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Canada and Peru conclude negotiations of a Free Trade Agreement

On January 26, 2008, Canada announced that Canada had concluded its negotiations of a free trade agreement with Peru. The Canada-Peru Free Trade Agreement (CPFTA) follows the Canada-Peru bilateral investment treaty (called a Foreign Investment Promotion and Protection Agreement (FIPA)) on June 20, 2007. The CPFTA is Canada’s sixth free trade agreement (after the North American Free Trade Agreement, Canada-Chile Free Trade Agreement, Canada-Israel Free Trade Agreement, Canada-Costa Rica Free Trade Agreement and Canada-EFTA Free Trade Agreement)

The next step in the process to finalize the CPFTA is that the final text will be scrubbed by various government departments in both countries before it is signed. Further, as a result of Canada’s announcement on January 25, 2008 relating to new legislative procedures for the approval of international treaties, the Prime Minister or the Minister of International Trade will table the negotiated and scrubbed FTA in the House of Commons for review and debate later this year. So, it is too soon to tell whether Canada will have a signing ceremony with Peru in 2008. The news release indicated that the intended timeline for ratification is sometime in 2009.

The draft text of the Canada-Peru (CPFTA) will not be available until after it is scrubbed and tabled in the House of Commons. Unlike the United States and many other countries, Canada does not make available the draft texts. What we do know is that the CPFTA is a comprehensive free trade agreement. Based on the following statement from the backgrounder, we can assume that the CPFTA is more comprehensive than the Canada-Chile Trade Agreement (the Canada-Chile Free Trade Agreement does not cover government procurement or e-commerce) and follows a NAFTA model:

"The negotiated agreement covers a number of elements, including trade in goods, rules of origin, customs procedures, trade facilitation, non-tariff measures, cross-border trade in services, financial services, temporary entry, investment, government procurement, trade-related cooperation, competition, intellectual property, e-commerce, dispute settlement and institutional provisions. In keeping with Canada’s approach to FTA negotiations, Canada has also addressed the social dimensions of economic integration through the negotiation of provisions on labour and the environment."

Many Canadian businesses will benefit from the free trade agreement with Peru. The news release regarding the FTA deal states:

"This FTA will benefit Canadian exporters, service providers and investors in several sectors including, but not limited to, mining, manufacturing, agriculture, financial services, and environmental and engineering services.

This FTA will allow our exporters to maintain their competitive position in this key export market relative to other suppliers, such as those from the U.S., who will benefit from preferential access under their own trade agreement with Peru. The FTA will also promote a more stable and predictable investment environment in key sectors of interest, such as natural resources and infrastructure."

The details provided in the Backgrounder are as follows:

"In 2006, two-way merchandise trade between Canada and Peru totalled $2.4 billion. Canada is also one of Peru’s most important source of foreign direct investment in the mining sector, and among the largest overall foreign investors with an estimated $2.9 billion of investment stock as of 2006. In 2004, Canadian commercial services exports to Peru totalled approximately $46 million."

Canada’s Globe & Mail newspaper reports the following statements made by Minister Emerson at the time of the announcement of the successful conclusion of negotiations:

Peru has emerged as one of the most dynamic economies in the Americas, supported by an aggressive commerce agenda and clear stance in favour of trade liberalization ...
the deal ... will provide greater market access in Peru for Canadian agricultural products including wheat and barley, some boneless beef cuts, paper products, and machinery and equipment ...
Peru will immediately eliminate tariffs on 94 per cent of current Canadian exports, with the remaining tariffs to be discontinued over a five-to-10-year period. Canada will immediately stop imposing 97 per cent of its tariffs on Peruvian exports, with the rest to be erased over three to seven years ...
the agreement includes provisions of interest to Canada in sectors including mining, energy and professional services
[Canadian mining businesses] invested about $2.9-billion in Peru’s mining sector in 2006.
A separate news release on the signing of the Canada-EFTA Free Trade Agreement and the conclusion of the negotiations of the CPFTA provides the following details about the CPFTA:

Peru will provide greater market access for a range of Canadian agricultural products, paper products, and production equipment and machinery;
Peru will improve market access for certain services, including certain mining, energy and professional services;
Peru will offer greater protection for Canadian investments in Peru;
The CPFTA includes provisions on the environment, biodiversity and corporate social responsibility in the area of the environment
The CPFTA establishes a Trade-related Cooperation Committee to oversee capacity building; and
The CPFTA includes a comprehensive Labour Cooperation Agreement, which includes enforcement obligations and associated penalties.
To review a copy of this news release. please click on the following link

The author of this blog article has reviewed over 75 free trade agreements for the Asian Development Bank and written a lengthy report on free trade agreements. She teaches a course at Case Western Reserve University School of Law on NAFTA and bilateral trading arrangements.