade agreements 
would prove increasingly ineffective in helping Canada to maintain and develop the policy and regulatory environment conducive to its objectives in the area of culture.  Several reasons were cited in support of this argument, including the likely evolution of  the trading system towards more openness and stricter disciplines, as well 
as the convergence of new technologies, a trend that has increasingly blurred the line s between telecommunications, 
cable, broadcasting, publishing, and other forms of distribution.  The SAGIT followed up on this study by providing a draft instrument and Discussion Paper made public by the Minister of International Trade on 13 September 2002. 
In late 1999 the Government announced that, in negotiating an instrument on cultural diversity, it would seek to set 
out clear ground rules to enable Canada and other countries to maintain policies that promote their culture while 
respecting the rules of the international trading system and ensuring markets for cultural exports.  Pending negotiation of such an instrument, the Government underscored its intention to continue to seek the maximum flexibility in international agreements to pursue its cultural policy objectives. 
Since then, Canada's efforts have focused on building international support for an instrument on cultural diversity and reaching consensus on the basic principles underlying such an instrument.  Some of the key principles being 
proposed by Canada in this context include: 
– cultural goods and services play a broader role  in society than that of simple commodities; 
– cultural diversity recognizes both openness to diverse cultural influences and the importance of promoting 
local content; 
– cultural diversity plays an important role in social cohesion, economic prosperity, and human security; and 
– governments have a key role to play in preserving and promoting cultural diversity. 
Canada has been active in international discussions on cultu ral diversity in a variety of international fora, including 
the G-8, La Francophonie, the Orga nization of American States, the Su mmit of the Americas, and UNESCO.  
Canada is also chairing the Working Group on Cultural Diversity and Globalization of the International Network on Cultural Policy (INCP), an informal grouping of more than 40 culture ministers.  At the request of ministers meeting 
in Lucerne, Switzerland in September 2001, the working group produced a draft international instrument on cultural 
diversity, which was discussed at the fifth ministerial meeting of the INCP held in Cape Town, South Africa in October 2002. 
Source:  The Cultural Industries Sectoral A dvisory Group on International Trade (1999), Canadian Culture in a 
Global World: New Strategies for Culture and Trade , available online at:  www.infoexport.gc.ca/trade-culture;  
Barbara Motzney (2002), Cultural Diversity: A New International Instrument , available online at: 
www.er.uqam.ca/nobel/gricis/actes/panam/Motzney.pdf;  and DFAIT (1999), It's Your Turn: Canada and the Future 
of the World Trade Organization-Government Response to the Report of the Standing Committee on Foreign Affairs 
and International Trade , available online at:  www.dfait-maeci.gc. ca/tna-nac/canwto-en.asp#Culture [15 December 
2002]. 
 
 
  WT/TPR/S/112/Rev.1 Trade Policy Review 
Page 118 
  
(6) MARITIME TRANSPORT  
(i) Introduction 
91. Canada's maritime transport polic ies and practices were last su rveyed in its 1996 Trade Policy 
Review.  Since then, many legislative changes have occurred, mainly with the objective of increasing 
competition both among carriers and among ports,  of shifting the financial burden of port 
management from taxpayers to users, and down-sizing and commercializing infrastructures.55 In the 
current WTO negotiations on mariti me transport services, Canada's stated objective is to achieve 
greater openness for trade in inte rnational maritime services thro ugh a reduction of market access 
barriers, so as to promote increased competition, lo wer prices, greater  choice, and greater efficiency 
of maritime services industries. 
92. The Federal Government has exclusive competence for inter-provincial and international 
transport.  Transport Canada is the Department responsible for maritime transport policies, while 
implementation and enforcement is in the hands of  the Canadian Transportation Agency, the federal 
regulator. 
93. Maritime freight is not a dominant mode of tr ansport for Canada's international trade because 
of the importance of Canada-U.S. traffic, where mar itime trade is dwarfed by land transport.  Trade 
with non-U.S. sources and destinations is dominated by foreign flag ships, and most of the tonnage carried by a Canadian-controlled international fleet is carried by vessels under foreign flags and 
employing foreign officers and crew.
56 The Canadian fleet (defined as vessels flying the Canadian 
flag) carries mostly domestic and Canada-U.S. traffic.  The Canadian fleet benefits from a number of 
measures designed to protect Canadian shipbuilders, shipowners, and seafarers, including from 
foreign competition. 
94. From 1976 to 1998, despite government support, the Canadian merchant fleet faced many 
economic and financial difficulties.  After its 1981 peak of 271 vessels and a combined loading 
capacity of 2.7 million gross tons, the Canadian me rchant fleet declined to a low of 174 vessels and 
2 million gross tons in 1997.  Carrying capacity began to recover in 1998, with 180 vessels and over 
2.3 million gross tons by the end of 2001.57  Total average annual employment in the marine transport 
industry has also increased by 16.3% since 1999.  Although employment increased in all regions, the largest increases were in Ontario and British Columbia , with more than 1,000 jobs created in each of 
these provinces over the last three years.
58  The authorities have noted that this job creation is mainly 
due to the increase in traffic handled as well as increased scenic and sightseeing transportation, both 
of which resulted in higher demand for water tr ansportation support activities, such as port and 
harbour operations. 
95. Dry bulk carriers registered a declining share in terms of gross tons and number of vessels 
from 1981 to 2001, but remain the backbone of th e Canadian merchant fleet, accounting for 55% of 
tonnage and 39% of vessels in 2001.  Dry bulk carri ers totalled 71 vessels in 2001, dedicated mainly 
to grain transportation and various bulk commodities.  Tankers' share of total gross tonnage has been 
increasing because of the addition of larger units, al though the number of vessels fell from 41 to 22 
over the 20-year period.59 
                                                      
55 For further details about this reorganization see Transport Canada annual reports, available online at: 
http://www.tc.gc.ca/pol/en/t-facts3/ Transportation_ Annual_Report.htm. 
56 See UNCTAD (2001), Table 16. 
57 Online information.  Available at:  http://www.tc.gc.ca/pol/en/anre2001/tc0110ee.htm. 
58 The average annual employment in the marine transport industry from 1998 to 2001 is available 
online at:  http://www.tc.gc.ca/pol/en/anre2001/tc0106be.htm. 
59 Online information.  Available at:  http://www.tc.gc.ca/pol/en/anre2001/tc0110ee.htm.  (Table 10-9 
Canadian registered fleet by type of vessel. 1981-2001). Canada WT/TPR/S/112/Rev.1 
 Page 119 
 
