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Canada – CARICOM Free Trade Negotiations

Initial Environmental Assessment Report - July 2008

Table of Contents

1. Executive Summary
2. Overview of the Environmental Assessment Process
   1. Assessment Methodology
3. Overview of the Trade and Investment Relationship Between Canada and the Caribbean Community
4. Trade and the Environment
5. Initial Environmental Assessment Findings
   1. Trade in Goods
   2. Trade in Services
   3. Investment
6. Conclusion

Appendix 1: Environmental Legislation and Regulations

I. Executive Summary

During a visit to Barbados on July 19, 2007, Prime Minister Stephen Harper, along with Caribbean Community (CARICOM) heads of state, announced the launch of the Canada-CARICOM free trade negotiations. Canada’s commitment to a modern trading relationship with CARICOM^{Footnote 1} is testimony to Canada’s long-lasting and special relationship with CARICOM, one that is based on commerce. A free trade agreement (FTA) between Canada and CARICOM, which will take into account special and differential treatment, has the potential to enhance not only Canada’s bilateral economic relationship with the Caribbean, but also to strengthen Canada’s presence in the Americas. An FTA with CARICOM is expected to generate economic benefits across a range of sectors in the Canadian economy, however, its effect in relation to the aggregated Canadian economy will be very modest, and therefore, the impact on the environment as a result of the FTA is expected to be minimal.

In keeping with the 2001 Framework for Conducting Environmental Assessments of Trade Negotiations, the government is conducting an initial environmental assessment (Initial EA) of the prospective FTA, to assist Canadian policy makers in addressing potential environmental issues arising from the negotiations that may affect Canada. Improved understanding of the relationship between trade, foreign direct investment (FDI), economic growth and the environment can assist in the formulation of government policy to reduce potential conflicts between commercial and environmental objectives.

There is a strong correlation between open markets, economic development and enhanced environmental protection. Liberalized rules-based trade and efficiently regulated markets are key building blocks for economic growth and development. In turn, public support for measures to protect the environment generally increases as incomes rise, and developed countries become better able to implement effective environmental policies than are lesser-developed countries. Open markets also help to foster the development of new, more environmentally friendly technologies, and liberalized trade and investment help to create the conditions for technology transfer.

This Initial EA was conducted as part of Canada’s commitment to achieving a mutually supportive relationship between trade and the environment. The intent is to assist Canadian negotiators to integrate environmental considerations into the negotiating process by providing information on the potential environmental impacts on Canada of the proposed trade agreements, and to address any public concerns by documenting how environmental factors are being considered in the course of trade negotiations.

Canada’s broad environmental objectives in negotiating trade agreements are to:

• preserve Canada’s ability to protect the environment;
• ensure mutually supportive relationships between trade agreements and multilateral environmental agreements;
• stimulate the efficient allocation of resources to generate positive environmental impacts;
• strengthen the environmental management capacities of Canada’s trading partners; and
• to use this strengthened capacity to combat trans-boundary pollutants and invasive species that directly affect Canada’s environment, economy and health.

In order to ensure that Canada’s environmental quality is strengthened through liberalized trade, Canada will be negotiating with CARICOM environmental obligations in the trade agreement itself, along with a parallel agreement on the environment.

This EA documents the findings of the Initial EA phase of the Canada-CARICOM FTA negotiations, focusing on the potential incremental environmental impacts, if any, of trade-induced economic and regulatory changes in Canada. It applies the analytical methodology outlined in the Framework that outlines the process for conducting EAs, and acts as a screening process to identify the main environmental issues, if any, that may be expected to arise as a result of this trade initiative. As such, it must be underscored that this environmental assessment is a strategic one and is intended to inform policy making throughout the negotiating process. The Initial EA is, therefore, more of a “forecasting” or “anticipatory” exercise.

Before being posted online on the Foreign Affairs and International Trade Canada (the “Department”) web site, the findings of an Initial EA are shared with an interdepartmental EA Committee,comprised of representatives of federal departments covering the sectors for which increases in production areanticipated. This approach facilitates informed policy development and decision-making throughout the federal government. The findings are also shared with the provinces and territories, as well as the Environmental Assessment Advisory Group, an advisory group made up of industry, non-governmental organizations and academics.

The analysis performed for this Initial EA suggests that increased Canadian exports flowing from the elimination of tariffs by CARICOM members on non-agricultural goods e.g. forestry, pharmaceuticals and mining – would have a minimal impact on the trade and production of these goods in Canada. With respect to agricultural goods, an FTA could facilitate an increase in Canadian exports of these products. In the event of increased exports of agricultural goods, crops and livestock, agricultural production would likely increase somewhat in those areas where production is currently concentrated (i.e. in the Prairies). Nevertheless, the analysis conducted shows that an increase in Canadian domestic production to supply the Caribbean Community markets will, overall, likely cause minimal environmental impact.

