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3. Barriers to trade
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3.1 Tariff and tariff administrative measures

3.1.1 Tariff peak

The Canadian Government still maintains high tariff rates over certain products, which constitute tariff peaks. Among such products there are vegetables (e.g. asparagus, 19 percent), flowers (e.g. Orchids, 16 percent; Roses, 10.5 percent), cigarettes that contain tobacco (12.5 percent), natural gas (12.5 percent), textiles (14 percent), clothing (18 percent), certain leather products (e.g. gloves other than those used for cricket or other sports, 15.5 percent), certain footwear (18 percent), watercrafts (20 or 25 percent) etc. The high tariff rates for these products have adversely affected China's exports to Canada.

3.1.2 Tariff escalation

In Canada, tariff escalation is quite prominent in food, beverages, tobacco, textiles and leather products. Though there is a zero tariff rate on coco beans, import duty on coco powder is around 6 percent. Natural mineral water is subject to a zero tariff rate, but an 11 percent import duty is imposed on mineral water added with sugar or flavor. While a zero tariff rate applies to unprocessed tobacco, rolled cigars with tobacco and cigarettes are subject to import duties ranging from 4 percent to 12.5 percent. Wool and animal hair when not carded or combed enjoy the zero tariff rate, but an import duty of 8 percent is imposed on semi-processed products such as yarn of wool or of fine animal hair (carded or combed). Tariff rates on woven fabrics rise to a level between 12 percent and 14 percent. The same thing can be said with raw hides and skins of bovine or equine animal. For most of the unprocessed hides and skins, the tariff rate is zero and for some the maximum rate is 3 percent. However, the tariff rates on articles of leather escalate to a level between 7 percent and 15 percent.

3.1.3 Tariff quota

Tariff quota administration is conducted by the Canadian authorities upon some agricultural products, including dairy products, poultry, meat, eggs and wheat and barley products. Very high tariff rates are imposed upon such agricultural products as live poultry, poultry meat, poultry eggs, turkey, whey, butter and cheese if they go beyond the access commitment. For example, the tariff rate over access commitment on imported milk is 243 percent with the collected tariff not lower than CAN$2.82 per kilo. For other dairy foods for smearing, the tariff over access commitment is as high as 313.5 percent and that on meat and edible offal of the poultry (fresh, chilled or frozen) as high as 154.5 percent and 238 percent.

3.2 Technical barriers to trade

In 2005, Canada made 48 TBT notifications to the WTO, mainly concerning radio communications equipment, emission standard of passenger cars and engines, safety measures for motor vehicles, grading of eggs and inspection requirements for packaging.

3.2.1 Safety requirements for lighters

In 2004, the Canadian government adopted the amendment to the act on lighters, requires those who produce, sell or import all non-luxury lighters (those domestic-made lighters sold under 2.5 Canadian dollars and imported ones under 2.5 Canadian dollars according to Customs valuation) to keep conformity certificate for three years since the production or importation of the lighters, showing that the these lighters contain child-resistant measures. Associating product safety with price is obviously not in line with the WTO Agreement on Technical Barriers to Trade. Therefore, the Chinese side hopes that the Canadian side will make reasonable amendment so as to comply with the WTO rules.

3.2.2 Specifications of packages contained in the Processed Products Regulations

The Processed Products Regulations lay down detailed requirements on quality, labeling, packing, hygiene and safety standards for a wide range of processed fruit and vegetable products sold in Canada, including canned fruits, vegetables, vegetable soup ingredients, and vegetable juice, etc. For instance, the Regulations impose a requirement on manufacturers of baby food to sell in only two standardized container sizes: 4.5 ounces (128ml) and 7.5 ounces (213ml). Only three container sizes are prescribed for mandarin orange. This requirement to sell in prescribed container sizes creates an unnecessary obstacle to trade in relevant products between Canada and China.

3.2.3 Nutrition labeling for food

As of December 12, 2005, food manufacturers and importers in Canada with a sales volume exceeding CAN$1 million are required to comply with nutrition labeling requirements as prescribed in the Food and Drugs Regulations. One year is given to the manufacturers to carry out the relevant standards, which means, tolerance is given to food produced or imported before December 12 2005 without nutrition facts.