 
(ii) Regulatory framework  
96. As noted, there have been a number of changes in Canada's maritime transport legislation.  
The Canada Shipping Act (CSA), the principal legislation governing the operation of Canadian flag 
vessels and of foreign vessels in waters under Canada's jurisdiction, was amended in 2001.  The overhaul of the CSA began in 1996, aimed at better  protecting the health, safety, and well-being of 
individuals and  the marine environment.  The reform was also aimed at encouraging viable, effective, 
and economical marine tran sportation and commerce.
60  
97. Bill C-14, the Canada Shipping Act (CSA) 2001, received Royal Assent in November 2001.  
However, its provisions will not en ter into force until supporting regu lations have been developed.  
According to the authorities, the new Act and regu lations will not introdu ce any change regarding 
market access or national treatment of foreign suppliers. 
98. The CSA, as amended, introduced changes to the Shipping Conferences Exemption Act 
(SCEA), which exempts certain shipping conference pr actices from the provisions of the Competition 
Act.61  The amendments aim to inject greater competiti on into liner shipping conference operations, so 
as to ensure that Canadian shippers have access to  adequate international o cean shipping services at 
reasonable cost.62 Competition was expected to increase not only between conference and non-
conference carriers, but also within conferences th rough the independent action provision contained in 
the Shipping Conferences Exemption Act.  The prov ision permits individual conference lines to offer 
a rate or services different from those published as pa rt of the conference tariff.  In addition, under the 
amendments to the SCEA, individual conference lines  may now sign service contracts with shippers 
without disclosing the contract terms and conditions  to the conference.  As under the previous 
legislation, conference-wide service contract s may also be negotiated and signed between a 
conference and a shipper.  These contracts are conf idential but, to comply with SCEA, must be filed 
with the Canadian Transportation Agency. 
99. In 2001, the Agency accepted filings for 98 se rvice contracts from seven conferences, four 
more than in 2000.  The contracts applied to  both inbound and outbound traffic and to 
origins/destinations on both the east and west coasts  of Canada.  The average duration of the contracts 
was one year. 
100. The Canada Marine Act (CMA) was passed in 1998. The CMA, coupled with the National 
Marine Policy of 1995, was designed mainly to ma ke the system of Canadian ports more competitive, 
efficient, and commercially oriented;  establish po rt authorities;  and transfer ownership of certain 
harbours and ports (see below) to local entities.  It also facilitated the commercialization of the 
St. Lawrence Seaway, contained provisions for the further commercialization of federal ferry services, 
and aimed to improve the way pilotage authorities operate in Canada.63  In May 2002, the Minister of 
Transport announced a review of the CMA to be completed by June 2003.   
101. According to Canada's response to the GATS Questionnaire on Maritime Transport Services, 
there are no Canadian restrictions limiting access to the international shipping market.64  C a n a d a  
                                                      
60 Online information.  Available at:  http://www.tc.gc.ca/pol/en/anre2001/tc0110ee.htm. 
61 The Act is available online at:  http://laws.justice.gc.ca/en/S-10.01/92442.html. A shipping 
conference is an association of liner companies operating under an agreement to provide ocean transportation 
services on common routes and using common rates and terms of service. Shipping lines calling at Canadian ports on a given route may choose to provide conference or non-conference liner services. Lines that choose not 
to participate in conferences are considered independent shipping lines or non-conference carriers. 
62 Online information.  Available at:  http://www.tc.gc.ca/pol/en/anre2001/tc0110ee.htm. 
63 Online information.  Available at:  http://www.tc.gc.ca/pol/en/marine/menu_e.htm. 
64 WTO document S/NGMTS/W/2/Add.5, 24 January 1995. WT/TPR/S/112/Rev.1 Trade Policy Review 
Page 120 
  
allows for temporary entry of business visitors, intra-corporate transfers (executives, managers, 
specialists), crew members remaining on board, as well as replacement crews, marine surveyors, and 
port captains.  In the two latter cases, entry is lim ited to 90 days.  Commercial presence is not tied to 
any specific legal form, except for licensed customs brokers, which must be incorporated in Canada 
and a majority of directors must be permanent resi dents or they must be organized as a partnership 
composed of permanent residents.  There are a fe w specific exceptions to national treatment of 
shipping operations.  One is the requirement for mo st crew members to hold certificates granted by 
the Minister in order to provide a service on Canadian-registered ships.  Such certificates may be granted only to Canadian citizens or permanent resi dents (see below).  Canada also maintains an MFN 
exception relating to the reciprocity provisions concerning double taxation on income and capital 
earned in Canada by non-residents from ships opera ting in international tra ffic.  The conditions of 
access to and use of port facilities do not discrimi nate between foreign- an d Canadian-owned vessels. 
102. Canada's commitments under the GATS are limite d to providing non-discriminatory access to 
and use of the following port services:  towing and tug assistance, provisioning, fuelling and watering, 
garbage collecting and  ballast wa ste disposal, emergency repair f acilities, lightering and water taxi 
services, ships agencies;  customs brokers;  stev edoring and terminal services;  surveying and 
classification services.
65  In addition, Canada undertook to provide non-discriminatory access to and 
use of transport services for the purpose of onwar d forwarding of cargo.  Market access and national 
treatment commitments for auxiliary services cover:  customs clearance, freight forwarding, container 
station and depot services, and storage and warehousing.  There is a limitation involving a commercial 
presence requirement for licensed customs brokers.   Canada has not undertaken any sector-specific 
commitments on the provision of auxiliary services  through the temporary entry of natural persons. 
(iii) Measures affecting market access  
103. Under the Coasting Trade Act, coasting trade (or cabotage) is reserved for Canadian-flagged 
ships.66  Specifically, this law reserves the carriage of goods and passengers, as well as any other 
marine activities of a commercial nature in Cana dian waters, to Canadian registered, duty-paid 
vessels.  This reservation extends to waters ab ove the continental shelf, when those activities are 
related to the exploration and exploitation of non-living resources.   Under the Coasting Trade Act, 
Canadian domestic shippers have access to foreign vessels when no Canadian registered, duty-paid 
vessel is capable of or avai lable to provide a service. 
104. Registration to fly the Canadian flag is reserved for the three following groups: 
− a Canadian citizen or a permanent resident67 or  a corporation incorporated under the laws of 
Canada or a province or; 
− a corporation incorporated under the laws of a country other than Canada, if one of the 
following is acting with respect to all matters re lating to the ship, namely, (i) a subsidiary of 
the corporation that is incorporated under the laws of Canada or a province, (ii) an employee 
or director in Canada of any branch office of the corporation that is carrying on business in 
Canada, or (iii) a ship management company incorporated under the laws of Canada or a 
province.  
105. A Canadian-registered ship must be operated by Canadian officers and a Canadian crew, hold 
Canadian certificates, and comply with Canadian sa fety standards.  The applicable regulations (the 
Crewing Regulations and the Marine Certification Regulations) were both amended in April 2002 to 
                                                      
