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Minister of Small Business, Export Promotion and International Trade appearance before the Committee of the Whole – Briefing material

2021-05-31

Table of contents

Committee of the whole main estimates appearance, May 31, 2021

Meeting scenario

Tracy Gray Vice-Chair (CPC — Kelowna-Lake Country, BC) critic for export promotion and international trade

Key interests

Parliamentary roles

Gray was named the Conservative Critic for Export Promotion and International Trade by Leader Erin O’Toole on September 8,  2020. She had previously served as the Critic for Interprovincial Trade.  

Notable committee membership 

Background

Gray defeated the Liberal incumbent in the 2019 General Election, where she had been a Kelowna city councillor 2014-2018. Prior to entering politics, Gray had extensive experience in the BC Liquor industry. In 2003 she introduced a chain VQA wine stores to the BC interior and she has experience managing several wineries and breweries in the Okanagan Valley. 

Simon-Pierre Savard-Tremblay Vice-Chair (BQ — Saint-Hyacinthe-Bagot, QC) Critic for international trade

Key interests

Parliamentary roles

Savard-Tremblay currently serves as the Bloc Quebecois critic for International Trade and Industry.

Notable committee membership 

Background

Prior to entering politics, Savard-Tremblay worked as an academic, author and columnist. He has a bachelors degree in political science from the University of Montreal, a Masters in Sociology from the University of Quebec at Montreal, and a doctorate in the social economy of development from the École des hautes études en sciences sociales in Paris. He was heavily involved in the youth forum of the BQ and has been a frequent commentator in Quebec on economic and sovereignty-related issues. In his academic work, he is critical of neoliberalism and globalization.

Daniel Blaikie (NDP — Elmwood-Transcona, MB) Critic for international trade 

Key interests

Parliamentary roles

Blaikie was first elected in 2015. Blaikie is currently the NDP Critic for Democratic Reform, Employment, Workforce Development and Disability Inclusion, Export Promotion and International Trade and Western Economic Diversification, as well as the deputy critic for Finance. He has previously served as the Critic for Public Services and Procurement, Deputy Critic for Ethics, and as NDP Caucus Chair.

Notable committee memberships

Background

Prior to entering politics, Blaikie worked as an electrician and acted as an advisor to the Minister of Health in the Government of Alberta. He has served on the Manitoba Apprenticeship and Certification Board and the Winnipeg Labour Council.

Investor-state dispute settlement (ISDS)

Supplementary messages

Right to Regulate/Regulatory chill

New FIPA Model

CUSMA

Keystone XL/Enbridge Line 5; other potential claims by CAD investors

CETA

COVID-19

Supporting facts and figures

Background

Investment agreements ensure fair treatment for foreign investors and equal chance for them to compete for business. The investor-state dispute settlement (ISDS) mechanism provides foreign investors an impartial and timely process for the resolution of private disputes.

Canada includes an ISDS mechanism in Foreign Investment Promotion and Protection Agreements (FIPAs) and in investment chapters of Free Trade Agreements (FTAs). CUSMA is the first such treaty in which Canada has not included an ISDS mechanism. Under CUSMA, apart from the three-year transition period (i.e., until June 30, 2023), investment disputes can only be brought under the State-to-State dispute settlement mechanism.

Earlier this month on May 13, you announced the release of Canada’s new model FIPA. The model FIPA includes an ISDS mechanism, reproduces innovations from CETA and CPTPP, and is in line with the Government’s inclusive trade agenda. It also addresses criticisms of the ISDS mechanism and will be more accessible to SMEs.

Canada’s international investment agreements

Background

Rules-based Investment Environment

Canada’s international investment agreements create certainty and predictability for Canadian investors abroad by depoliticizing investment disputes and establishing transparent and enforceable rules surrounding foreign investment. The rules governing the administration of Investor-State dispute settlement were established through transparent, multilateral processes, including at the United Nations Commission on International Trade Law (UNCITRAL), and the International Centre for the Settlement of Investment Disputes (ICSID), part of the World Bank.

Right to Regulate

Canada’s international investment agreements are carefully drafted to protect governments’ rights to regulate in the public interest, including with respect to health and the environment. Canada’s agreements include provisions, which ensure that governments do not relax or fail to enforce such measures as an incentive for investment. Canada’s agreements also include many important exceptions, such as for measures in the cultural industries or for the Investment Canada Act. Canada’s investment agreements always include reservations, exempting sensitive areas from certain obligations, including social services as well as rights and preferences provided to Indigenous peoples and disadvantaged minorities.

Treatment of State-Owned-Enterprises in Canada’s International Investment Agreements

Canada’s international investment agreements treat state-owned enterprises and private investors equally. Nonetheless, Canada is mindful that the presence of foreign state-owned enterprises in Canada may have adverse effects on the competitiveness of Canadian companies. The Investment Canada Act (the Act) provides for the assessment of whether significant foreign investments above a certain threshold are of economic benefit to Canada. The Act specifies a lower threshold for state-owned enterprises than for other investors. Separately, the Act also provides that any foreign investment can be subject to a national security review. All of Canada’s international investment agreements guarantee Canada’s discretion to screen foreign investment, and decisions following such a review are not subject to challenge under the agreements. Finally, there is no known case of a state-owned enterprise using a Canadian treaty to launch an Investor-State claim.

Canada’s mining sector and ISDS

Supplementary messages

Responsible Business Conduct

Supporting facts and figures

Background

Mining companies often operate in a complex and risky environments and their investments require significant capital outlay. Canada’s investment agreements help mitigate the risk for these companies by establishing standards of protection for their investments (e.g. non-discrimination, expropriation, etc.). When a dispute arises with the host state, investor-State dispute settlement is a helpful avenue for these companies, particularly where the independence of the domestic courts is not guaranteed. Moreover, obligations found in investment agreements may not always have equivalents in the host state domestic law. Therefore, breaches of the treaty protections cannot always be addressed in domestic courts.

There are important limitations to the issues that companies can resolve through investor-State dispute settlement under Canada’s investment agreements. The mechanism can only be used to challenge an alleged breach of obligations found in an investment agreement. Absent such a breach, the mechanism cannot be used to resolve a private commercial dispute or other challenges, such as labour and community-relations issues.

Claims against Mexico by canadian investors

Background

The Government of Canada is currently aware of four ongoing investor-state dispute settlement cases brought by Canadian companies against the Government of Mexico. While some of these cases were submitted after the entry into force of CPTPP, to which Canada and Mexico are also Parties, the claims have been brought under NAFTA Chapter 11.

Lion v Mexico (2015): Lion is a Canadian company operating in the construction sector. The claim arose out of the Mexican authorities’ cancellation of promissory notes held by the claimant and mortgages to which the company was a beneficiary. Lion is claiming US$76 million in damages. The case is still pending.

Sastre and others v Mexico (2017): This claim was brought by separate investors as a group, including two Canadians, pursuant to the alleged illegal seizure by municipal and federal officials of hotel properties in the state of Quintana Roo, as well as the failure of federal courts to provide remedy. The claimants are seeking a combined US$80 million, under multiple agreements, including NAFTA Chapter 11.

Espiritu Santo Holdings (ESH) v Mexico (2020): This Canadian company alleges a local government’s interference with the terms of a concession for digital taximeters and the operation of a mobile taxi application. The concession was held by a locally-incorporated company to which ESH is an indirect shareholder. The claim is brought under NAFTA Chapter 11 for currently unknown damages.

First Majestic v Mexico (2021): This Canadian public company owns a gold and silver mine in Mexico. It alleges that Mexico has issued and is enforcing tax re-assessments, which contravene an advanced pricing agreement previously signed with the Mexican taxation agency. First Majestic filed its claim on March 2, 2021 under NAFTA Chapter 11 for a yet unknown amount.

Key innovations in Canada’s approach to investor-state dispute settlement

Supplementary messages

Canada’s Approach:

Comprehensive Economic and Trade Agreement (CETA):

Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP):

New FIPA model

Background

Comparison Table: ISDS in Canadian FTAs

CETACPTPPNAFTANew Model FIPACUSMA
Traditional ISDS mechanism✓✓✓ISDS is not applicable to Canada in CUSMA. (Potential disputes concerning Mexico measures or by Mexican investors would be addressed by CPTPP.)
Permanent Investment Tribunal✓****
Appellate Tribunal✓******
Binding Code of Conduct for Arbitrators/Members of Tribunal✓✓✓
Flexibilities for SMEs to reduce cost of proceedings✓✓
Public Access to Hearings and Documents✓✓✓✓
Third Party Submissions ✓✓✓✓
Mandatory Consultations✓✓✓
Expedited Arbitration✓
Suspension of Timelines for Mediation✓✓
Express provision on early dismissal of frivolous claims✓✓✓
Disclosure of Third Party Funding✓✓
Exclusion from ISDS for decisions under Investment Canada Act✓✓✓✓

* CETA Parties also committed to pursue creation of a multilateral investment tribunal & appellate mechanism.

** CPTPP Parties committed to consider a multilateral appellate mechanism if it gets developed in the future.

*** New FIPA Model includes a commitment to consider a multilateral investment tribunal or an appellate mechanism.

Stakeholder interactions on ISDS

In the summer of 2018, the Department launched a review of Canada’s model Foreign Investment Promotion and Protection Agreement (FIPA). A variety of approaches were used to consult stakeholders over the course of the FIPA review process. This included:

This consultations process was governed by the Department’s privacy policy and the Privacy Act. As such, any personal identifying information cannot be disclosed for individuals and/or groups that provided a submission or participated in this process.

WTO reform

Supporting facts and figures

Background

Canada is exercising global leadership on WTO reform. This includes leading the Ottawa Group – a group of 14 likeminded WTO members created in 2018 with the objective of supporting WTO reform efforts, such as to improve the efficiency and effectiveness of the WTO; safeguarding and strengthening the dispute settlement system; and reinvigorating the WTO’s negotiating function.

Canada is actively engaged in work to preserve the WTO dispute settlement system – which is key to protecting Canadian commercial interests – in the face of the U. S. block on appointments to the Appellate Body, which has prevented the appeal mechanism from functioning and has made WTO dispute resolution non-binding since December 2019. On April 30, 2020, Canada and a group of WTO Members established a Multi-Party Interim Appeal-Arbitration Arrangement (MPIA) to hear appeals in disputes amongst its participants.

