Report: Public consultations on the possible modernization of the Canada-Ukraine Free Trade Agreement (CUFTA)

Summary

The Government of Canada conducted public consultations on the possible modernization of the Canada-Ukraine Free Trade Agreement (CUFTA) from February 15 to March 16, 2020. We heard from five provincial and territorial governments, fourteen businesses and industry associations, six civil society organizations, and two individuals, for a total of 27 submissions. Public consultations also included calls with interested stakeholders to discuss the scope of possible CUFTA modernization.

Overall, the majority of submissions conveyed support for possible CUFTA modernization, with submissions providing either positive or neutral views. In general, Canadians see value in modernizing the CUFTA as a means to further strengthen Canada and Ukraine’s bilateral commercial relationship and people-to-people ties, and to build on Canada’s current engagement with Ukraine. They also recognize the strategic importance of pursuing stronger trade rules and increased transparency in support of Ukraine’s democratic and economic reforms. In light of the existing scope of coverage of CUFTA, which immediately eliminated tariffs on 86% of Canadian merchandise exports upon entry-into-force, submissions largely focused on opportunities to expand the agreement to cover services and investment, as well as address various types of non-tariff barriers. Stakeholders also noted that CUFTA modernization would provide the opportunity to include new provisions to reflect Canada’s inclusive trade objectives, including chapters for gender, small and medium-sized enterprises (SMEs), and Indigenous peoples.

What we heard from stakeholders

Business stakeholders

In general, Canadian businesses and national business associations representing broad sectors of the Canadian economy were supportive of possible CUFTA modernization. In their view, modernization of CUFTA would enhance Canada’s competitiveness, contribute to further trade diversification, and stimulate economic growth. Some stakeholders raised issues that fall outside of the traditional scope of Canada’s FTAs, including visas, challenges with Ukraine’s legal and judicial framework, and a lack of available financing arrangements under Export Development Canada for Canadian investors in Ukraine.

Agriculture and agri-food

The Government of Canada received a total of nine stakeholder submissions from the agriculture sector, which were generally supportive of modernization negotiations with Ukraine. Several of these submissions indicated that the current CUFTA is working well, and requested that commitments in the existing Agreement be maintained (for example, commitments in the areas of market access and rules of origin). Other issues raised include a desire for better harmonization of pesticide regulations, and the removal of specific technical barriers to trade.

Stakeholders from the supply-managed agriculture sectors did not express opposition to CUFTA modernization, provided that there is no expansion of tariff rate quota volumes beyond existing levels, or additional market access concessions such as any reduction of over-quota tariffs.

Services

Canadian service providers, including those from the cybersecurity, engineering, and broader services sector, provided detailed submissions that were either broadly supportive or neutral regarding CUFTA modernization. Overall, stakeholders were supportive of seeking the inclusion of chapters on cross-border trade in services, financial services, telecommunications, temporary entry for business persons, and investment, as well as a modernization of the existing e-commerce chapter. Some stakeholders referenced non-tariff barriers and cited challenges associated with Ukraine’s business climate, especially for foreign investors in Ukraine, which represent persistent obstacles to trade and investment. A number of submissions also requested that Canada undertake more promotion of the CUFTA and provide greater support for small businesses, to help them take advantage of the opportunities that flow from the Agreement.

Other business stakeholders

Several stakeholders representing multiple sectors also provided detailed submissions which were supportive of a possible CUFTA modernization. These submissions cited support for including new obligations on temporary entry of business persons, and mentioned opportunities for the information and communications technologies (ICT) sector, and SMEs. Concerns raised include burdensome customs procedures, including additional “red tape” with respect to border clearance procedures for Canadian goods exports to Ukraine shipped through third countries.

Civil society, including labour unions and national indigenous organizations

The Government of Canada heard from a number of civil society organizations advocating on behalf of issues related to inclusive trade. Several of these organizations welcomed the possible addition of new chapters on trade and gender, trade and Indigenous peoples, and trade and SMEs in the event of possible modernization of the CUFTA. Stakeholders also recommended that impact assessments be undertaken to fully understand the effects of CUFTA modernization on gender, the environment, and human rights. Other interests raised by stakeholders include the incorporation of provisions for individuals with disabilities, the inclusion of a general exception for the rights of Indigenous peoples, and more robust labour and environment provisions.

Provinces and territories

The Government of Canada received positive feedback from the Provinces and Territories. Several Provinces and Territories were particularly supportive of the potential inclusion of new or modernized chapters on cross border trade in services, financial services, investment, e-commerce / digital trade, and additional commitments to support SMEs. Specifically, some provinces highlighted opportunities for collaboration in the Ukrainian energy and agricultural sectors, as well as consultancy, ICT and environmental services, while others sought additional transparency and ease of access with regards to Ukrainian border clearance procedures, and noted that a modernized chapter on e-commerce had the potential to create new opportunities for digital industries. Other areas noted include support for the addition of a chapter on trade and gender and interest in pursuing expanded access to the Ukrainian market for the aerospace, agri-food, and the fish and seafood sectors. Some Provinces also noted the opportunity to accelerate tariff phase-outs for certain products.

Next steps

Despite conclusion of the public consultation period, the Government of Canada is committed to continuing to hear the views of Canadians on the possible modernization of the CUFTA. The feedback received from stakeholders will help inform the Government’s decision whether to pursue modernization negotiations with Ukraine, as well as Canada’s negotiating priorities in the event that negotiations are initiated. Moving forward, officials will continue to engage with stakeholders on a possible CUFTA modernization.