65 WTO document S/L/34, 20 September 1996. 
66 The Act is available online at:  http://laws.justice.gc.ca/en/C-33.3/32348.html. 
67 Within the meaning of subsection 2(1) of the Immigration and Refugee Protection Act. Canada WT/TPR/S/112/Rev.1 
 Page 121 
 
 
achieve compliance with the IMO Convention on Standards of Training Certification and 
Watchkeeping. 
106. The Coasting Trade Act allows for the temporary importation of a non-Canadian-registered or 
non-duty-paid Canadian-registered vessel, when no Canadian registered duty-paid vessel is available or suitable to carry out the activity.  When the carr iage of passengers is involved, a determination is 
also based on the availability of identical or simila r adequate marine services  from persons operating 
one or more Canadian vessels.  Subject to Canada’s Customs Tariff and Excise Tax Act, and under 
the Vessel Duties Reduction or Removal Regulations, duties and taxes on vessels authorized to be 
temporarily imported may be reduced to 1/120 of 25 % of the declared value of the vessel, payable on 
a monthly basis, for no more than 12 consecutive months.  Subject to a new authorization, vessels 
imported temporarily may benefit from this reduction for an additional 12 months.  Ships imported 
from Chile, Costa Rica, Israel, Mexico, and the United States, enter duty free, as well as those from 
the Caribbean and least developed countries.  Following the temporary importation of a foreign ship 
destined for coasting trade, the employment of an y foreign personnel is subject to whether Canadian 
seafarers are available. 
107. As in other transport services , the acquisition of control of a Canadian maritime transport 
business by a non-Canadian is subject to a "net be nefit to Canada" test under the Investment Canada 
Act. 
(iv) The national port system 
108. At the time of Canada's 1996 Review, there we re 549 public ports under the responsibility of 
Transport Canada, although 80% of Canada's ma ritime traffic passed through only 40 ports.  
Transport Canada began commercializing its public ports in 1996, and the Federal Government 
gradually moved out of the direct operation of ports.
68  However, it still operates a number of local 
and regional ports that have yet to be divested and intends to continue to run remote ports after the 
divestiture programme is complete.  The National Ma rine Policy was embodied in the Canada Marine 
Act of 1998 (see above).  There are now three cat egories of ports:  (1) Canada port authorities, 
(2) regional/local ports, and (3) remote ports.  Howe ver, no major Canadian port has yet been opened 
to private investment. 
109. The independently managed Canada port author ities (CPAs) are financially self-sufficient 
ports that are critical to domestic and internationa l trade.  In mid-2002, there were 19 such CPAs, 
composed of representatives of user groups and various levels of government. By the end of 
December 2001, 420 of the 549 public ports and por t facilities that were previously under Transport 
Canada's control and administration (before the Na tional Marine Policy came into force) had been 
transferred, deproclaimed or demolished, or had Transport Canada's interests terminated.69  Some 
129 regional/local and remote ports and port facil ities remained under Transport Canada control at 
that time. 
110. Canada stated in its response to the GATS Ques tionnaire on Maritime Transport Services that 
the conditions of access to and use of port fac ilities do not discriminate between foreign- and 
Canadian-owned vessels.  The authorities have explaine d in the context of this report that Canada port 
authorities are authorized to fix fees in respect of  vessels or persons coming into or using the port, 
                                                      
68 For a status report on the divestiture of ports by the Federal Government, see the Transport Canada 
online information.  Available at:  http://www.tc.gc.ca/programs/ports/menu.htm. 
69 Further details about this reorganization are detailed in Transport Canada's annual reports available 
online at:  www.tc.gc.ca/pol/en/t-facts3/Transportation_Annual_Report.htm.  A status report on the divestiture 
of ports by the federal government can be found at www.tc.gc.ca/programs/ports/menu.htm. WT/TPR/S/112/Rev.1 Trade Policy Review 
Page 122 
  
goods loaded, unloaded or trans-shipped within the limits of the port, or services provided by the port 
authority;  however, fees cannot discriminate between users or classes of users except on a 
commercially accepted basis.  Port authorities may en ter into lease arrangements with third parties, 
including foreign firms, for the provision of servic es such as stevedoring or terminal operations, 
within the limits of the port. 
(7) AIR TRANSPORT  
(i) Introduction 
111. Aviation is Canada's third largest transport se ctor, representing some 11% of the transport 
industry's total value added, behind truck and ra il transport.  Some 26 million passengers were 
transported domestically in 2000, up from about 21  million in 1995.  In addition, the number of 
transborder passengers (with the United States) in creased from 15 to 20 million, and the number of 
other international passengers incr eased from about 11 to 14 million.70  After a period of uninterrupted 
growth during 1995-99, in 2001, the sector was struggling under the combined effect of the rising fuel 
prices in 1999-00, the slowing of consumer demand in the first half of 2001, and the 11 September 2001 attacks on the United States.  In the fourth quarter of 2001, transborder traffic 
decreased by some 27% compared with the same period in 2000.   
112. The airline industry has undergone continuous restructuring since 1987-88, when the market 
was deregulated and the state-owned airline, Air Ca nada, was privatized. In 2000, Air Canada took 
over its major competitor, Canadian Airlines Interna tional.  In 2002, a number of airlines provided 
domestic scheduled air services, several smal l companies focused on Canada-United States 
transborder flights and charter comp anies operated on domestic or international routes.  However, in 
part because of the relatively small size of the Canadian market, Air Canada has emerged as the 
dominant carrier, accounting for 79% of  the domestic market in December 2001.
71  In 2001, the 
industry reported a loss of Can$991 million.  WestJet, the second largest domestic carrier in late 2002 
with a 15% domestic market share, was the only profitable airline. Canada 3000 was the country's second largest carrier before it went bankrupt in 2001. 
113. Following the 11 September 2001 attacks, the Canadian Government announced a Can$160 
million programme to compensate Canadian air car riers for losses resulting from the closure of 
Canadian airspace;  the authorities indicated that  Can$99.3 million were actually disbursed, of which 
Air Canada received Can$69.8 million.
72  The Government has also provided indemnity for third-
party aviation war-risk liability following the cancellatio n of this coverage by insurance underwriters.  
The programme was extended until 1 March 2003. 
(ii) Regulatory framework 
114. Economic regulation of the air industry is carried out under the Canada Transportation Act 
(CTA) of 1996 and Canada's bilateral air agreements.  The Canadian Transportation Agency is 
responsible for granting, suspending, and revoking licences.  It receives any notices of exit from 
domestic air services and ensures compliance with  ownership provisions.  Domestic services on 
monopoly or duopoly routes may be  withdrawn on 120 days' notice.  New entrants must meet several 
licensing requirements including having adequate  insurance and holding a Canadian aviation 
document.  New Canadian entrants using medium a nd large-sized aircraft must show that they are 
                                                      