Canada is also committed to concluding fisheries subsidies negotiations ahead of the 12th WTO Ministerial Conference (MC12) – ideally by the summer, in line with the WTO Director General’s priorities – and progressing work in other areas, including on services domestic regulation; e-commerce; Micro, Small and Medium-sized enterprises; investment facilitation; and agriculture.

On November 23, 2020, Ottawa Group Ministers endorsed a Communication calling on WTO Members to avoid further disruptions in the supply chains of essential goods and proposing a WTO Trade and Health Initiative. This stems from the June 15 Ottawa Group Joint Statement Focussing Action on COVID-19, where members committed to a work plan to address the trade-related impacts of COVID-19, foster global economic recovery, and be prepared to respond to similar crises in the future.

WTO dispute settlement and the multi-party interim appeal-arbitration arrangement

Top line messages

Supplementary messages

Update

While the new U.S. Administration has signaled that the long-expressed U.S. concerns over the Appellate Body (AB) will need to be addressed, USTR Katherine Tai has yet to shed light on the precise nature of reforms which the U.S. will seek on dispute settlement (DS).

Supporting facts and figures

Background

A key objective for Canada is having a DS system that provides for timely enforcement of WTO rules. The AB impasse caused by the U.S.’ blockage of the appointment of AB members has prevented the WTO DS system from fully functioning since December 2019. Since then, nine panel reports have been appealed to a non-functioning AB (i.e. into the void).

WTO trips agreement waiver proposal

Supplementary messages

Responsive – WTO Director General’s “third way” proposal

Responsive – What is the relationship between Canada’s support for the WTO Director General’s proposed “third way” and the TRIPS waiver discussions?

Responsive – Bolivia’s request regarding a compulsory licence for the production of COVID-19 vaccines by the Ontario company Biolyse

Supporting fatcs and figures / Background

Bolivia’s request regarding a compulsory licence for the production of COVID-19 vaccines by the Ontario company Biolyse

Position on potential sectoral agreements

Supplementary messages

Background

Canada’s FTAs: Canada’s approach to FTAs is to seek to eliminate tariffs on all but the most sensitive agricultural goods. The WTO Most Favoured Nation (MFN) rule prevents Members from negotiating sectoral agreements on a preferential basis, i.e. they may not provide preferential treatment to one Member without extending it to other Members. An exception to this MFN obligation is provided for FTAs that eliminate tariffs on substantially all trade in goods between the parties. A similar exception also exists for agreements that liberalize substantially all trade in services.

WTO Sectoral Agreements: A subset of WTO Members may negotiate sectoral agreements as long as they provide MFN treatment to all Members, including non-participants. This creates a free-rider problem as non-participants benefit from tariff concessions without offering any reciprocal concessions in return. To minimize free-riding concerns, sectoral agreements must include key trade partners, in particular the EU, the U.S. and China, to reach critical mass. Examples of plurilateral sectoral agreements are the Information Technology Agreement (1996) and its expansion (2015), as well as the Agreement on Trade in Pharmaceutical Products (1994). Negotiations towards a plurilateral Environmental Goods Agreement stalled in 2016.

Other WTO Rules: Beyond tariffs, rules on trade in goods at the WTO and in Canada’s FTAs generally apply to all goods. However, these rules are subject to exceptions designed to fulfill certain legitimate policy objectives, such as for measures necessary to protect life or health or essential security interests, or for temporary export restrictions necessary to prevent or relieve a critical shortage of an essential good.

Trade and Health Initiative: Canada and other Members are building support for a WTO Declaration on Trade and Health to be adopted by the Twelfth WTO Ministerial Conference. If supported by the U.S. and other key Members, the Declaration could potentially lead to eventual plurilateral negotiations of commitments for medical goods.

Digital Economy Partnership Agreement (DEPA): In December 2020, Canada formally notified New Zealand, Singapore and Chile (DEPA Parties) on its interest to commence exploratory discussions on Canada’s potential accession to the DEPA, which were publically supported by all DEPA Parties. In March 2021, the Government of Canada launched public consultations on Canada’s possible accession to the DEPA. The consultation period was 45 days, which ended on May 3.

Non-tariff barriers

Supplementary messages

Background

Canada’s FTAs include disciplines addressing various types of non-tariff barriers, the most prominent being technical barriers to trade (TBT) and sanitary and phyto-sanitary measures. Building on WTO rules, these disciplines help ensure that measures put in place by trading partners do not unnecessarily restrict trade or discriminate against imported products, while preserving Canada’s and our trading partners’ right to regulate (e.g. measures necessary to protect human, animal and plant life and health, or the environment, or ensure public safety). These disciplines also ensure partners are transparent in the development of new regulations by providing notice and an opportunity to comment when a new regulation is being developed.

Despite these disciplines in our free trade agreements, Canadian stakeholders often raise concerns over non-tariff barriers maintained by trading partners, notably in heavily regulated sectors such as agriculture and agri-food. These can include labelling rules (e.g. country-of-origin labels), or unpredictable and unclear approval procedures for innovative agricultural technologies (e.g. products that include genetically modified organisms, or GMOs). Many regulations respect these disciplines but still can make it expensive or challenging for Canadian firms to do business and secure access to the market. The Government helps stakeholders address these issues by utilizing the mechanisms included in trade agreements to raise and discuss these concerns (e.g. Committees where trade policy and technical consultation occur), as well as through Canada’s network of missions abroad to advocate for Canadian stakeholders’ case and calling on trading partners to ensure transparency and minimize compliance costs.

TCS support for the agriculture sector

Supplementary messages

Supporting facts and figures

Canada commercial consular service

Supplementary messages

Update

The TCS is currently finalizing the Canada Commercial Consular Service (CCCS) website and service offering, including user testing..

Background

Through its approximately 1,500 employees worldwide, the TCS provides a range of services to support the international business activities of its clients:

As a consequence of the COVID-19 pandemic, demand from clients for problem-solving support services by the TCS increased by 40% between April 2020 and March 2021 compared with the same period in 2019-20. During that period, support provided by the TCS centered around business travel restrictions, shipping delays, and inspection assistance.

While the TCS is actively helping Canadian businesses faced with export challenges, the CCCS mandate letter commitment will provide a new tool to ensure exporters are aware of and have quick and easy access to an array of resources.

A dedicated website operated by the TCS will provide Canadian companies – both existing clients of the TCS and other Canadian companies – with information to avoid problems, and access to personalized support within one business day to help resolve those that emerge.

It will also maintain a "no wrong door" approach to the federal and provincial services Canadian businesses may require, referring them quickly to the right place to get the right help.

This enhanced TCS service will help firms to manage risk, save time and reduce costs, maintain relationships with clients, and continue to export.

Export diversification strategy

Supplementary messages

Update

Canadian businesses are likely to experience continued uncertainty and disruption in international markets in coming months. At the same time, exporters will face renewed opportunity as foreign economies reopen and global demand rebounds. Investments made under the Export Diversification Strategy mean that exporters will be able to draw on enhanced trade development services and resources to help them re-engage with global markets.

Supporting facts and figures

Background

The 2018 Fall Economic Statement established the target of increasing by 50% Canada’s overseas exports by 2025 and announced Canada’s Export Diversification Strategy, which included transformative investments to enhance services and programs available to Canadian businesses from the Trade Commissioner Service. Enhancements have included:

The Trade Commissioner Service has leveraged these resources to adapt and maintain robust services for Canadian businesses throughout the pandemic. They will remain a source of support for exporters as Canadians look to return to growth through trade. 

The Office of the Chief Economist at GAC regularly produces a report, “Growing Canada’s exports to overseas markets by 50 percent” which is publicallly available on the Department’s website, that tracks progress towards achieving that goal.

Recovery in Exports

FTA Utilization Rates

Trade commissioner service COVID-19 response

Supplementary messages

Supporting facts and figures

Facts about the TCS

Support to Women-owned SMEs

Virtual Trade Missions:

Investment in Canada

Supplementary messages

Update

Since March 2020, COVID-19 has slowed the steady growth of FDI into Canada, as well as globally. Ongoing interactions with existing and potential investors, however, confirm that Canada continues to be a premier investment destination. The TCS and IIC effectively pivoted their service-delivery methods to reach foreign investors by moving to virtual events where possible, organizing sector-specific webinars, organizing virtual site visits or meetings with investors and working with partners to identify innovative ideas on how to promote Canada.

Supporting facts and figures

Background

Global Affairs Canada and IIC share the mandate to increase FDI into Canada and work closely together to exchange information, support investors and coordinate with other partners to attract FDI. The TCS manages a network of 44 investment officers abroad, which identifies and advances FDI opportunities in key markets and sectors and is often the first point of contact for potential investors.

FDI success stories

Sanofi

HCL Technologies

Invest in Canada hub (overview and target indicators)

Supplementary messages

Supporting facts and figures

Background

IIC is a departmental corporation in the portfolio of the Minister of Small Business, Export Promotion and International Trade. Its departmental planning and results reporting obligations follow the process that applies to line departments.

Target indicators of the 2021-22 Departmental Plan

Invest in Canada has the following targets and indicators as outlined in the 2021-22 Departmental Plan. The 2020-21 actual results will be available as part of the Departmental Results Report scheduled to be released in Fall 2021.

Departmental resultDepartmental result indicatorTargetDate to achieve target2019–20 actual result
Canada’s brand is seen as a global leader in investment attractionImproved score in global foreign direct investment attractiveness index0.03 point increaseMarch 20220.33 point increase
Increased awareness/recognition of the Invest in Canada brandIncrease of 2% March 202234% high familiarity (Baseline target established in 2019-20)
Percentage increase in “my opinion of Canada as a prominent global leader for foreign investment”Increase of 6% March 202272.4% (Baseline target established in 2019-20)
Canada is a location and destination of choice for global investmentPercentage increase of Canada’s FDI stockIncrease of 1.3% March 2022Increase of 7.7%
Increase in FDI stock from key target markets2% increase for the 2019 reporting yearMarch 2022Increase of 2.9% for the 2018 reporting year (excluding US and Europe)*
Increase in FDI investments from key sectors170 announced FDI projects in 2021-22March 2022293 announced FDI projects in 2019-20
Global investors have simplified access to partners, services and tools to accelerate their investmentNumber of investors/decision makers using the independent Cost Comparative Analysis Tool for FDI decisions2500March 2022Not available
Number of partners collaborating to access, build and format data sets to be highly available to potential investors34March 202226 (Baseline target established in 2019-20)
Number of investment leads facilitated with partners150March 202266 (as measured from mid-year to 2019-20 fiscal year end)

*Although the US and Europe remain key markets for attracting FDI into Canada, IIC is also focused on diversifying the source country aligned with the Government of Canada Trade Diversification strategy.