Conversely, in terms of imports, Canada extended duty-free treatment to roughly 97% of goods of all types that it imported from Commonwealth Caribbean countries in 2007^{Footnote 2}. As a result, an FTA with CARICOM would have a negligible impact on the environment in terms of industrial goods produced in Canada.

With respect to services, it is unlikely that there will be a substantial increase in services trade as a result of these negotiations. Consequently, any increase is expected to have a limited impact on the environment.

In terms of investments, CARICOM remains a modest source of FDI for Canada, representing only 0.2% of the total stock of incoming FDI in 2006. As such, the results of the Initial EA indicate that significant changes to investment flows into Canada are not expected as a result of an FTA, with any potential environmental impacts being minimal.

II. Overall Environmental Assessment Process

The Government of Canada is committed to conducting environmental assessments (EAs) for all trade and investment negotiations using a process that requires interdepartmental coordination and public consultations. The 2001 Framework for the Environmental Assessment of Trade Negotiations^{Footnote 3} (the “Framework”) details this process. It was developed in response to the 1999 Cabinet Directive on Environmental Assessment of Policy, Plan and Program Proposals^{Footnote 4}, which requires that all initiatives considered by Ministers or Cabinet must be environmentally assessed to indentify significant environmental effects, either positive or negative, and incorporate environmental considerations in decision-making. Detailed guidance for applying the Framework is contained in the Handbook for the Environmental Assessment of Trade^{Footnote 5} (the “Handbook”).

The Framework provides a process and methodology for conducting an EA of a trade negotiation. It is intentionally flexible so that it can be applied to different types of negotiations (e.g., multilateral, bilateral, regional), while ensuring a systematic and consistent approach to meet two key objectives.

• The first objective is to assist Canadian negotiators to integrate environmental considerations into the negotiating process by providing information on the environmental impacts of the proposed trade and/or investment agreements. As such, trade negotiators and environmental experts are involved in the EA and work proceeds in tandem with the negotiations.
• The second objective is to address public concerns by documenting how the environment is considered during negotiations. As such, the Framework contains a strong commitment to communications and consultations throughout the EA process.

The Framework provides for three increasingly detailed phases of assessment: the Initial, Draft, and Final EA. These phases correspond to progress within the negotiations. The Initial EA is a preliminary examination to identify possible key issues. The Draft EA builds on the findings of the Initial EA and requires detailed analysis. The Final EA takes place at the conclusion of the negotiations. At the conclusion of each phase, a public report is issued with a request for feedback^{Footnote 6}. A Draft EA is not required if the Initial EA finds little likelihood of significant environmental impacts as a result of the negotiations. In such circumstances, environmental considerations will continue to be integrated into ongoing discussions and a Final EA will be completed.

Following the conclusion of the EA process, follow-up and monitoring can be undertaken in order to review any mitigation or enhancement measures recommended in the Final EA. Monitoring and follow-up activities can be undertaken anytime during the implementation of the concluded agreement in order to gauge the performance of its provisions from an environmental perspective.

A. Assessment Methodology

Pursuant to the Framework, this Initial EA is being conducted in an ex ante fashion (before the negotiations are completed). A Notice of Intent to conduct a Strategic Environmental Assessment of the Canada-CARICOM FTA negotiations was announced on October 13, 2007, in the Canada Gazette. To date, no comments have been submitted to the government. It must be underscored that this is a strategic assessment and is intended to inform the decision-making process as the proposed FTA is being negotiated. Consequently, there is a fair degree of uncertainty associated with identifying likely economic and environmental impacts. The Initial EA is, therefore, more of a 'forecasting' or 'anticipatory' exercise. Nevertheless, the analysis allows for the early clarification of national goals and priorities with respect to trade and environmental interests, as well as for any mitigation and enhancement options that can be taken into account while the trade negotiations are underway and after they are completed.

Consistent with the methodology prescribed in the Framework, this assessment explores the link between trade rules, investment and environmental regulatory policy, while focusing on the incremental economic and potential environmental impacts in Canada of the prospective Canada-CARICOM FTA. In other words, this assessment considers the effects of new trade and investment that may result directly from the proposed FTA. Trans-boundary, regional and global environmental impacts are considered insofar as they have a direct impact on the Canadian environment.

The Framework provides a four stage analytical methodology. The Handbook provides guidance on how to conduct each stage of the analysis.