However, the standards should be strictly observed after 12 December 2006. For small-scale producers, a grace period of 2 years till 12 December 2005 is given before requirements are fully met. According to the relevant regulation, Canadian food producers and importers must make sure that the food labeling or advertising contains such wordings as 'nutrition facts', 'valeur nutritive' or 'valeurs nutritives'. When making a new health or nutrient content claim, they are required to indicate clearly the content of calories and 13 key nutrients. Besides, the Regulations also provide about 272 different labeling samples. However, instead of being chosen randomly, the labeling samples are to be selected according to the size of the available display surface on the packaging of the food, which is often 15 percent. Therefore, domestic enterprises should pay close attention to the relevant labeling regulations and their development in Canada and will have a further look at the regulations to see whether they fall within the necessary administrative procedure.

3.3 Sanitary and phytosanitary measures

In 2005, Canada made 64 SPS notifications to the WTO, mainly concerning the amendments to the Food and Drugs Act, the Pest Control Products Act, sanitary requirements for imported bean products and wood products.

3.4 Trade remedies

Canada is one of countries that frequently resort to trade remedy measures, affecting a wide variety of products. In 2005, Canada launched 5 trade remedy investigations and reinvestigations against Chinese exports. There were 2 antidumping and countervailing cases involving laminate floor and hot rolled steel plate respectively, 2 safeguard investigations on the importation of bicycle and un-manufactured tobacco from other countries, and a special safeguard investigation involving outdoor barbeques.

3.4.1 Antidumping and countervailing investigations

On 17 May 2005, the CBSA made a final ruling on the original investigation over laminate floor that dumping and subsidies exist in laminate floor originated or imported from China with weighted average dumping margin of 7.8 percent and weighted average amount of subsidy of 3 percent. On June 16, 2005, the Canada International Trade Tribunal (CITT) made a final ruling to the effect that laminated floor originated or imported from China caused injury to the domestic industry of Canada. The Chinese side expresses dissatisfaction over the ruling by pointing out that the investigation was launched based on the letters of complaints which lacked adequate or accurate information and evidence regarding the qualification of applicant, existence, amount and nature of subsidy, adequate evidence regarding the injury caused by subsidy to the domestic industry, or necessary evidence establishing a causal link between subsidy and injury. The Chinese side argues that the ruling is inconsistent with facts and the Canadian side has failed to comply with Paragraph 2 of Article XI of the Agreement on Subsidies and Countervailing Measures (SCM) as well as the relevant domestic laws of Canada.

On 14 November 2005, the CBSA issued a notice, initiating an antidumping and countervailing reinvestigation against laminate floor imported from China between 1 January 2006 and 30 September 2006. The investigation would be conducted based on the recognition of the market economic status of the laminate floor industry in China. However, should there be evidence provided by the relevant interested parties during the process of the investigation to the contrary of the above status, CBSA would issue questionnaires to the Chinese Government and producers to collect further information.

Besides, Canada also initiated an antidumping reinvestigation against hot rolled steel plate originated or imported from China to reestablish the normal value and export price of the investigated product. CBSA is going to make a determination in March 2006.

3.4.2 Special safeguard investigations

In July 2005, the Canadian International Trade Tribunal officially filed a case to initiate a special safeguard investigation over barbeques originated or imported from China. This is the first special safeguard investigation launched by the Canadian side against Chinese exports, following the negative result of the antidumping and countervailing investigation made over the same item in 2004.

On 11 October 2005, the CITT determined that increased imports of barbeques from China have constituted a serious injury to its domestic industry, thereby causing a substantial disruption in the Canadian market. The CITT recommended that an annual surtax of 15 percent be levied on Chinese barbeques for a row of three years. During the consultations with the Canadian side, the Chinese side pointed out that the determination was groundless instead of being objective as there was an increase in the export of domestic-made barbeques from Canada when Canada was importing barbeques from China.

3.4.3 Safeguard investigations

On 10 February 2005, the CITT launched a safeguard investigation against imported bicycles and bicycle frames. This was the second safeguard investigation launched by Canada since the establishment of the WTO. On September 1, 2005, the CITT made a final report, determining that imported bicycles and related products have caused a serious injury to its domestic industry and recommending a three-year surtax be imposed on imported bicycles and bicycle frames. The Chinese side believed that several mistakes were made and the relevant rules of the WTO were not followed when this case was handled by the CITT. For instance, no due consideration was given to the number of imported bicycles from China, which was quite small in recent months. Besides, there were other reasons than import that caused injury to the domestic industry but the CITT failed to identify. Therefore, the Canadian side should not have solved the problems resulting from their own industrial development by resorting to safeguard measures.