Export development Canada (EDC) current issues

Supplementary messages

Update

The Canada Emergency Business Account (CEBA) has delivered over $47.3 billion in emergency credit to over 876,000 Canadian businesses since April 2020. The Government has expanded the level of credit available to individual businesses from $40,000 to $60,000, of which $20,000 is forgivable upon timely repayment. CEBA will continue to ensure Canadian businesses receive the support they need to endure the pandemic and be well positioned for a dynamic recovery.

Supporting facts and figures

Background

EDC is Canada's export credit agency with a mandate to support and develop, directly or indirectly, Canada's export trade. In 2020, EDC facilitated over $102 billion in Canadian business through serving over 12,200 financial clients. The day-to-day operations of EDC are at arm's length from the Government. In order to meet the needs of the Canadian economy resulting from the impacts of COVID-19, the Minister of Small Business, Export Promotion and International Trade provided EDC with an increased capital limit, expanded domestic authorities, and increased the Canada Account statutory limit. With this additional financial flexibility, EDC has implemented the BCAP program, temporarily broadened its risk profile, and administered CEBA. EDC is working to ensure that Canadian businesses impacted by COVID-19 continue to receive the support they need across the economic spectrum.

Canada account write-offs

Supplementary messages

Supporting facts and figures

Background

Canada Account was established in 1969 by section 23 of the Export Development Act. It is a program that is administered by Export Development Canada (EDC) and allows the Government to provide support to exporters when such support would otherwise exceed the financial or risk capacity of EDC on its Corporate Account. The source of funds for Canada Account transactions is the Consolidated Revenue Fund, and the risks are borne by the Government of Canada. Approval from the Minister of International Trade and concurrence of the Minister of Finance is required for all Canada Account transactions.

Although restructuring of loans is a last resort and rare, on occasion EDC recommends that the Government forgive or write-off amounts owing under a Canada Account loan. A recommendation to write off a portion of a loan is typically made in order to maximize recovery on a non-performing loan. Requests for the write-off of all or part of a loan are approved by the Minister for International Trade with the concurrence of the Minister of Finance, when this is deemed to be in the best interests of Canada and of Canadians. Authorities to proceed with write-offs are provided through Ministerial Authorizations.

All Canada Account transactions are reported in the Canada Account Annual Report, which is made public via tabling in Parliament on an annual basis. Any adjustments made to Canada Account transactions are also reported in the Public Accounts.

Export development Canada (EDC) support for carbon intensive industries

Supplementary messages

Update

In 2020, EDC facilitated $8.1 billion in oil and gas sector business via 544  transactions.

Supporting facts and figures

Background

Export Development Canada (EDC) is a Crown corporation and Canada’s export credit agency. The Export Development Act provides EDC with the mandate to support and develop, directly or indirectly, Canada’s export trade, and Canadian capacity to engage in that trade, and to respond to international business opportunities. EDC provides a range of trade finance and risk management services, including short-term credit insurance, direct loans, loan guarantees, bonding support, and political risk insurance. The day-to-day operations of EDC are at arm’s length from the Government. EDC is governed by a Chair and Board of Directors responsible for implementing the direction provided by the Minister of Small Business, Export Promotion and International Trade.

Export development Canada (EDC) annual report and corporate plan

Supplementary messages

Supporting facts and figures

Background

EDC is a Crown corporation and Canada’s export credit agency with a mandate to support and develop, directly or indirectly, Canada's export trade. As a Crown corporation, EDC is required under the Financial Administration Act to report on its activities in order to receive approval for its strategic direction and borrowing authorities from the Minister of international Trade, the Minister of Finance, and the Treasury Board.

The Corporate Plan is a forward-looking document that seeks to outline EDC’s strategic priorities and activities for the next five years, while aligning with any direction or guidance provided by the Government. Subsequently, EDC is required to produce an Annual Report that outlines EDC’s performance for the previous year. Global Affairs Canada and Finance Canada officials monitor EDC’s performance against its Corporate Plan, including its alignment with Government priorities, by tracking EDC’s programs, results and strategic planning.

EDC’s 2021-2025 Corporate Plan outlines the development of the Crown corporation’s new long-term strategy focusing on COVID-19 response and recovery, customer segmentation to better support the unique needs of Canadian businesses, digital modernization to serve companies where they are, and leadership in driving environmental and social governance impact for Canada. The 2020 Annual Report outlines how EDC has increased its support to SMEs, historically underrepresented groups in trade, and clean technology companies, while reducing support to carbon intensive industries. It also further outlines how EDC has supported Canadian business through the pandemic and worked with partner organizations to achieve its objectives.

EDC dividend payments

If Pressed:

Supplementary messages

Supporting facts and figures

Background

As outlined in the Financial Administration Act, the Minister of Finance is responsible for the Capital Adequacy and Dividend Policy of all financial Crown corporations. Consistent with this responsibility, the Minister of Finance, in consultation with the President of the Treasury Board and the responsible Minister of the Crown corporation, provides the Crown corporation with the policy framework that governs its capital management and ensures adequate capitalization to deliver on its mandate.  The Government’s Capital Adequacy and Dividend Policy does not require that a financial Crown corporation return a dividend annually unless it retains capital in excess of its requirements.

As a financial Crown corporation, EDC is subject to this policy and has returned an annual dividend in eight of the past ten years based on this policy, totalling $6.684 billion. EDC manages its capital through a Board of Directors-approved Capital Management and Dividend Policy, which is consulted with Finance Canada and Global Affairs Canada as required.

Canada Commercial Corporation (CCC)

Current Issues

Supplementary messages

Supporting facts and figures

Background

CCC is Canada’s government-to-government contracting agency. The Corporation acts as the prime contractor for foreign governments to supply Canadian goods and services, and sub-contracts with a Canadian exporter, passing on all contractual obligations.

Among CCC’s primary functions is the administered Defence Production Sharing Agreement (DPSA) on behalf of the Government of Canada. The DPSA is a bilateral defence trade agreement with the U.S., first signed in 1956, that allows Canadian companies to compete for U.S. Department of Defense (DoD) contracts on the same terms as domestic suppliers, as part of the integrated North American Defence Industrial Base. CCC’s role as prime contractor helps maintain this bilateral framework, and ensure that Canadian exporters continue to enjoy a level playing field with U.S. companies.

In September 2020, Senator Don Plett drew attention to delays in filling Governor in Council appointments at CCC through a Senate written question. The 2019 Report of the Auditor General of Canada to the Board of Directors of the Canadian Commercial Corporation—Special Examination noted that in January 2018, the terms of all nine directors had expired. However, by November 2018, five directors had been appointed, including three who were reappointed to their positions. Three more directors were appointed in July 2018, and an additional director was appointed in December 2021.

Robert Kwon, who had served as a member of the Board of Directors since 2018, was appointed as President and CEO effective March 8, 2021, for a five-year term.

Canexport funding program

Supplementary messages

Update

COVID-19 and the resulting travel restrictions have had a significant impact on the ability of CanExport clients to explore new markets. In response to these challenges, on November 3, 2020, the program updated its guidelines to provide more flexible funding, particularly for virtual activities. Main changes include:

Supporting facts and figures (since program inception in January 2016)

CanExport SMEs

CanExport Innovation

CanExport Associations

CanExport Community Investments

Background

Established in 2016, the Trade Commissioner Service’s CanExport Program is composed of four sub-programs: CanExport SMEs, CanExport Associations, CanExport Innovation, and CanExport Community Investments. Funding for the program was increased by $100 million over six years in June 2018. The 2018 Fall Economic Statement provided an additional $26 million on an ongoing basis.

Responsible business conduct

Supplementary messages

Update

Ms. Meyerhoffer was appointed as the CORE in April 2019.  The office of the CORE opened on March 15, 2021 to accept cases. In January 2019, MINT/Minister Carr instructed the Department to provide funding for a total of six positions and approximately $1 million per year. This was in addition to the funding provided for CORE through Budget 2018. Budget 2021 provides additional funding of $16.2 million over five years, starting in 2021-22, and $3.3 million per year ongoing to Global Affairs Canada in support of the CORE.

Supporting facts and figures

[REDACTED]

CPTPP implementation

Supplementary messages

Responsive: Taiwan’s interest in CPTPP accession

Responsive: China’s interest in CPTPP accession

Update

The U.K. submitted its formal accession application on February 1, kicking off the first CPTPP accession process. A special meeting of the CPTPP Commission is expected to meet in early June to decide whether to commence the accession process and establish an Accessions Working Group (AWG) to oversee accession negotiations.

Consultations on a Canada-UK bilateral FTA and UK accession to the CPTPP, which ended on April 27, demonstrated widespread support for both initiatives.

Supporting facts and figures

Background

Ratification: The COVID-19 pandemic has further delayed ratification of CPTPP by Chile, Peru, Brunei and Malaysia. For Chile, it is unknown when CPTPP legislation will be voted upon. Peru has faced ongoing political challenges, the timeline for ratification is unknown. Brunei continues to advance its domestic work on technical issues necessary for ratification. Malaysia is tentatively targeting end of year for ratification.

Canada-Asean FTA negotiations

Supplementary messages

Responsive – Human Rights/Myanmar

Supporting facts and figures

Background

Canada and ASEAN have been discussing a possible FTA since 2017. At the ASEAN Economic Ministers (AEM)-Canada Consultations in August 2020, Ministers agreed to a timeline in support of a launch in 2021, which includes developing a reference paper to outline the scope of a possible agreement. Canadian officials are working with ASEAN on this paper, which is expected to be finalized in advance of the next AEM-Canada Consultations, scheduled for September 2021.

In 2018, the Government conducted public consultations. Overall, stakeholders expressed support for a Canada-ASEAN FTA and highlighted significant opportunities to Canadians in the ASEAN market, notably with non-CPTPP economies (Indonesia, Philippines and Thailand), across a broad range of sectors, including agriculture, manufacturing and services. A small number of stakeholders expressed concern or, in the case of supply-managed agriculture sectors, conditional support. 