70 Transport Canada (2001). 
71 Transport Canada (2001), p. 113.  Expressed in average daily seat kilometres (thousands). 
72 Canada newswire on line information.  Available at: http://www.newswire.ca/releases/April2002/ 
18/c5924.html. Canada WT/TPR/S/112/Rev.1 
 Page 123 
 
 
financially fit.  The CTA prohibits the selling of ticke ts prior to licensing.  Transport Canada monitors 
compliance with safety regulations and specifies a ccess conditions to computer reservation systems.  
115. Domestically, air fares and cargo rates are largely deregulated.  In 2000, legislative 
amendments gave the Canadian Transportation Agency increased powers to review prices and prevent unreasonable fares on routes on wh ich there is no, or very limited, competition and to address 
complaints about conditions of carriage for domestic services.  In addition, until July  2004, the 
Agency has the power to take action on its own in itiative on any price on such non-competitive routes 
that it determines to be unreasonable.  Fares, car go rates, and terms and conditions for travel between 
Canada and other countries are regulated under the Air Transportation Regulations and, for scheduled 
services, are subject to provisions contained in bilateral air agreements (see below). 
116. Only Canadians are eligible for a domestic licen ce to carry traffic between points in Canada.
73  
Under the CTA, foreign ownership of an airline is limited to 25%.  The CTA definition is:  "Canadian 
citizen or a permanent resident, a government in Canada  or an agent of such a government or an entity 
incorporated under the laws of Canada or a province, that is controlled in fact by Canadians and of 
which at least 75%, or such lesser percentage as the Governor in Council may by regulation specify, 
of the voting interests are owned and controlled by Canadians".   
117. Approval by Investment Canada is required for the direct acquisition of any company with 
assets of over Can$5 million that provides transpor tation services, and for indirect acquisitions with 
assets over Can$50 million.  The establishment of a new Canadian transportation business is subject 
to notification but not to review.  In December 20 01, legislation was passed eliminating Air Canada’s 
15% individual share ownership limit.  No individual ownership restrictions apply to any other airline. 
118. The air-transport market between Canada and ot her countries is governed by 73 bilateral 
agreements and arrangements (as of mid-2002).  Th ese agreements create de facto limits on the 
liberalization of air services in Canada, because they  restrict  routes, airlin es, and capacity, specify 
ownership provisions, and regulate fares.  However, the agreements with the United States (1995), the United Kingdom, and Germany are more liberal ar rangements that provide for third and fourth 
freedom access to all cities in both partners’ terr itories, with no restrictions on the capacity and 
number of carriers that may be operated on these se rvices.  They also reduce government involvement 
in other rights of value to the airline industry  (e.g. code-sharing, doing business regulations and 
competitive ground handling provisions).  A cabotage clause is absent in almost all bilateral 
agreements entered into by Canada. 
119. The authorities have indicated that, as a result  of the 1995 Canada-U.S. Aviation Agreement, 
any number of U.S. and Canadian air carriers may be designated to operate between an unlimited 
number of points in the United States and an unlimited number of points in Canada.  Points may be served separately, or in combination on a single flight, the only exception being the lack of co-
terminalization rights for courier services.  Therefore, air carriers that provide large aircraft services for the carriage of courier goods ar e not permitted to serve more than one point in the territory of the 
other party on a single flight, a restriction designed to maintain a Canadian presence in the transborder 
courier industry.  Prices for third and fourth free dom transportation are not required to be filed for 
government approval and are subject to a minimum of regulatory control.  The agreement does not 
include, and will not phase in, fifth freedom rights.
74  
                                                      
73 Canada Transportation Act.  See Transportation Canada online information.  Available at: 
http://www.tc.gc.ca/Actsregs/ct-1tc/ct_a.html. 
74 The "fifth freedom" concerns the right of an airlin e to carry traffic between two countries outside its 
own country of registration as long as the flight originates or terminates in its own country of registration. WT/TPR/S/112/Rev.1 Trade Policy Review 
Page 124 
  
120. Increased code-sharing activity has resulted in a corresponding increase in the number and 
importance of code-share provisions in bilateral air agreements.  While Canada's international 
scheduled air services policy does not provide an  explicit statement regarding the negotiation of 
code-share rights, Canadian practice in this regard has generally been to seek the broadest and most 
liberal provisions possible, including  "third country" code-sharing rights (e.g. Air Canada’s code-
share services between London and Brussels on British Midland).75  Code sharing is not exempted 
from competition rules.76 
121. In 2002, Canada eliminated its policy that had restricted scheduled air designations to one 
Canadian carrier in all non-U.S. international markets where the number of one-way scheduled 
passengers was below 300,000 passengers per year.  All Canadian carriers may now apply to operate 
scheduled international services to any non-U.S. market provided that adequate rights are available 
under the relevant bilateral air agreement.  The authorities expect this to encourage competition and 
promote international travel options for Canadians. 
122. International passenger charter air services are generally regulated on the basis of a "country 
of origin" regime rather than bi lateral treaties.  Canada usually applies its charter regulations to 
Canadian-originating charter services, whether Canadi an- or foreign-owned, with foreign-originating 
charter services governed by foreign rules.  In Apr il 2000, a new policy eliminated restrictions such as 
minimum-stay requirements, advance booki ng, and prohibitions on one-way travel.77  The 
requirements to charter the entire capacity of an ai rcraft, and the prohibition of direct sales to the 
public by an air carrier were re tained.  Foreign charter carriers are permitted to provide service 
between Canada and their home country under the same conditions as Cana dian charter carriers, 
provided acceptable reciprocity exists for Canadian air carriers. 
123. The new policy adopted in April 2000 also envi sages the possibility for charter traffic moving 
directly between Canada and another country to occasionally be carried by an airline of a third 
country.  The permission for foreign carriers to operate such charter services is assessed on a 
case-by-case basis and is based on reciprocity of opportunity for Canadian charter air carriers.  
However, the interests of Canadian  travellers in having access to such services will have to be 
balanced with the interests of the third and fourth freedom (i.e. the Canadian and foreign) scheduled 
and charter carriers that may be affected. 
124. The Federal Government has to a large extent withdrawn from involvement in infrastructure 
management, leading to the commercialization of main  airports and the air navigation system, and the 
decentralization of resp onsibilities for smaller airports.  Alth ough the Federal Government retains 
ownership of the 26 airports within the Nationa l Airports System (NAS), responsibility for the 
operation and management of 23 of them is in th e hands of not-for-profit airport authorities through 
60-year leases. Airport authorities finance themselves through charges levied on passengers and 
aircraft operators and seek capital from financ ial institutions and the bond markets. A private 
corporation, NavCanada, operates all of the air navigation operations as a not-for-profit monopoly.  
NavCanada is responsible for air traffic services, community aerodr ome radio services, aeronautical 
telecommunications, information services, and air traffic control;  NavCanada funds itself through 
charges levied on carriers.78  
                                                      