2005 was the year during which Canada frequently took trade remedy measures. When initiating the antidumping and countervailing investigation against the same Chinese products, the Canadian side required Chinese exporters to fill in two separate questionnaires within a very short period of time. At the same time, a questionnaire and 7 follow-up questionnaires were issued to the Chinese Government. This has turned out to be a heavy burden on the Chinese Government and enterprises. Apart from continuing to make antidumping and countervailing investigation on Chinese products, the Canadian side made a further pursuit of Chinese products by resorting to special safeguard measures after the antidumping and countervailing investigation ended up with a result which was considered undesirable by the Canadian side. Such practice is not beneficial to the normal deve lopment of economic and trade relations between the two sides. And the Chinese side hopes that the Canadian side will do what is best for maintaining and promoting economic and trade cooperation between the two countries before taking up any trade remedy measures against Chinese exports, in particular such discriminatory measures as special safeguard measures.

3.5 Subsidies

Established in 1996, Technology Partnerships Canada (TPC) is a Canadian Government program that supports the R&D and innovation activities of the private sector. TPC provides loan funding or companies incorporated in Canada that operate in three strategic areas, including environmental technologies, enabling technologies, and aerospace & defence technologies. Funding covers approximately 25 percent to 20 percent of a project's total costs, but may be significantly higher.

By April 2005, the program has made well over CAN$2.7 billion in funding commitments for over 600 projects, of which about 70 percent has been disbursed. The Canadian Government restructured the TPC program in 1999 after a WTO Dispute Panel requested by Brazil determined that it was providing an illegal subsidy. In September 2005, the Canadian Government decided that upon expiration of the TPC grogram on April 1 2006, a new program named 'TTP' will be launched to provide further support to its aerospace & defense industry. The Chinese side expresses concern over the compliance of such program with the relevant rules of the WTO.

3.6 Barriers to trade in services

The Canadian Government imposes restrictions on market access to the service sectors where major national interests, political, economic and cultural sovereignty are involved. These sectors include basic telecommunications, broadcasting and financial services.

3.6.1 Air transport

According to the Transportation Act, foreign ownership of a Canadian airline is limited to 25 percent.

3.6.2 Banking

Individual ownership of a large bank or insurance company is limited to 20 percent of voting shares, regardless of nationality. According to some provincial regulations, individual ownership of a trust, credit or securities company is limited to 10 percent with aggregate foreign ownership no more than 25 percent.

There are also restrictions imposed on the business scope of foreign-funded banks, such as barriers to retail banking. That means branches of foreign banks are not allowed to compete with Canadian banks in personal financial services. According to the Banking Act, with some exception an authorized foreign bank shall not make a loan in Canada on the security of residential property in Canada.

3.6.3 Insurance

Pursuant to the Insurance Companies Act, the aggregate foreign ownership of a Canadian life insurance company shall be no more than 25 percent with individual ownership limited to 10 percent.

3.6.4 Television and broadcasting services:

According to the rules made by the Canadian Radio-television and Telecommunications Commission (CRTC), non-Canadian citizens are not allowed to have broadcasting licenses. Besides, foreign ownership of a broadcasting and media service in Canada is limited to 20 percent of voting shares (maximum 33.3 percent in the case of a parent corporation).

3.6.5 Telecommunications

Under the terms of the WTO Agreement on Basic Telecommunications Services, Canada's Commitment permit foreign firms to provide local, long distance, and international services through any means of technology. However, Canada retained a 46.7 percent limit on foreign ownership for all services except fixed satellite services and submarine cables. In addition to the equity limitations, Canada also retained a requirement for "Canadian control" of basic telecommunications facilities which stipulates that at least 80 percent of the members of a board of directors must be Canadian citizens.

3.6.6 Cultural sectors

Canadian book publishing and distribution firms may be indirectly acquired by foreign investors, who are required, however, to negotiate specific commitments to promote Canadian publishing. Foreign investors may directly acquire Canadian book firms under limited circumstances.

Canadian policies prohibit foreign acquisitions of Canadian-owned film distribution firms. A new distribution firm established with foreign investment may only market its own proprietary products. Indirect or direct acquisition of a foreign distribution firm operating in Canada is only allowed if the investor undertakes to reinvest a portion of its Canadian earnings in a manner specified by the Canadian Government.

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