Possible Canada-Indonesia comprehensive economic partnership agreement (CEPA)

Supplementary messages

Update

Public consultations held between January 9 and February 23, 2021 revealed strong support for a Canada-Indonesia CEPA. Stakeholders and other partners cited the significant market potential that could be facilitated by reducing tariff and non-tariff barriers and investment restrictions. A What We Heard report summarizing the views of Canadians will be published on Global Affairs Canada’s website later this spring.

In parallel with public consultations, Canada and Indonesia held technical discussions to assess the potential for negotiating a comprehensive trade agreement, which took place in February and March 2021. Technical discussions revealed that there is scope to negotiate a comprehensive trade agreement and secure meaningful market access.

Supporting facts and figures

Background

Indonesia is Canada’s 24th largest merchandise trading partner and a key market for Canadian exports of agricultural, machinery products, and natural resources. Canada and Indonesia have been exploring the possibility of negotiating a comprehensive bilateral trade agreement in parallel with a possible Canada-ASEAN FTA.  A Canada-Indonesia CEPA would provide Canadians with enhanced access to Southeast Asian supply chains and trade and investment opportunities.  A CEPA would benefit Canadian exporters of goods and services by eliminating tariffs and other barriers, enhancing market access and protection for investors, and creating a more transparent, predictable, and accessible environment for international trade. 

China – trade relations and market access issues

Supplementary messages

China/Xinjiang

China/Hong Kong

China/Canola

China/COVID-19 import measures on food products

Responsive: U.S.-China trade dispute and Phase One agreement

Update

In response to China’s use of coercive diplomacy, including economic coercion, Canada is advising companies to take on a strong suite of policy and operational measures to support diversification and mitigation of vulnerabilities. The Trade Commissioner Service is proactively providing clients and stakeholders information on the risks of doing business in China, including the importance of Responsible Business Conduct and international best practices for Canadian companies operating abroad, as well as new risks related to human rights violations in Xinjiang and Hong Kong’s NSL.

To safeguard Canadian supply chains and prevent Canadian businesses from becoming unknowingly complicit, on January 12, 2021 Canada announced a suite of measures to address extensive human rights violations against Uyghurs and other ethnic minorities in China. On March 22, Canada announced sanctions on four Chinese officials and one entity involved in human rights violations in Xinjiang.

Canada has been working with like-minded countries in calling upon trading partners to ensure that trade measures are transparent, rules-based and non-trade disruptive to global supply chains. It will require a critical mass of like-minded countries to agree to mechanisms to deter such coercive actions, share business risks, and hold China to account. In this regard, officials are currently developing options.

Supporting facts and figures

Background

India – market access and investment

Supplementary messages

Supporting facts and figures

Background

Pulses: India is the world’s largest pulse import market and, until September 2017, had been Canada’s largest pulse export market. India continues to apply a number of measures on imported pulses including mandatory fumigation requirements, increases in import tariffs, quantitative restrictions on dry peas (de-facto banning imports of yellow peas) and, most recently, increased scrutiny for the presence of weed seeds, including a number of previously untested pests. Pulse exports to India from Canada have decreased significantly as a result of India’s restrictive measures, from $930 million in 2017 to $158 million in 2018 (an 83% decrease). Exports in 2020 rose to $708 million but are still well below 2017 levels. In the case of peas, additional trade restrictions (quota) has made the impact more significant: exports have fallen from $526 million in 2017 to $21 million in 2020 (a 96% decrease). On March 11, 2021, you raised the issue with India’s Minister of Commerce and Industry.

Foreign Investment Promotion and Protection Agreement: Canada and India launched FIPA negotiations in 2004. The most recent round of negotiations took place in 2017. Ministers and officials have had regular contact over the last year with a view to re-engaging in FIPA discussions and officials are tentatively planning to meet in June.

Comprehensive Economic Partnership Agreement: CEPA negotiations launched in November 2010. The tenth round of negotiations took place in 2017. Several meetings have taken place between Chief Negotiators since then, including most recently on November 19, 2020. The next meetings are tentatively planned for June.

Canadian Investment in India: Priority sectors for investment attraction from India include ICT, automotive, aerospace, infrastructure, financial services, and the oil & gas and extractive sectors. Canadian portfolio investments in India have grown substantially over the past five years and are estimated to exceed $60 billion. Canadian investors are active in India’s real estate, infrastructure, logistics, information technology, private equity, renewable energy sectors, and credit financing.

COVID-19: EU vaccine production and export measure

Supplementary Messages

Responsive: What is Canada doing in response to the EU measure?

Update

On May 5, the EU extended its March 24 amendment to the Export Authorisation Mechanism on vaccines until June 30, 2021. The amendment was originally scheduled to expire on May 6. The amendment reduced the number of countries exempted from the mechanism. It also gave Member States and the Commission means to block shipments on the criteria of reciprocity – whereby the destination country restricts its own exports of vaccines or their raw materials – and the criteria of proportionality – whereby the conditions prevailing in the destination country are better than the EU’s with regards to its epidemiological situation, its vaccination rate or its access to vaccines.

With the shift of Canada’s Pfizer vaccine supply toward U.S.-based manufacturing, Canada is currently only relying on EU export authorizations for Moderna vaccines being produced in Switzerland/Spain. 

Background

On January 29, 2021, the European Commission’s Implementing Regulation 2021/111 “Making the Exportation of Certain Products Subject to the Production of an Export Authorisation”, entered into force. Although initially presented as a transparency measure, the new Regulation is tantamount to export licensing, which could result in a prohibition or restriction on vaccine exports to Canada. While the measure has increased uncertainty and concern about future vaccine shipments to Canada, the European Commission at the highest levels has consistently reassured that these measures would not affect Canada, reassurances which have been confirmed in practice.

Meetings with EU Interlocutors: The Minister of International Trade discussed vaccines with EVP Dombrovskis on: March 25 on the margins of the CETA Joint Committee just following the announcement of the amendments to the mechanism. The Minister has also spoken directly with her Belgian, Spanish, German, French and Swedish counterparts, all of whom offered assurances that Canada’s vaccines were not the target of the mechanism. Prime Minister Trudeau also spoke with President von der Leyen on March 24, who provided assurances that Canada’s exports would not be affected.

CETA implementation and trade irritants

Supplementary messages

Update

CETA’s implementation continues with many Committee meetings and dialogues taking place each year. These meetings allow the Parties to raise: concerns relevant to stakeholders; to work for a resolution of such issues; and in some cases to develop decisions or recommendations to implement or address new issues under the Agreement. For example, in January 2021, four decisions related to CETA’s Investment Chapter were adopted by the CETA Joint Committee, marking an important step toward ensuring the full functioning of CETA once it is ratified by all EU Member States. The decisions established clear and rigorous ethical rules and transparency in the resolution of investment disputes. The EU also recently implemented their Protocol on Conformity Assessment obligations under CETA after a three-year delay.

Supporting facts and figures

Background

CETA is one of the most comprehensive and ambitious free-trade agreements that Canada and the EU have ever implemented. The EU is Canada’s second largest trading partner after the U.S., offering tremendous opportunities for Canadian businesses. A few irritants persist in the Canada-EU trade relationship, such as the EU’s delay in publishing Temporary Entry information, the difference of opinion vis à vis “effective enforceability” of CETA’s Trade and Sustainable Development Chapters [REDACTED]. In addition, Canadian agricultural stakeholders have raised complaints with the EU’s non-tariff barriers (e.g. Italy’s COOL law, access for Canadian beef and pork, hazard based approach towards pesticides, long approval process for biotech products).

Canada – U.K. trade continuity agreement

Supplementary messages

Update

After making its way through the House of Commons without amendments, Bill C-18, An Act to Implement the Agreement on Trade Continuity between Canada and the United Kingdom of Great Britain and Northern Ireland, passed quickly through the Senate and received Royal Assent on March 17, 2021. Following approval of the necessary regulatory changes and an exchange of diplomatic notes with the U.K., the TCA entered into force on April 1, 2021. Public consultations on future trade negotiations with the U.K. were conducted from March 12 through April 27, 2021. Overall, submissions to the consultation process were supportive of a future bilateral FTA.

Background

The Canada-U.K. Trade Continuity Agreement (TCA) entered into force on April 1, 2021. The agreement ensures a seamless transition of our trade relations with the United Kingdom following its departure from the EU at the end of 2020. The TCA replicates the outcomes of the Canada-EU Comprehensive Economic and Trade Agreement (CETA), which ceased to apply to the U.K. as of January 1, 2021 (while remaining otherwise unchanged and still governing trade between Canada and the EU). Modifications were required in areas where it was not appropriate to transpose the CETA outcome directly, such as tariff-rate quotas (TRQs), TRQ administration, rules of origin, and investment.

The TCA addresses the unique situation brought about by the U.K. leaving the EU in the medium term. For the longer term, however, Canada is interested in negotiating an agreement that can best reflect the nature of Canada-U.K. trade relations going forward and take into account any post-Brexit developments. Canada and the U.K. have committed to enter into subsequent negotiations within one year of the TCA’s entry into force, and to make best efforts to reach a new agreement within three years. Public consultations to seek the views of Canadian stakeholders and interested parties on future bilateral trade negotiations with the U.K., as well as the prospect of the U.K. acceding to the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), were held from March 12 to April 27, 2021. We received 145 submissions from a wide variety of stakeholders including Industry Groups, Provincial and Territorial Governments, Civil Society, Academia, individuals and others. A “What We Heard” report of the consultations will be published online in May 2021.

Canada-Ukraine free trade agreement (CUFTA) modernization

Supplementary messages

Supporting facts and figures

Update

On March 20, 2021 Global Affairs Canada launched public consultations in the Canada Gazette towards an Initial Environmental Assessment (IEA), and Gender Based Analysis+ (GBA+) of the modernization of CUFTA for a 45-day period.