75 Transport Canada, "Canada's Policy for International Scheduled Air Services" [Online].  Available 
at:  http://www.tc.gc.ca/pol/en/airpolicy/intlairpolicy/policyscheduledairservices/ iaprdocumentpartone%20.htm. 
76 See subsection 4(2) of the Canada Transportation Act, available online at:  http://laws.justice.gc.ca/ 
en/c-10.4/23194.html. 
77 Transport Canada, Press Release 4 April 2000, available online at: http://www.tc.gc.ca/pol/en/ 
airpolicy/Intlcharterpolicy.htm. 
78 Transport Canada (2001). Canada WT/TPR/S/112/Rev.1 
 Page 125 
 
 
125. According to the authorities, airport access and slot  allocation are generally granted on a first-
come, first-served basis at airports that are not slot  constrained.  Canada’s only fully allocated slot 
controlled airport is Toronto’s Lester Pearson Inte rnational Airport, Canada’s  largest airport.  The 
authorities have indicated that slots at Pearson Airport are managed by a not-for-profit organization 
that follows the slot allocation guidelines establis hed by the International Air Transport Association 
(IATA).  Air Canada has a ground-handling monopoly at Terminal 2 in Toronto, where it is the sole 
tenant.  
126. The Canadian Air Transportation Security Aut hority Act (part of th e Budget Implementation 
Act, 2002 Bill C-49) of March 2002 established the Canadian Air Transport Security Authority.  The 
Authority will take responsibility for all screening equipment and security services at airports, which 
were previously the airlines' responsibility.79 
127. Canada's air transport commitments under GATS are limited to aircraft repair and 
maintenance services, and computer reservation systems.  As discussed in its previous Review, in 
2000, Canada has not bound consumption abroad of repair and maintenance se rvices, thus retaining 
the possibility of requiring carriers to use domest ic repair providers and maintenance facilities.  
Operations outside of Canada may only be used if they are a "sub-organization" of those who have 
been certified in Canada.80  However, in practice, Canada ha s concluded agreements with certain 
other countries recognizing the certifications of th ese countries for providers doing repair, overhaul, 
and maintenance work within their borders on Cana dian aircraft and components.  Thus aircraft 
maintenance and repair services have been listed as MFN exemptions under Article II of the GATS.  
The sale and marketing of air transport services have  also been listed as an MFN exemption, as these 
services can be included in bilateral air agreements.81 
(iii) Competition policy developments 
128. In October 1999, the Competition Bureau expr essed the view in that very significant 
competition concerns would develop in the domes tic market as a result of a dominant carrier 
emerging from the purchase of Canadian Airlines by Air Canada.82  As part of the conditions for this 
merger, in 2000 Air Canada was required to:  surrender peak hour slots at Pearson;  surrender gates, 
bridges, and counters at airports with facilities cons traints;  make frequent flyer points and interline 
and joint fares available to other Canadian carriers;  delay commencing a discount carrier in eastern 
Canada, and offer a regional carrier for divestiture.  Although smaller airlines have been able to enter 
the market and provide some competitive alterna tives, especially in th e regional and “no frills” 
services, in December 2002 Air Canada retained close to 70% of the domestic market.  
129. The Minister of Transport recognized these competition concerns, and committed to fostering 
as much competition as possible within the Canadian airline industry.83  In July 2000, Bill C-26 was 
passed giving both the Competition Bureau and th e Canadian Transportation Agency increased power 
to address concerns regard ing competition in the airline industry (Chapter III(4)(i)).  In addition a 
                                                      
79 Transport Canada online information.  Available at:  http://www.tc.gc.ca/mediaroom/releases/nat/ 
2002/02_h035e.htm. 
80 Transport Canada online information.  "Air Transportation Services", February 2001.  Available at:  
http:www.tc.gc.ca. 
81 WTO document GATS/EL/16 15 April 1994. 
82 Letter from the Commissioner of Competition to the Transport Minister, 22 October 1999 [Online]. 
Available at:  http://strategis.ic.gc.ca/SSG/1/ct01638e.html. 
83 See "Canada’s Policy For International Scheduled Air Services, Issues For Discussion", available 
online at:   http://www.tc.gc.ca/pol/en/airpolicy/IntlAirPolicy/PolicyScheduledAirServices/ IAPRDocumentintro 
%20.htm#Context. WT/TPR/S/112/Rev.1 Trade Policy Review 
Page 126 
  
review of Canada’s international air policy wa s launched in December 2000, with an expected 
liberalization of the policy to take effect at the end of October 2001.  Accordingly, Transport Canada 
sought the views of Canadian stakeholders on ho w Canada’s policy for international scheduled air 
services should be liberalized.   In March 2001, the Competition Bureau launched an application to 
the Competition Tribunal alleging predatory cond uct by Air Canada against two of its smaller 
competitors.  The case was pending in late 2002. 
130. In May 2001, the Commissioner stated that "The new provisions introduced to the 
Competition Act to respond to potentially anti-comp etitive behaviour on the part of Air Canada are 
helpful, but will not on their own be sufficient to cr eate a competitive domestic  airline market."  For 
this to occur, he reiterated his earlier recommendatio ns that the domestic market be opened to greater 
foreign competition.84  In particular, he recommended the creation of a new class of licensee under the 
CTA to allow 100% foreign ownership of carriers that can fly only within Canada;  legislative 
changes to the CTA to allow modified sixth freed oms, either on a unilatera l or reciprocal basis85;  and 
changes to permit up to 49% of the voting shares of  a Canadian carrier to be held by foreigners. 
131. In June 2002, the Government passed furt her amendments to the Competition Act to 
strengthen "cease and desist" orders against predatory behaviour by a dominant carrier, and to 
authorize the application of substantial fines as a de terrent to such behaviour.  As was suggested by 
participants in Canada's previous  Review, multilateral air transport liberalization could also benefit 
Canadian consumers while expanding internationa l market opportunities for the national flag 
carrier(s). 
(8) FINANCIAL SERVICES  
(i) Introduction 
132. Canada's main federal financial legislation includes the Bank Act, the Trust and Loan 
Companies Act, the Insurance Companies Act, and the Cooperative Credit Associations Act.86  These 
laws are supplemented by regulations and guidelines developed by the Office of the Superintendent of Financial Institutions (OSFI), which is in charge  of federal financial re gulation and supervision.
87  
Credit unions, mutual funds, and securities firms in  several provinces are regulated by provincial 
laws.88  Insurance and trust and loan companies are regulated at both the federal and provincial levels.   
133. Canada's financial legislation is subject to revi ew every five years.  As a result of the last 
review, in February 2001 the Government introduced  legislation to reform the legislative framework 
for the financial services sector.  Bill C-8 – An Ac t to establish the Financial Consumer Agency of 
Canada and to Amend Certain Acts in Relation to Fi nancial Institutions, came into force in October 
2001.  The new law widens the activities that fore ign banks may undertake in Canada, and enhances 
the possibilities for direct investment in banks and insurance companies, including for foreign firms. 
                                                      