• Identification of the economic effect of the Agreement to be negotiated: The purpose of this stage is to identify the trade liberalization activity of the agreement under negotiation. This stage examines what the potential agreement would entail, the changes or new trade activity that could result, and the overall economic relevance to Canada. This helps determine the scope of analysis for the environmental assessment and to prioritise the issues to be assessed.
• Identification of likely environmental impact of such changes: Once the economic effects of the proposed trade agreement have been identified and characterised, the likely environmental impacts of such changes are identified. Consideration is given to potential positive and negative impacts. For the purpose of this EA, “environment” refers to the components of the Earth, which includes: land, water, and air (all layers of the atmosphere); all organic and inorganic matter; living organisms; and, the interacting natural systems that include components of the foregoing. The Framework calls for analysis of the most likely impacts on the Canadian environment. The Handbook demonstrates that there are two main factors that contribute to likelihood: exposure and probability.
• Assessment of the significance of the identified likely environmental impacts: The identified likely environmental impacts are then assessed as to their significance. The Framework outlines various criteria in determining significance, including frequency, duration, permanency, geographical scope and magnitude, level of risk, irreversibility of the impacts, and possible synergies among the impacts. This study uses the following scale in relation to the criteria outlined above to describe significance: none, minimal, moderate, high and extreme.
• Identification of enhancement/mitigation options to inform the negotiations: In the Initial EA, this step is intended to identify, in a preliminary fashion, the possible policy options or actions to mitigate potential negative impacts and/or to enhance potential positive impacts that may occur as a result of the proposed FTA.

In conducting EAs of trade negotiations, the Government of Canada is committed to a process that involves interdepartmental coordination. An interdepartmental committee is established to review the EA of each negotiation, which is led by the Chief Negotiator and involves officials from various government departments. Before being posted online on the Department web site, the findings of an Initial EA are shared with this interdepartmental EA Committee, which includes representatives of federal departments responsible for the sectors for which increases in production are anticipated, as well as Environment Canada. This approach facilitates informed policy development and decision making throughout the federal government.

The EA process also includes consultations with the Provincial and Territorial Governments, as well as stakeholders, which include representatives from business, academia, non-governmental organizations and the public. As a part of the preparations for the Initial EA, a Notice of Intent is issued inviting the public to provide their thoughts on the potential impacts of the proposed agreement on the Canadian environment. At the conclusion of each phase, EA reports are shared with provinces and territories and environmental experts and then issued publicly with a request for feedback.

The Government of Canada welcomes comments on this Initial EA Report. Feedback on the analysis of the economic relevance of new negotiations and the initial assessment of the likelihood and significance of resultant environmental impacts is welcome. Comments on opportunities to mitigate any negative environmental impacts and to enhance any positive effects, as may already have been identified at this stage, are also welcome. Comments on this document can be sent to:

E-mail: consultations@international.gc.ca or Fax: (613) 944-7981 or Mail:

Consultations & Liaison Division (CSL) Environmental Assessment Consultations – Canada-CARICOM FTA Negotiations Foreign Affairs and International Trade Canada Lester B. Pearson Building 125 Sussex Drive Ottawa, ON K1A 0G2

III. Overview of the Trade and Investment Relationship Between Canada and the Caribbean Community

In response to today’s rapidly evolving global trading environment, the Government of Canada is committed to an aggressive bilateral trade negotiations agenda, which is supported by Budget 2007 and the Government’s economic plan, Advantage Canada. Consistent with the Global Commerce Strategy, the strategic international commerce framework in support of Advantage Canada, the Caribbean Community was identified as being among the next trading partners with which Canada should pursue a trade agreement. Moving forward with trade negotiations with CARICOM is also in-line with the Government’s commitment to Canadian re-engagement with the Americas.

Canadian foreign policy has long recognized the special relationship between Canada and the Commonwealth Caribbean. Trade relations date back to the 18^th century when goods such as salted cod, lumber and other staples were exchanged for West Indian rum, molasses and spices. Canadian banks, notably the Royal Bank of Canada and Scotiabank, began to establish their first international branches in the region starting in the 1880s. In 1907, Canada opened its first trade office in Barbados. From this base, throughout the 20^th century, Canadian companies and entrepreneurs made substantial private investments in various other sectors of the region’s economy.

In addition to commercial ties, with joint membership in the Commonwealth, the Canada-Caribbean relationship evolved into a complex myriad of links in many other areas and has been enhanced over the years by a number of agreements and initiatives. The first formal trade arrangement between Canada and the region dates back to The Trade Treaty of 1912, which allowed the movement of goods between Canada and the British West Indies (except Jamaica), at preferential tariff rates. In 1966, both sides agreed to establish the Canada-CARICOM Summit^{Footnote 7} and in 1979, Canada and CARICOM signed the Canada-CARICOM Trade and Economic Cooperation Agreement. Through the latter Agreement, Canada provided financial support for regional programmes and projects, which contributed to the economic and social development of the region.