Background

The CUFTA is a comprehensive FTA, but does not include chapters on services and investment. The CUFTA contains a review clause (Article 19.2) that commits the Parties to review the Agreement within two years of its entry into force with a view to expanding the agreement to include trade in services and investment, as well as other areas as agreed by the Parties. In July 2019, PM Trudeau and Ukrainian President Zelenskyy announced a mutual commitment to expand and modernize the 2017 CUFTA. Public consultations to seek the views of Canadians were held in winter 2020 through a Canada Gazette notice, and an official report of the consultations was published on GAC’s website in May 2020. The majority of submissions were positive or neutral. At this time, Canada is ready to proceed and is waiting for Ukraine to finalize its preparations, anticipated in spring 2021, prior to launching negotiations. Modernization of CUFTA would demonstrate the Government of Canada’s commitment to increasing and diversifying rules-based international trade, and would support Canada’s overall commitment to Ukraine and its domestic reform efforts. CUFTA modernization would help improve the business environment in Ukraine by strengthening trade rules and increasing transparency and certainty for Canadian stakeholders, including building on the existing obligations of the 1995 FIPA.

CETA agricultural issues

Supplementary messages

Update

A renewed advocacy strategy to help address Canadian agricultural industry concerns with the EU market is currently being implemented; a meeting between AAFC, GAC, and trade commissioners in the EU will be held in June.

Background

Beef and Pork Market Access / TRQ: The fill-rate of EU CETA meat TRQs has been very low, due to a limited supply of livestock in Canada that meets EU sanitary and import requirements. EU requirements for hormone-free certification are very specific and require process controls throughout the lifecycle of the animal. As Canadian industry increases production eligible for export to the EU, concerns related to the administration of the EU’s quota management system will become more important. The Government of Canada is working with industry to address these issues.

Country of Origin Labelling (COOL): Certain EU Member States maintained national COOL measures (e.g. Italy) after the implementation of an EU-wide COOL measure creating confusion for Canadian agricultural exporters. [REDACTED] the EU has committed to put in place expanded EU-wide COOL rules under its Farm-to-Fork (F2F) policy [REDACTED].

Canola: Canada and the Canola Council of Canada (CCC) have engaged with the EU to have them accept Canada’s methodology to certify canola’s sustainability as a biofuel. Acceptance of this methodology would likely increase canola exports to the EU. A Guideline for voluntary schemes on how to certify sustainability criteria is being developed by the Commission in the form of an implementing act which could be informed by Canada’s current dialogue with the Commission. Publication of the act is planned for July 2021.

Canada-Pacific alliance FTA negotiations

Supplementary messages

Update

Eight rounds of negotiations have taken place to date, most recently in Nov. 21-23, 2019 in Lima, Peru. Discussions are ongoing regarding next steps.

Supporting facts and figures

Background

In June 2017, the PA invited Canada, Australia, New Zealand, and Singapore to become Associated States. Canada launched FTA negotiations with the PA in October 2017. Canada already benefits from a high level of market access from its existing FTAs. Achieving Associate State status would allow Canada to strengthen its commercial and political linkages with important partners in Latin America, and to continue to promote Canada’s inclusive approach to trade.

Domestic consultations to seek the views of Canadians on a potential Canada-PA FTA were held in 2017. The CIIT also undertook a study on a potential FTA in 2018-19; a government response was presented to the House in July 2019.

Canada-Mercosur FTA negotiations

Update

Since launching FTA negotiations with Mercosur in March 2018, seven rounds of negotiations have been held. Round 8, which was originally targeted for mid-September 2019 and then subsequently March 2020, was postponed on two occasions: first due to general elections in Canada, Uruguay and Argentina in late 2019 and second, due to concerns related to COVID-19 in mid-March 2020. Given the international travel restrictions in place, no new rounds are scheduled. In the meantime, officials have been engaging virtually to advance technical discussions on non-contentious issues.

Supporting facts and figures

Background

These negotiations provide an opportunity for Canada to promote an inclusive approach to trade and to advance broader social, labour and environmental priorities both at home and abroad, while reinforcing the importance of a rules-based trading system at a time of growing protectionism. Environmental concerns stemming from the forest fires in Brazil’s Amazon region, coupled with human rights concerns related to Brazil’s treatment of Indigenous peoples and potential links to increased agricultural trade, have triggered greater public scrutiny of trade liberalization efforts with Brazil. The ratification of the EU-Mercosur FTA has been stalled due to concerns about these issues. Canadian stakeholders, led by Greenpeace, as well as Indigenous groups, have echoed these concerns. Canada continues to raise its concerns bilaterally with Brazil on broader environment and Indigenous rights issues, and will continue to keep Canadian stakeholders and Indigenous representatives apprised. 

Buy american and buy America

Supplementary messages

Background

Buy American requirements were first established during the U.S. Great Depression and are set out in the Buy American Act of 1933, which mandates that all federal government departments purchase only U.S. goods. Canada is exempt from Buy American requirements as a result of our respective obligations under the revised WTO Agreement on Government Procurement (GPA).

However, Canada is not exempt from Buy America requirements. Since 1982, Buy America requirements have applied to the purchase of iron, steel and manufactured goods used in state/local infrastructure projects funded – in whole or in part – by certain U.S. federal departments and agencies (mainly the Department of Transportation and the Environmental Protection Agency). In addition, procurement of rolling stock (e.g. buses, subway cars, vehicles) requires 70% U.S. domestic content and final assembly in the U.S. to be considered Buy America compliant. As federal transfers or grants to lower levels of government are not covered by the U.S. under the GPA, imposing Buy America requirements is consistent with U.S. trade obligations. 

On March 31, 2021, President Biden announced the American Jobs Plan, which will provide up to $2 trillion in infrastructure funding over eight years. This initiative could have negative impacts on Canadian companies supplying products for transportation infrastructure (roads/highways, bridges, airports, ports), transportation goods (trains, subway cars, buses), water and wastewater facilities, power sector infrastructure, high-speed broadband networks and general building renovation/construction (e.g. schools, hospitals). While technical details of the Plan are not yet known, it’s widely expected that the implementing legislation will likely apply existing Buy America requirements and potentially expand them to include other materials, such as cement, aggregate and other construction materials.

Canada-U.S. relations

Supplementary messages

Trade

Climate and energy

Border and pandemic

Arctic

International security and foreign policy

Supporting facts and figures

Background

On May 10, MINT and U.S. Secretary of Commerce Gina Raimondo held their first bilateral call. They agreed to continue the close collaboration to strengthen our integrated supply chains to support competitiveness and the economic recovery from the pandemic. They also discussed a number of other key issues, including advancing opportunities for women-owned and women-led business as well as entrepreneurs from traditionally underrepresented groups, green infrastructure, Buy America, softwood lumber, export/import controls and Line 5.

On April 21, PM Trudeau had a call with President Biden ahead of the Climate Leaders’ Summit hosted by the U.S. on April 22-23. The two leaders highlighted the importance of increased global ambition in the fight against climate change, and discussed the ongoing vaccination efforts in both countries, as well as the economic recovery and the importance of the G7 in protecting our shared values. PM Trudeau also thanked President Biden for his administration’s support and efforts in securing the release of Michael Kovrig and Michael Spavor.  

Political context: While the Senate’s confirmation process for the members of the Biden cabinet is essentially complete, there are still a substantial number of outstanding confirmations for political appointments across the U.S. government in the mid and lower ranks. The new administration inherited significant domestic challenges – including tense partisan and racial relations, the impact of the COVID-19 pandemic, immigration pressures and a fragile economic recovery. 

The Biden administration’s response to these challenges includes the US$1.9 trillion “American Rescue Plan” signed by President Biden on March 11 to provide fast and direct economic assistance for American workers, families, small businesses, and industries affected by the COVID-19 pandemic, as well as the “American Jobs Plan” unveiled on March 31 (pending adoption in Congress), which includes up to US$2 trillion over eight years to finance ambitious and resolutely progressive objectives focused on clean growth and green technologies. On April 9, President Biden also released the outlines of his first budget proposal, a US$1.5 trillion blueprint that calls for a 16% increase in nondefense spending in areas ranging from climate change to gun violence to medical research and education. The proposal also calls for a 1.7% increase in defence spending, far less than the increase in defence spending under the previous administration. 

On April 28, during his first address to Congress to mark his first 100-days in office, President Biden announced the “American Families Plan,” a $1.8 trillion package aimed at supporting American families, notably by expanding access to child care and education.

Canada-U.S. Roadmap: PM Trudeau and President Biden had their first virtual meeting on February 23. The two leaders committed to a Roadmap for a Renewed U.S.-Canada Partnership, which is intended to be the cornerstone of a whole-of-government approach to Canada-U.S. relations. In particular, the Roadmap prioritizes:

In a meeting between PCO and the NSC on May 5th, the U.S. indicated that a NALS is not likely before the G7 meeting in June, but the summer time frame may still be a possibility.  Canada’s embassy in Washington is in contact with the U.S. government on the agenda and timelines. GAC is leading an interdepartmental process on potential areas for discussion and deliverables that could include COVID-19; building back our economies; regional issues (e.g. migration), global issues (e.g. China); and diversity, equity and inclusion. 

Trade: Canada and the U.S. enjoy the largest trading relationship in the world. Canada’s efforts are focused on ensuring the effective implementation of the CUSMA and defending Canadian trade interests in the U.S., and collaborating closely to address global trade challenges, including with respect to China and the WTO. While CUSMA implementation is proceeding well overall, certain bilateral irritants exist. For example, the U.S. has pursued dispute settlement consultations with Canada regarding tariff rate quota administration policies for dairy, and Canada has requested consultations with the U.S. regarding its continued illegal global safeguards on imports of Canadian solar products. U.S. trade policy continues to be closely linked to domestic priorities and a tendency towards protectionism remain. 

While technical details of the “American Jobs Plan” are not yet known, it’s widely expected that the implementing legislation will apply existing Buy America requirements and potentially expand them to include other materials, such as cement, aggregate and other construction materials. This could have negative impacts on Canadian companies supplying products for transportation infrastructure (roads/highways, bridges, airports, ports), transportation goods (trains, subway cars, buses), water and wastewater facilities, power sector infrastructure, high-speed broadband networks and general building construction (e.g. schools, hospitals). 

Climate and energy: New U.S. policies and overall approach on climate change and environmental protection are aligned with Canada’s views. As part of the Roadmap, PM Trudeau and President Biden pledged to explore opportunities to align policies and approaches to create jobs, while tackling climate change and inequality, and enhancing adaptation and resilience to climate impacts. The two countries are committed to working together to advance shared goals on clean energy, emission reductions and net zero targets. They also agreed to protect businesses, workers and communities in both countries from unfair trade by countries failing to take strong climate action. 