84 Competition Bureau online information. Konrad von Finckenstein Commissioner of Competition. 
Remarks to The House of Commons Standing Committee on Transport and Government Operations. 
8 May 2001.  Available at:  http://strategis.ic.gc.ca/SSG/ct02181e.html.  See also the Letter of 22 October 1999, 
available at:  http://strategis.ic.gc.ca/SSG/1/ct01638e.html. 
85 A modified 6th freedom right would allow foreign carriers to pick up passengers in Canada and fly 
them to another Canadian city via a U.S. destination.   
86 These laws are available online at:  http://laws.justice.gc.ca/en/B-1.01/1884.html. 
87 OSFI online information.  Available at:  http://www.osfi-bsif.gc.ca.  
88 A list of provincial and territorial regulators is available in OSFI's online information. Canada WT/TPR/S/112/Rev.1 
 Page 127 
 
 
134. The new regulatory framework  gives bank fina ncial groups the option of organizing their 
business in Canada under a holding-company structure.  Under the new regime, a bank holding- 
company structure is an incorporated entity, wh ich allows banks the choice of moving certain 
activities that are currently conducted in-house, or in a subsidiary of the bank, to an affiliate outside 
the bank.  Depending on the risk posed by the aff iliate entity to the holding company, the affiliate 
could be subject to lighter regulation than that of the bank.  The entire group continues to be overseen 
and supervised on a risk basis in order to safeguard regulated affiliates.   
135. The same ownership regime and range of perm itted investments apply to banks and bank 
holding companies.  As a general principle, an y activity carried out by a financial institution 
(e.g. banking, insurance, securities dealing) can be  carried out through a subsidiary of the financial 
institution or of its holding company.89  However, domestic banks are not allowed to engage in auto-
lease financing.90  
136. An additional change introduced by Bill C-8 was the decision to expand access to the 
payments system to certain non-deposit taking institutions.  Previously, access to the payment system 
was available solely to deposit-taki ng institutions.  Under the new regime, access is allowed to life 
insurance companies, money market mutual funds, and securities dealers.  Permitting these types of 
financial institutions to join the payment systems en ables them to expand the range of services offered 
to their clients, e.g. life insurance companies may now offer payment services that are basically 
similar to those provided by banks or deposits accounts. 
137. Canada's GATS market access and national trea tment commitments cover the full spectrum of 
financial services. These commitments are undertaken in accordance with the Understanding on 
Commitments on Financial Services.91 
(ii) Banking services 
138. As of October 2002, there were 15 domestic banks, 33 bank subsidiaries of foreign banks, 
20 foreign bank branches, and 29 foreign bank repres entative offices operating in Canada.  Canada's 
six major domestic banks account for 92% of the assets held by the banking industry, whilst foreign banks account for 6.2% of assets.
92   
139. The five major domestic banks also have a si gnificant presence outside of Canada, in areas 
such as the United States, Latin America, the Cari bbean, and Asia.  International operations accounted 
for approximately 35% of revenues and 40% of net income earned by those banks in 2001.  Canada's largest bank was 48
th world-wide by asset size as of July 2002. 
140. Canada offers a generally liberal environment for foreign suppliers in the banking sector, 
including a policy of national treatment towards branches, subsidiaries, and other operations of 
foreign banks.  There is no limitation on cross-border supply or consumption abroad of banking 
services, although foreign financial suppliers must establish a commercial presence in order to solicit 
business.  A number of limitations concerning commercial presence are described below. 
                                                      
89 See Banks Act, Part IX (Investments), section 468(1); and Part XII (Foreign Banks), section 522.08. 
90 See Banks Act, Part VII (Business and Powers), section 517; and Part IX (Investments), 
section 464 (1). 
91 WTO document GATS/SC/16/Suppl.4/Rev.1, 6 June 2000. 
92 Canadian Bankers Association, (2001). WT/TPR/S/112/Rev.1 Trade Policy Review 
Page 128 
  
(a) Regulatory framework  
141. Bill C-8 introduced a new size-based ownership regime for Canadian banks in October 2001.  
Canadian federally regulated banks  are now divided into three sub-groups depending on the size of 
equity.  The first comprises "large" banks (i.e. with  equity of Can$5 billion or more).  The "widely-
held" rule states that no single person (Canadian or  foreign) may acquire more than 20% of the voting 
shares or 30% of the non-voting shares in a larg e bank.  Until 2001, the threshold was 10%.  This 
increase in the maximum single ownership ratio was de signed to allow banks to enter into substantial 
share exchanges, in order to solidify st rategic alliances and joint ventures.  
142. However, the prohibition remains against any single entity, domestic or foreign, acquiring 
control of a large bank.  There are certain limited ex ceptions to the control re quirement, including for 
entities such as a widely held regulated bank-holdi ng company or for a foreign bank that controls a 
Canadian bank subsidiary that has grown through the Can$5 billion threshold.  The Guidelines 
Respecting Control in Fact (Bank Act) set out the policy objectives and factors that the Minister 
would consider in assessing an application to acquire more than 10% of the shares of a large bank.93  
There have not been any applications of this type  since the legislation came into force in 2001. 
143. The second sub-group consists of banks with equity between Can$1 billion and Can$5 billion, 
which are allowed to have individual shareholdings of up to 65%, provided that at least 35% of voting 
shares are listed and posted for trading on a rec ognized exchange and are widely-held; and the third 
sub-group comprises small banks (i.e. with equity of  less than Can$1 billion) that have no ownership 
restrictions other than “fit and proper” tests. 
(b) Foreign bank branches and subsidiaries94 
144. In 1999, new foreign branching legislation wa s passed under the title of  Authorized Foreign 
Banks in Part XII.1 of the Bank Act, supplemented by OSFI regulations and guidelines.  It abolished 
the requirement for foreign bank subsidiaries to re quest ministerial approval to establish more than 
one location.  Under this legislation, described in Canada's previous Review, foreign banks can 
establish full-service branches and/or lending bran ches.  Full-service branch es are permitted to take 
deposits greater than Can$150,000 (i.e. non-retail de posits).  Lending branch es may lend in Canada 
but are not permitted to take any deposits and ar e restricted to borrowing from other financial 
institutions, not from the Canadian public.95  In addition, foreign bank subsidiaries that do not have 
any deposits of less than Can$150,000 may opt out of Canada Deposit Insurance Corporation (CDIC) 
coverage.  Usually, these foreign banks convert thei r operations into branches, but they have the 
option to remain subsidiaries with out having to pay CDIC premiums. 
145. A foreign bank may establish a lending branch, a full-service branch, a bank subsidiary, a 
loan company, or a trust company.  A foreign bank is allowed to operate concurrently a full-service 
and a lending branch.  The guidelines developed by OSFI require a foreign bank wishing to establish 
a full-service or lending branch to have a minimu m of Can$5 billion in world-wide assets.  Full-
service branches and lending branches are required to maintain a deposit with a Canadian financial institution approved by OSFI.  The deposit for full-serv ice branches is set at 5% of branch liabilities, 
or Can$5 million, whichever is greater.  Lending branches must maintain a deposit of Can$100,000. 
                                                     