On April 22-23, 2021, President Biden hosted the Leaders’ Summit on Climate, bringing together more than 40 heads of state and government, more than 80 ministers and other senior officials, and representatives from multilateral institutions, academia, civil society, and the private sector. PM Trudeau (along with Minister Wilkinson and Minister Gould) announced that Canada would reduce its emissions by 40-45% below 2005 levels by 2030 – an announcement that was specifically highlighted by President Biden during his closing remarks. The U.S. will target reducing emissions by 50-52 percent by 2030 compared to 2005 levels. Canada also announced that it will join the Net-Zero Producers Forum with the energy ministries of the U.S., Saudi Arabia, Norway and Qatar. The Summit was designed as a way for the U.S. to reassert its global leadership in the fight against climate change and push other countries to increase their ambition, in the lead-up to COP26 later this year, toward achieving the goals of the Paris Agreement, and was largely successful in this regard.

Energy Infrastructure: On May 7, Colonial Pipeline Co. was hit by a ransomware cyberattack, forcing the company to shut down its operations temporarily while it assessed the extent of the damage and worked to respond. Its 5,500 miles (roughly 8850 km) pipeline supplies nearly half of the East Coast's transportation fuel from the hub of refineries near Houston, TX. In response, President Biden announced that his Administration has assembled an interagency task force to address the breach, including exploring options for mitigating the impact of the attack the country’s energy supply.

There is local and national opposition in the U.S., including court actions, against Enbridge Line 5 and Line 3 pipelines. The Biden administration has not pronounced on these two projects yet. The renegotiation of the 1964 Columbia River Treaty, a bilateral flood control and hydropower Canada-U.S. Agreement, is currently underway and remains a priority. The Governor of Michigan has announced her intention to shut down Enbridge Line 5 on May 12th. 

Border management: On April 21, the temporary border arrangement between Canada and the U.S. was extended through May 21, 2021. In the Roadmap, PM Trudeau and President Biden recognized that coordinated border policies remain central to controlling COVID-19 and new variants while promoting economic growth and recovery. Both leaders agreed to take a coordinated approach based on science and public health criteria when considering measures to ease Canada-U.S. border restrictions in the future. 

The Federal Court of Appeal granted the Government of Canada’s appeal of the July 2020 Federal Court decision in the case of Canadian Council for Refugees v. Canada (Immigration, Refugees and Citizenship). As a result, the application of the STCA at Canadian and U.S. land ports of entry remains in effect. An agreement in principle has been reached between Canada and the U.S. on an Additional Protocol on the STCA, closing the “loophole” by which the STCA does not apply in between ports of entry (e.g. Roxham Road). 

International security and foreign policy: Canada and the U.S. have a long history of cooperating to confront the security challenges that threaten our countries and our North American homeland, and are steadfast allies in promoting global peace and security. Canadian and American law enforcement cooperation is extensive, and our militaries work alongside each other as NORAD partners and NATO Allies. 

There is a recognition from the Biden administration that the U.S. will have more of a lasting and consequential impact on regional and global challenges when it works in concert with partners. The foreign policy challenges identified by the U.S. include building back from COVID, global migration, democracy vs. authoritarianism, China, Russia and Iran. 

As part of Budget 2021, Canada announced new funding of $252.2 million dollar over 5 years to support NORAD modernization and sustain existing continental and Arctic defence capabilities. Budget 2021 also includes an additional $847.1 million over 5 years to support NATO operations, notably Canada’s higher contribution to NATO’s common budget and NATO’s Readiness Initiative.

On April 15, the U.S. announced new sanctions on Russia, including expelling diplomatic personnel, in response to the SolarWinds compromise, bounties on U.S. troops in Afghanistan, and interference in the 2020 U.S. presidential election. Canada and several allies, including NATO, issued a statement blaming Russian Foreign Intelligence Services (SVR) for its malign activities and supporting the U.S. sanctions.  

On April 13, President Biden announced that the U.S. would withdraw its remaining troops from Afghanistan by September 11, 2021. During a call with MINA prior to the announcement, Secretary Blinken stressed that the U.S. is committed to an orderly withdrawal process starting on May 1st in close coordination with NATO allies and partners in line with the ‘in together, adjust together, leave together’ principle. The U.S. is also determined to support peace talks and settlement, and remain committed to political and financial support for ANSF. 

COVID-19: As of May 10, there have been more than 32.4 million cases and over 578,000 deaths in the United States. About 260 million people have received at least one dose of a COVID-19 vaccine, including about 114 million people who have been fully vaccinated. 

Representation: Canadian Ambassador to the U.S., Kirsten Hillman. U.S. Chargé d’affaires to Canada, Katherine Brucker.

Canada-U.S. Trade Promotion

Supplementary messages

Supporting facts and figures

Background

Approximately 80% of new exporters are SMEs that export to a single market and almost 70% of new exporters choose the U.S. as their first export destination, a proven testing ground for new exporters, and established ones piloting a new product or service. 

Canada is the United States’ largest customer and buys more goods from the United States than do China, Japan and the United Kingdom combined.  Canada is the number one international customer for more than 32 U.S. states.

Solar tariffs and other trade remedy issues

Solar Tariffs

Fact-Finding Investigations on Seasonal Produce

Supplementary messages

Supporting facts and figures

Background

Solar Tariffs

In 2018, the Trump Administration imposed a 30% safeguard tariff on solar modules from Canada, despite the NAFTA provisions requiring the United States to exclude Canada from the safeguard measure.  The United States blocked Canada’s attempt to launch NAFTA dispute settlement proceedings in 2018, but is unable to do so under the CUSMA. On December 22, 2020, Canada launched CUSMA dispute settlement proceedings and held consultations on January 28, 2021, with the goal of convincing the Biden Administration to respect NAFTA and CUSMA rules and exempt Canada from the solar tariff. Canada has been in a position to launch panel proceedings since March 8, 2021, but is providing the new U.S. Administration an opportunity to resolve the matter amicably.

Fact-Finding Investigations on Seasonal Produce

The Trump Administration also launched various investigations on seasonal produce. Although Canada was successful in preventing the imposition of a safeguard duty on blueberries, the threat of new safeguard investigations on bell peppers and strawberries remain, and any resulting tariffs could disrupt Canadian exports of these products (fact-finding investigations can lead to safeguard investigations). It will be important to ensure that the Biden Administration adheres to CUSMA safeguard rules, which require the United States to exempt Canada from the application of these tariffs, subject to certain conditions.

Section 232 Investigations on Transformers and Vanadium

The U.S. Section 232 National Security investigations on Vanadium that was launched by the Department of Commerce in 2020 remains without final decision or closure by the President. A Presidential decision on the Vanadium case would need to come before the May 23 deadline, although the tariff threat appears to have diminished greatly with the new Administration The deadline for the Section 232 investigation on transformers has passed and the new Administration cannot impose any trade restrictions as a result of the investigation launched by the Trump Administration in 2020.

Canada-U.S. border

Supplementary messages

Update

Discussions continue within the Government of Canada on options for an eventual border reopening. Canadian officials have developed productive working relationships with the Biden Administration. 

Stakeholders’ interest in the future of the temporary border arrangement and options for re-opening the border to normal flows is expected to continue to rise.

Supporting facts and figures

Background

The Canada-U.S. temporary border arrangement, temporarily restricting all non-essential travel across the Canada-U.S. border, took effect on March 21, 2020. It has since been extended 14 times with a current expiry date of May 21, 2021.

In the Roadmap for a Renewed U.S.-Canada Partnership, Prime Minister Trudeau and President Biden recognized that coordinated border policies remain central to controlling COVID-19 and new variants while promoting economic growth and recovery. Both leaders agreed to take a coordinated approach based on science and public health criteria when considering measures to ease Canada-U.S. border restrictions in the future.

Canada-U.S. cooperation on China

Supporting facts and figures

Background

Whereas in the past the U.S. has seen China as a developing country (with nuclear weapons), its unprecedented economic growth over the last 20 years, technological advances, large military expenditures, and more assertive foreign policy under President Xi have led to the realization that American pre-eminence cannot be guaranteed. Also, the hope that U.S. support for economic liberalization, especially following China’s accession to the World Trade Organization in 2001, would lead to greater democratization has been unrealized.

In light of these conclusions, a new narrative has emerged in Washington, partly reflected in and influenced by President Trump’s “America First” agenda, that China will not engage as a constructive, cooperative partner with the U.S. and that a new era of great power competition has begun. As stated in his January 2021 Senate confirmation hearing, U.S. Secretary of State Antony Blinken believes that China poses the most significant challenge of any state to the U.S. Supported by a bipartisan consensus in Congress, counter-balancing China’s growing global influence and safeguarding U.S. national and economic security is a high priority for the U.S. administration, which is expected to adopt a whole-of-government approach to China. That said, President Biden and his top national security officials have also stated that the U.S. must find ways to coexist with China, noting that competition and cooperation are not mutually exclusive. Canada also recognizes that we need to work with China to address global issues such as climate change, health, non-proliferation, and finance.

In these circumstances, the Biden administration is seeking to act in concert with like-minded democratic partners to address shared concerns about Chinese domestic issues such as repression of human rights (including in Xinjiang and Hong Kong), media freedom, rule of law, growing military expenditures, conditions for foreign investors, market access, and technological competition. The U.S. is also seeking to work with allies to counter other Chinese activities it sees as problematic, such as assertions of its maritime/territorial claims in the South China Sea, foreign direct investment/financial assistance under the Belt and Road Initiative, coercive diplomacy, state-sponsored cyber program (including 5G network concerns) and foreign interference. Long-standing concerns about Taiwan and growing Chinese interest in the Arctic, Latin America, and elsewhere will also preoccupy the United States.

Canada shares many of the U.S. concerns with respect to China’s assertive behaviour both internationally and domestically, notably with respect to trade, intellectual property, human rights, rule of law, security issues and industrial policies. For example, as part of the CUSMA Canada and the U.S. jointly signed on to new obligations that prohibit each country from importing goods made in whole or in part by forced labour. Canada has made use of this provision in order to bring attention to and minimize risk exposure for Canadian companies to the on-going human rights situation in Xinjiang as part of its measures announced on January 12. On March 22, in coordination with the U.S. and U.K., and in solidarity with the E.U., Canada announced new sanctions against 4 officials and 1 entity under the Special Economic Measures (Peoples Republic of China) Regulations, based on their participation in gross and systematic human rights violations in the Xinjiang Uyghur Autonomous Region. Secretary Blinken and the U.S. administration have also commended Canada’s leadership on the Arbitrary Detention Initiative, supported Canada in advocacy around the world, and joined Canada and 60 other parties in endorsing the Declaration against Arbitrary Detention in State-to-State Relations. The U.S. has also pledged to raise the arbitrary detention of Michael Kovrig and Michael Spavor systematically with China at every level and treating it as though they were American citizen.

Some specific policies of the Biden administration are already apparent. Domestically, Trump-era restrictions, such as the requirement for China-based media to register as foreign missions in the U.S., limits on the network of Chinese-language Confucius Institutes, and attempts to ban Chinese technology companies from critical sectors (e.g. semiconductors, 5G) will likely remain in place. Plans to strengthen domestic U.S. manufacturing and increase supply-chain resiliency, particularly for medical supplies, are partly intended to reduce dependence on Chinese sources. The Biden campaign pledge to increase government spending on green technology explicitly refers to the advantage that state subsidies and industrial strategies have given China’s own industry. Canada is also moving forward on investment in green technologies and is considering options with respect to supply chains resiliency in critical sectors, particularly telecommunication technologies (i.e. 5G), critical minerals, and medical supplies.

To counter China’s aggressive foreign policies, the Biden administration has argued that the U.S. should focus on ad hoc coalitions or issue-specific groups to increase pressure on China such as a “D-10 coalition” (G7 + Australia, South Korea and India) proposed by the UK to address issues related to trade, technology, supply chains, and standards. Increased U.S. engagement in multilateral organizations such as the U.N. as well as regional groupings such as Quads, ASEAN and APEC are also expected to be instrumental in a Biden strategy to counter-balance China. Secretary of State Blinken has stressed the importance of taking a lead role in international institutions instead of, through disengagement or absence, effectively ceding leadership to China. Biden has advocated greater consideration at NATO of the risks stemming from China’s growing military capabilities and assertiveness (e.g. Taiwan, South China Sea) and in favour of increased military capacity to address potential Chinese security threats in the Euro-Atlantic and Indo-Pacific regions. As a member of the G7, NATO, ASEAN, and other multilateral organizations, Canada will be a key partner for the United States. A number of bilateral priorities will also feature prominently in the U.S. strategy to counter China, such as modernizing NORAD, the Arctic, cybersecurity, and strengthening democracy.

On trade and economic issues, President Biden made campaign promises to address structural issues such as steel overcapacity, industrial subsidies, and support for state-owned enterprises, as well as forced technology transfer, cyber threats, intellectual property theft faced by U.S. companies in China. Canada is already well aligned with the U.S. on these issues.

While Canada did work with the Trump Administration on some China-related issues, it’s clear that the Biden administration policies toward China will provide many opportunities for collaboration and cooperation, including a much greater focus on some of Canada’s top priorities, including human rights. Early signs from Washington are encouraging and there is a clear recognition from the U.S. that working in tandem with like-minded partners, including Canada, will be likely to achieve results when it comes to China.

CUSMA implementation and reinforcing the Canada-U.S. economic partnership

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Responsive – Mexico Labour Reform

Responsive – U.S. Concerns on Canada’s Dairy Tariff Rate Quotas (TRQs)

Responsive – Next Steps and Timelines

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CUSMA Implementation: Following entry into force on July 1, 2020, the Parties have focused on the implementation of the autos rules of origin and standing-up CUSMA committees, including those on Small and Medium-Sized Enterprises and North American Competitiveness. More recently, Ministers met for the first Free Trade Commission meetingon May 17-18, during which they heard reports from committees and discussed forward priorities related to labour, environment and inclusive trade. While implementation is proceeding well overall, certain bilateral irritants exist including with respect to U.S. concerns on Canada’s dairy tariff rate quota practices and Canada’s concerns with continued U.S. safeguard tariffs on Canadian solar products.

Mexico Labour Reform Support: Canada has devoted $27.5 million over 4 years, starting in April 2021, to support Mexican labour reform programming and establish a  monitoring and compliance regime. The U.S. has appropriated US$180 million for programming to support similar efforts in Mexico. Canadian and U.S. officials are engaged in regular discussions to coordinate efforts.

Dairy Tariff Rate Quota Administration: On May 25, the U.S. formally requested the establishment of a panel under chapter 31 state-to-state dispute settlement regarding Canada’s administration of CUSMA dairy tariff rate quotas (TRQs), specifically Canada’s practice of allocating a high proportion of its TRQs to processors. The U.S. previously requested consultations on December 9, 2020, which subsequently took place on December 21, 2020 and Mexico participated as a third party. 

Canada-U.S. Cooperation on Global Trade Issues: Early engagement with the U.S. on global trade issues is crucial to demonstrate the role that Canada can play in advancing shared objectives. In particular, there is an opportunity to collaborate to support resilient supply chains and North American competitiveness; advance the global response to climate change; and, demonstrate the benefits of our essential security relationship and make progress on global trade issues (e.g. China and the Indo-Pacific, WTO reform, forced labour).

Softwood lumber

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Currently, most Canadian companies are subject to a combined 8.99% duty rate when exporting certain softwood lumber products to the United States.

Softwood lumber continues to be a priority for the Government of Canada, and it is being raised at all levels and at every opportunity with the new U.S. Administration. In addition, Canada continues to work with long-time allies in the United States, such as homebuilder associations, to stress that U.S. duties are not only causing undue harm to Canadian producers, but also to U.S. homebuilders and consumers. The current record-high lumber prices are hampering the role that the U.S. housing sector may play in the economic recovery. U.S. homebuilders have been vocal about the need to find solutions to the high prices and to ensure stability of supply. Canada’s position remains that a new softwood lumber agreement is in the best interests of both countries, and Canada is prepared to re-engage in negotiations when the United States is ready to discuss realistic proposals that would be acceptable to Canadian industry. In the meantime, Canada is continuing to vigorously pursue legal challenges against U.S. duties at the WTO and through NAFTA/CUSMA dispute settlement panels.

Under NAFTA Chapter 19, Canada is challenging the U.S. Department of Commerce’s (Commerce) initial countervailing (CVD) and anti-dumping (AD) determinations. Canada and the United States continue to be engaged in protracted discussions regarding panel composition for these cases. Canada is also challenging Commerce’s determinations before the WTO. While the WTO AD panel found that the U.S. improperly calculated dumping margins, Canada appealed in June 2019 certain findings from the Panel that were unfavourable. The Panel’s report on Canada’s CVD challenge was released in August 2020, with findings overwhelmingly in Canada’s favour, namely that U.S. CVD duties on Canadian softwood lumber are inconsistent with the United States’ WTO obligations. However, the United States appealed the Panel’s report in September 2020. Timelines for both appeal proceedings are unclear due to the WTO Appellate Body’s current lack of quorum.

Finally, Canada is pursuing challenges of the final results of Commerce’s first Administrative Reviews under Chapter 10 of CUSMA. Administrative reviews are annual reviews that Commerce conducts of its AD and CVD orders. The Administrative Review process establishes duty assessment rates for shipments entered during the period of review, as well as the new duty deposit rates going forward until the next annual Administrative Review is completed. On November 23, 2020, Commerce issued the final results for its first AD and CVD Administrative Reviews. The final duty rates are, for most companies, significantly lower than those from the initial investigation (8.99% compared to 20.23% “all-others” rate). The second and third Administrative Reviews are underway and final results are, respectively, expected in November 2021 and August 2022.

Canada-U.S. oil and gas pipelines

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Keystone XL (KXL)

For more than a decade, successive Canadian governments, including the present one, have strongly and consistently supported the KXL project through engagement with the U.S. federal and state governments, and other American stakeholders.

Canada was disappointed with President Biden’s decision to cancel KXL’s Presidential permit, but acknowledges this decision to fulfil his election campaign promise made in public in May 2020.  We believed there was a strong case to be made for KXL. To that end, following the U.S. elections last November, Canada made every effort, and reached out to make the strongest possible case for KXL with the incoming Biden team, the transition team and their advisors. In his first telephone call with then President-elect Biden, the Prime Minister raised KXL.

Enbridge Line 3

Enbridge’s Line 3 replacement project has been completed in Canada, and is also complete for the portions in North Dakota and Wisconsin. For the incomplete section in Minnesota, Canada has strongly supported the project through formal, detailed, written submissions to U.S. federal and state regulatory and environmental assessments. Construction is now underway in Minnesota, with approximately 25% of that leg of the project complete. As the project is still subject to some litigation, we are continuing to monitor the situation closely.

Enbridge Line 5

Line 5 is a pipeline operating safely since 1953, carrying light crude oil and natural gas liquids (NGLs) from Alberta and Saskatchewan to Michigan and Ontario. Connecting pipelines transport these resources further to Quebec, Ohio and Pennsylvania. A shutdown of the Line 5 would cause significant economic disruption.

On November 13, 2020, Michigan announced that it was revoking Enbridge’s 1953 authorization (‘easement’) to operate its Line 5 pipeline through the Straits of Mackinac, which connects Lakes Michigan and Huron. Citing alleged violations of the easement agreement by Enbridge, which Michigan sees as an unacceptable oil spill risk, the company was given until May 12, to cease operations. The Governor has filed a legal claim seeking a state court decision to validate the action. Enbridge has filed a suit against Michigan in federal U.S. District Court, seeking to remove the case from state to U.S. federal jurisdiction. The state court case is in abeyance, waiting for a decision from  federal court, and on February 17, the judge in the federal court set down a briefing schedule on only one procedural motion, whether to remand the case to state court, where all action is suspended until the federal court determines jurisdiction.

Filings of pleadings will run until June 1, 2021; after Michigan’s stipulated shutdown date of May 12, 2021. The federal court judge ordered Enbridge and Michigan to enter into mediation to see if they might reach a settlement that would render the court proceedings unnecessary. On March 16, a mediator was announced, the first meeting took place on April 16, and the next session will take place on May 18. While the mediation is obligatory, the judge did not impose any binding result. As the process is confidential, Enbridge has declined to provide any details. However, both Enbridge and Michigan have referred to the mediation process in constructive terms.