 
93 See the issue Canada Gazette , Part II, 8 May 2002 [Online].  Available at: http://www.gc.ca/gazette/ 
part2/pdf/g2-13610.pdf. 
94 Under the Bank Act, domestic banks are referred to as "Schedule I" banks. Schedule II banks are the 
foreign bank subsidiaries, and Schedule III are the branches of authorized foreign banks.   
95 See Department of Finance Canada online information.  Available at:  http://www.fin.gc.ca/toce/ 
2001/bank_e.html. Canada WT/TPR/S/112/Rev.1 
 Page 129 
 
 
146. The 1999 branching legislation precluded author ized foreign banks (i.e. foreign banks that 
have established branches under the 1999 foreign bank branching regime) from providing specialized 
business management or advisory services through their branches in Canada.  The C-8 legislative 
framework provides for authorized foreign bank s to engage in these activities;  however, 
implementing legislation has yet to be drafted.   The new framework also expands the scope of 
specialized financing entities in which foreign banks  are permitted to invest.  For foreign banks, the 
definition of a specialized financing entity is set out in the Bank Act in subsection 507(1) and in the 
Specialized Financing (Foreign Banks) Regulations.  The authorities have indicated that these regulations mirror the specialized financing regulatio ns for domestic institutions, in order to provide a 
level playing field between fore ign and domestic participants. 
(iii) Insurance services  
147. In 2000, Canada’s life and health insurance industry comprised some 120 firms, down from 
163 companies at the end of 1990.  As a result of this consolidation, the five largest companies 
represent over 59% of the domestic market in te rms of premiums, up from 38% in 1994.  Premium 
income reached approximately Can$45 billion in 2000.  Much of the consolidation activity has involved foreign insurers selling their operations to Canadian insurance companies, although there has 
also been significant merger and acquisi tion activity among Canadian companies. 
148. In 2000, 71 companies were incorporated in Ca nada and accounted for 91% of total premiums 
collected in Canada.  In October 2002, there were 108 federally registered health and life companies, 
of which 60 were branches of foreign companies.  There were also 24 fraternal benefit societies, 
13 Canadian and 11 foreign. 
149. In October 2002, there were 195 federally regist ered property and casualty (P&C) insurance 
firms and about 90 provincial ones.  Federally registered P&C companies earned premiums of 
approximately Can$21 billion in 2001, while provinc ially incorporated firms earned Can$7 billion.  
Foreign companies have a strong position in Canada’s P&C market, as seven of the ten largest insurers in 2001 were foreign owned, and accounted for 64 % of net premiums earned. 
150. Canada's life and health insurance sector is also  relatively export oriented.  For example more 
than half of life and health premium income (som e Can$50 billion in total) is generated from foreign 
sources.  Thus, market access abroad is essencial fo r the Canadian life and heal th insurance industry.  
In contrast, only 2% of the property and casua lty insurance premiums are generated abroad. 
151. Canada did not make new multilateral commitme nts in the area of insurance within the 
context of the Fifth Protocol to the GATS on financial services.
96  In general, commercial presence is 
required to offer insurance, reinsurance, and retr ocession services in Canada, except for marine 
insurance.  A foreign company may incorporate as a separately capitalized subs idiary, or a branch, or 
establish a new insurance business; it may also acqui re an existing Canadian enterprise, subject to 
notification and prior government review.   A number of federal and provincial market access and national treatment limitations to foreign participa tion in the insurance market are described below.  
152. A number of restrictions, including residenc y and nationality requirements, which may limit 
foreign participation in the provision of broking and agency services, have also been listed  in 
Canada's GATS Schedule. 
                                                     