Line 5

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Line 5 is a pipeline operating safely since 1953, carrying light crude oil and natural gas liquids (NGLs) from Alberta and Saskatchewan to Michigan and Ontario. Connecting pipelines transport these resources further to Quebec, Ohio and Pennsylvania. A shutdown of the Line 5 would cause significant economic disruption.

On November 13, 2020, Michigan announced that it was revoking Enbridge’s 1953 authorization (‘easement’) to operate its Line 5 pipeline through the Straits of Mackinac, which connect Lakes Michigan and Huron. Citing alleged violations of the easement agreement by Enbridge, which Michigan sees as an unacceptable oil spill risk, the company was given until May 12 to cease operations. The Governor has filed a legal claim seeking a state court decision to validate the action. Enbridge has filed a suit against Michigan in federal U.S. District Court, seeking to remove the case from state to federal jurisdiction. The state court case is in abeyance, waiting for a decision from federal court, and on February 17, the judge in the federal court set down a briefing schedule on only one procedural motion, whether to remand the case to state court, where all action is suspended until the federal court determines jurisdiction.

Filings of pleadings will run until June 1, 2021; after Michigan’s stipulated shutdown date of May 12, 2021. The federal court judge ordered Enbridge and Michigan to enter into mediation to see if, they might reach a settlement that would render the court proceedings unnecessary. On March 16, a mediator was announced, the first meeting took place on April 16, and the next session will take place on May 18. While the mediation is obligatory, the judge did not impose any binding result. As the process is confidential, Enbridge has declined to provide to any details. However, both Enbridge and Michigan have referred to the mediation process in constructive terms.

Canada’s advocacy in support of Line 5 has been ongoing for several years, led by our Embassy in Washington, and our consulates general in Detroit and New York.

Commitment to a green economic recovery

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Canada and the U.S. are increasing public climate-resilient and green infrastructure spending as a means to spur economic recovery after COVID-19. Climate change is a “cornerstone” of the Government’s plan to create one million jobs and is included in one of the four pillars of the Speech from the Throne. The Government of Canada committed to making investments in clean energy and helping sectors transition to a net-zero future. Canada’s Task Force for a Resilient Recovery recognized green recovery as essential for Canada’s competitiveness in climate action – through buildings, zero-emission vehicles, clean energy, nature, and clean competitiveness.

President Biden’s US$2 trillion green infrastructure and clean energy plan calls for investments in clean energy technologies and infrastructure, new electric vehicle charging stations, battery manufacturing incentives, and foreign investment. Part of that plan has been incorporated into draft legislation that is currently before Congress. The Roadmap for a Renewed U.S.-Canada Partnership, announced by the PM and the U.S. President on February 23, 2021, embraces the opportunity for clean growth by strengthening the Canada-U.S. Critical Minerals Action Plan for a net-zero industrial transformation, essential to zero-emissions vehicle batteries and renewable energy storage. These technologies require specific mineral and metal inputs, the demand for which is projected to grow exponentially in some cases. Under the Joint Action Plan, the United States and Canada are working collaboratively in building a resilient global critical mineral supply chains that will benefit both nations.

Increased demand for clean growth products and services equally leverages Canadian technological strengths – energy storage, renewables, electrification and power distribution via smart grids, and global Canadian infrastructure company expertise in services – project management, engineering, and consulting. Efforts to facilitate recovery after COVID-19 present a transformative opportunity to stimulate economic growth through climate resilient and green infrastructure investments. Canadian firms have significant experience building and operating some of the largest renewable energy plants in the world, through developers, engineering firms, equipment manufacturers and suppliers.

Climate change and border carbon adjustment

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Canada’s approach to carbon pricing

Canada recently announced a new commitment to enhance its emissions reduction target under the Paris Agreement by 40-45% below 2005 levels, by 2030.

Canada has had a carbon pricing system in place since 2019, known as Pan-Canadian Approach to Pricing Carbon Pollution. The Pan-Canadian Approach to Pricing Carbon Pollution gives provinces and territories the flexibility to develop their own carbon pricing system so long as the system meets the established criteria designed to ensure all systems are stringent, fair and efficient (known as the federal benchmark).

On December 11, 2020, Canada introduced A Healthy Environment and a Healthy Economy – Canada’s strengthened climate plan. The plan includes $15 billion in investments to build a stronger, cleaner, more resilient and inclusive economy. As part of Canada’s strengthened climate plan, the Government of Canada proposes to continue putting a price on carbon pollution post 2022, by $15 per year to 2030. The Government will engage with provinces and territories, as well as with Indigenous organizations, on the proposal to increase carbon pricing from $50/tonne in 2022 (the current policy target) in $15/tonne annual increments to $170/tonne in 2030. 

Current status of U.S. initiatives to tackle climate

President Biden has identified action on climate change as a key priority of its build back better agenda. In addition to commitments to rejoin the Paris Agreement and achieve net zero emissions by 2050, the Biden Administration’s trade policy agenda for 2021 prioritizes using trade to advance environmental sustainability. This includes inter alia: negotiating and implementing strong environmental standards; exploring and developing market and regulatory approaches to address greenhouse gas emissions in the global trading system, including considering border carbon adjustments (BCAs); working with trading partners as they develop their own approaches; taking action against trading partners who fail to meet their environmental obligations; and promoting resilient renewable energy supply chains. President Biden has also committed to condition future trade agreements on partners’ commitments to meet their enhanced Paris climate targets. [REDACTED]

The U.S. is also placing a lot of emphasis on, and preparing for, the 2021 United Nations Climate Change Conference (COP26) in Glasgow in November. The U.S. Special Envoy for Climate John Kerry called on the world's top 20 largest emitters, including Canada, the EU, China, India, and the U.S., to lead by example and drastically reduce emissions within the next 10 years. The U.S. sees this as a key measure to ensuring the rest of the world the ability to hold the global temperature well below 2 degrees, as outlined in the Copenhagen Accord. The U.S. is also making efforts to fulfil the Copenhagen Accord commitment of creating a $100 billion annual climate fund for developing countries as a way to demonstrate their commitment to this issue.

Clean energy (hydro) exports

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At the PM/President meeting on February 23, the leaders: …agreed to take a coordinated approach to accelerating progress towards sustainable, resilient, and clean energy infrastructure, including encouraging the development of cross-border clean electricity transmission. 

On February 24, 2021, the U.S. International Trade Commission (ITC) issued a report examining the economic effects of increased renewable energy commitments in New England and Massachusetts, and the role of renewable electricity imports. Canada and some of the provinces testified at the ITC’s hearings. The main finding is that Massachusetts can meet its increased renewable and clean energy commitments with a relatively small increase in retail electricity rates. Positive for Canada, the report states that increased imports of hydroelectric energy from Canada will likely support Massachusetts’s carbon emissions reduction goals.

Over 30 cross-border transmission lines move electricity back and forth across the Canada-U.S. border. These operate both under long-term contracts (e.g. Hydro Quebec supplies Vermont with 25% of its electricity) and on the spot market as supply, demand and price dictate.

From this existing electricity trade, Canada’s hydro exports are expanding with the Hydro Quebec New England Clean Energy Connect (NECEC) supplying Massachusetts and the New England grid under a 20-year contract, running through Maine. The project has obtained all federal and state permits, and pre-construction work has started. Local opposition to the project remains, and litigation is ongoing, but there is no expectation of federal intervention. Hydro Québec’s Champlain-Hudson Power Express (CHPE) would provide clean power to the New York City government. The project is fully permitted at U.S. state and federal level, so construction could begin if a supply agreement is reached that includes financing the project. Manitoba Hydro, on July 1, 2020, brought into service a new export/import project the Great Northern Transmission Line (GNTL) between the province and Minnesota.

Canada-U.S. vaccine cooperation

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On January 21, 2021, President Biden signed an Executive Order titled “Sustainable Public Health Supply Chain” to direct authorities to secure supplies necessary to respond to domestic needs related to COVID-19, including the authorities of the Defense Production Act (DPA).

Since the issuance of this Order, the Biden Administration has invoked the DPA to increase production of vaccines by U.S. manufacturers. U.S. Government priority-rated orders do not explicitly prohibit exports. However, once a U.S. company has been issued a DPA-rated order from the U.S. government, it is legally bound to comply in fulfilling that order on a priority basis. A supplier can continue to fill other orders while working on a priority-rated order if its supplies are sufficient, in accordance with the details of the Order.

Canada has an exemption to export restrictions of certain medical products under the Federal Emergency Management Agency (FEMA), valid until June 30, 2021. These restrictions do not cover COVID vaccines.

Last March, the U.S. Government allowed exports of 1.5 million AstraZeneca-Oxford vaccine doses to Canada, which counted as part of Canada’s 20 million doses secured through a bilateral agreement with AstraZeneca. The White House announced on April 26 that the U.S. will begin sharing its entire pipeline of AstraZeneca vaccines – with 10 million doses available immediately and an additional 50 million to be delivered during May and June. Country allocations for these doses are still unconfirmed, and there is no detail yet in terms of potential shipments to Canada.

Mexico energy reform

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Energy Sector

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Although passed by Congress earlier this year, the implementation of the new electricity law has been suspended by the Mexican courts, following numerous injunctions. The Supreme Court will likely rule on the constitutionality of the law in Fall 2021. Approximately US$4.1B of Canadian investment in Mexico is at risk, including from companies such as ATCO, JCM, Northland Power, and Canadian Solar.  On March 3, Mexico’s Senate passed into law a bill that aims to undo many elements of Mexico’s energy reform that opened the country to international investment, including from Canada.  President López Obrador had submitted the bill to Congress on February 1 with priority status.  

The law essentially codifies many of the regulatory changes that have been attempted and been subject to injunctions over the past year. It includes favouring the national utility, CFE, to supply power to the grid, relegating clean energy producers (who are largely foreign owned) to a lower position and limiting their guarantees to sell onto the grid. It also centralizes processes to obtain permits within the Energy Secretariat; and disbands the wholesale energy market.  

Year-Over-Year Changes – Explanation of Items

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The 2021-22 Main Estimates include:

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 By Core Responsibility

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Allocation by Core Responsibility:

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Trade and Investment

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Briefing note on Departmental Plan 2021-22

PICTURE TABLE

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Briefing note on Departmental Results Report 2019-20

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Global Affairs Canada’s results highlights include:

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Explanation of Variances

Canada’s network abroad

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Overview of 2020-21 Main Estimates (Previous Year)

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Public Accounts 2019-20 – Travel and Conferences

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