 
96 WTO document GATS/SC/16/Suppl.4/Rev.1, 6 June 2000. WT/TPR/S/112/Rev.1 Trade Policy Review 
Page 130 
  
(a) Business regulations  
153. Foreign insurers must be approved as federa lly authorized companies to insure risks in 
Canada.  Insurance companies may incorporate either  under federal or provincial law.  About three 
quarters of Canada's life insurance companies (90%  of total premium income) and two-thirds of the 
P&C insurance companies (75% of total premium in come) are federally incorporated.  Depending on 
the provinces, there are two ways to incorporate, either through an incorporation regime already in 
place or through the legislative process.  For example, In Nova Scotia, incorporation of a local 
insurance company must be done through a legislation process. In New Brunswick, a provincially 
incorporated insurance company must also be cons tituted by a special legislation.  New insurance 
legislation is being developed in both provinces.  In Alberta, foreign insurers must be approved 
federally to operate in the province. 
154. All insurance companies, whether federally or pr ovincially incorporated, must be licensed in 
each province where they do business.  They are also generally subject to market regulation by the 
province in which they carry on business, although some provinces (e.g. New Brunswick) rely on OSFI 
for market regulation as well as financial solvency regulation.  Market regulation covers the type of insurance products, the setting of rates, standards of competence and behaviour of insurance agents and 
brokers.  Agents or brokers must also be registered or licensed in each province, in order to do 
business in that province. 
155. In an attempt to achieve uniformity among provi ncial regulatory regimes in the life and health 
insurance sector, the provinces through the Canadian Council of Insurance Regulators have 
established the Uniform Life Insu rance Act, which is a model law governing insurance contracts and 
beneficiary rights. The authorities indicated that  all provinces excluding Quebec have adopted the 
Uniform Act;  however, they also noted that Queb ec's regulations in this area are very similar.  
156. In contrast with the general rule applicable to  Canadian corporations, which are taxed on their 
world-wide income and enjoy a tax credit for taxes pa id abroad, life insurers incorporated in Canada 
(both Canadian and foreign-owned, including branch es) are taxed only on their income earned from 
carrying on business in Canada, a measure designed to ensure that Canadian life insurance companies 
can compete in foreign markets. 
(b) Commercial presence  
157. Foreign companies may either incorporate in Canada as a subsidiary or establish a branch of a 
foreign insurance company.  A foreign company operating as a branch may only write premiums based on capital deposited in Canada.  OSFI requ ires that branches of foreign P&C insurance 
companies maintain, at all times, trustees assets  equivalent to their liabilities in Canada plus a 
minimum capital and surplus margin of 10% of li abilities.  Branches of foreign companies must 
therefore vest in total at least 110% of liabilitie s in order to do business in Canada.  These 
requirements apply to federally registered  forei gn insurance companies.  The Deposit Adequacy Test 
(DAT) requirements were to be replaced by the Branch Adequacy of Assets Test (BAAT) effective January 2003.  The authorities noted that the impact of the BAAT on the insurance industry is 
intended to be the same as the DAT even though, on a company basis, the BAAT requirements can be 
slightly different from the DAT requirements. 
158. Foreign investment through acquisition of a dom estic insurance company with the exception 
of non-resident insurers and life insurers that have business both inside and outside of Canada, is subject to prior notification and approval.  Under th e Investment Canada Act, the Federal Government 
reviews and may approve all foreign direct acquis itions of insurance companies with assets above 
Can$5 million, and Can$50 million for indirect acquisiti ons.  If the assets in Canada are 50% or more Canada WT/TPR/S/112/Rev.1 
 Page 131 
 
 
of the assets of the targeted company for indirect acquisitions, the acquisitions are deemed to be direct 
and therefore, the threshold of Can$ 5 million applies. 
159. Certain provinces may also restrict such acqu isitions. Under Quebec's Loi sur les assurances, 
non-residents (of Canada) may be prevented from  acquiring more than 30% of the voting shares of a Quebec-chartered insurance company.  In 2001, the Quebec Government proposed to abolish this 
provision. In British Columbia, incorporation, share acquisition or application for business 
authorization, where any person controls or will cont rol 10% or more of the votes of the company, is 
subject to ministerial approval. 
160. Under the new financial services legislati on (Bill C-8 described ab ove), a new ownership 
regime allows for larger individual shareholdings in  large insurance companies since December 2001.  
Specifically, for insurance companies that had equity  and surplus in excess of Can$5 billion prior to 
their demutualization in 1999-00
97, individual investors may now own up to 20% of any class of 
voting shares or 30% of any class of non-voting shares.  Under the previous regime, no individual 
could own more than 10% of any class of shares.  Acquisition of shareholdings in these companies, 
however, remains subject to ministerial approval.   The Guidelines Respecting Control in Fact 
(Insurance Companies Act) set out the policy object ives and factors that the Minister would consider 
in assessing an application to acquire more than 10 % of the shares of one of these companies.  Two 
companies are subject to these rules.  Their tota l premium income was Can$13.8 billion at the end of 
2001. 
161. Any other stock insurance company need not be widely held.  However, all insurance 
companies are required to list and post for trading 35% of their voting shares on a recognized 
Canadian stock exchange if equity exceeds Can$1 billion.  Closely held insurance companies would 
be allowed to grow beyond Can$5 billion in equity without any ownership restrictions, other than the 
35% requirement. 
162. A number of provinces, including British Columbia, Manitoba, Quebec, and Saskatchewan 
maintain publicly owned monopolies for car insuranc e.  In Quebec, while automobile insurance for 
corporal damage is public, insurance for material damage is private. 
(c) Cross-border supply 
163. As noted above, companies wishing to provide insurance services in a given province must be 
licensed by the province's insurance authority, and cross-border supply of unlicensed companies is not 
permitted.  However, in order to  meet coverage requirements, notably those needed by large 
companies, access to foreign (unlicensed) coverage is possible in certain cases.  In those cases, cross-
border supply of insurance services is generally conditional on the refusal of local companies to cover 
the risk.  In New Brunswick, sale of products of un licensed insurers is permitted but limited to fire 
and marine insurance.  An unlicensed insurer may af fect insurance in Alberta if it is unsolicited, and 
the insured pays a fee to the Province of Alberta eq ual to 50% of the premium paid.  In Saskatchewan, 
the applicable rate is 10%.98 
                                                      
97 In 1999, legislation was passed to permit large federally regulated mutual life insurance companies to 
convert into stock companies, a process known as demutualization.  Canada's four largest mutual insurance companies subsequently demutualized.   
98 See also WTO document GATS/SC/16/Suppl.4/Rev.1, 6 June 2000. WT/TPR/S/112/Rev.1 Trade Policy Review 
Page 132 
  
164. Further, under Part I of the Excise Tax Act, a federal excise tax of 10% is applicable on 
premiums paid to unauthorized foreign direct non- life insurers (except marine insurance) on risks 
within Canada, unless such insurance is deemed not to be available in Canada.99 
(d) Reinsurance services 
165. Federally registered foreign companies wishing to  supply reinsurance services must establish 
a subsidiary or a branch, and cross-border supply is not generally permitted.  In cases where it is 
permitted, the purchase of reinsurance services by  a Canadian direct non-life insurer from a non-
resident reinsurer is limited to no more than 25% of  the risks undertaken by the insurer purchasing the 
reinsurance;  if the reinsurance is purchased from a resident reinsurer, the limit is 75% of the risks.100  
Similar provisions apply in respect of life insurance.  
166. Similarly to the requirements for direct P&C insurance, branches of foreign reinsurance 
companies insuring Canadian risks must also vest as sets at least equal to 110% of liabilities ceded by 
the company.  In August 2001, the OSFI amended the standard reinsurance trust agreements (RTAs) 
to be used by insurers in respect of cessions to unregistered (foreign) reinsurers. In particular, the share was reduced from 115% to 110%.  
                                                     
 
99 See Excise Tax and Special Levies Notice, 18 February 1998. 
100 WTO document GATS/SC/16/Suppl.4/Rev.1, 6 June 2000.  Canada WT/TPR/S/112/Rev.1 
 Page 133 
 
 
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