In 1986, the Commonwealth Caribbean Countries Tariff (CARIBCAN), a one-way preferential trade arrangement for the Commonwealth Caribbean countries and territories, was established as a result of a commitment by Canada at the Commonwealth Heads of Government meeting in Nassau, Bahamas, in October 1985. The programme provides duty-free access to the Canadian market for most products originating in 18Commonwealth Caribbean countries and territories^{Footnote 8}. Further to a request by Canada^{Footnote 9}, on December 15, 2006, the World Trade Organization (WTO) granted a five-year renewal for CARIBCAN^{Footnote 10}.

Pursuing a comprehensive FTA represents the next logical step to solidifying further Canada’s long-standing relationship with CARICOM. Moving forward with this initiative reflects Canada’s ongoing commitment to support the economic development of CARICOM and Canadian business in the region. Moreover, FTA negotiations provide a platform for dialogue and cooperation on such issues as labour and the environment, as well as establishing mechanisms that facilitate future dialogue on a broad spectrum of issues. During a visit to Barbados on July 19, 2007, Prime Minister Stephen Harper, along with CARICOM heads of state, announced the launch of the Canada-CARICOM FTA negotiations.

IV. Trade and the Environment

Public support for trade liberalization in Canada is linked to the expectation that the environment will be protected. Canada is committed to achieving mutually supportive trade and environmental goals with its trading partners. Canada’s broad environmental objective when negotiating trade agreements is to preserve Canada’s ability to protect the environment. Where global and trans-boundary impacts due to increased economic activity directly affect Canada’s environment, economy and health, Canada will seek to work with its trade partners to strengthen their national environmental management systems.

Open markets, economic development and environmental protection are strongly correlated. Liberalized rules-based trade and efficiently regulated markets are key building blocks for economic growth and development. In turn, public support for measures to protect the environment generally increases as incomes rise, and wealthier countries are better equipped to implement effective environmental laws and policies than are lesser-developed countries. Open markets also help to foster the development of new, more environmentally friendly technologies, and liberalized trade and investment help to create the conditions for technology transfer.

In order to ensure that economic development is sustainable, Canada will negotiate with CARICOM meaningful environment related provisions in appropriate sections of the FTA (e.g., preamble, initial provisions, and investment) as well as a parallel Environment Agreement.

In the context of increased economic activity due to trade liberalization, it is important to ensure that Canada and its trade partners maintain high levels of environmental protection and do not lower their standards or enforcement to attract foreign investment.

Incorporating Environmental Provisions into the Canada-CARICOM FTA.

In the context of the FTA between Canada and CARICOM members, Canada will seek to negotiate a parallel Environment Agreement, which will include environmental obligations that address, inter alia:

• establishment of high levels of environmental protection;
• the commitment not to derogate from domestic environmental laws to encourage trade or investment;
• compliance with and the enforcement of environmental laws; and
• promotion of accountability, transparency and public participation on environmental matters.

The Environment Agreement will also include a section on environmental cooperation aimed at strengthening the environmental management systems of CARICOM countries. Recognizing the need to reinforce sustainable development on all fronts, Canada will endeavour to leverage its expertise on key issues of interests to both Parties.

The following table in Section V of this Initial EA contains a summary of where environmental provisions could appear in a future FTA.

V. Initial Environmental Assessment Findings

In addition to the sections pertaining to goods, services, and investment, the following chart provides information relating to other chapters in an eventual FTA with CARICOM.

Results of Initial EA Analysis

Preamble: Anticipated outcome and Potential environmental implications and provisions

The Preamble will summarize the overall spirit of the Agreement. The Preamble is expected to reference the Parties’ ongoing commitment to sustainable development and cooperation on environmental matters.

Initial Provisions: Anticipated outcome and Potential environmental implications and provisions

This chapter will seek to include the following elements: establishment of the free trade area; relation to other agreements; relation to environmental and conservation agreements; and extent of obligations. Provisions in this chapter will identify a number of environmental agreements and provide that each of these environmental agreements prevail in the event of inconsistency.

Rules of origin: Anticipated outcome and Potential environmental implications and provisions

This chapter will seek to provide rules of origin that are clear, as simple as possible, and leave little room for administrative discretion. The rules are intended to be sufficiently stringent to ensure that the benefits of the FTA flow only to goods qualifying as originating in the territory of either or all countries. Production and consumption changes resulting from product-specific rules of origin will be captured in the Trade in Goods section below, along with their corresponding environmental impacts.

Customs procedures: Anticipated outcome and Potential environmental implications and provisions

This chapter will seek to administer and enforce the rules of origin in a fair and transparent manner. There are no foreseen environmental impacts as a result of this chapter.

Trade facilitation: Anticipated outcome and Potential environmental implications and provisions

This chapter will seek to streamline customs processes and facilitate the movement of goods more efficiently. There are no foreseen environmental impacts as a result of this chapter.
This chapter will not affect how Canadian environmental regulations are developed or implemented or how environmental objectives are set.

Sanitary and phytosanitary measures (SPS): Anticipated outcome and Potential environmental implications and provisions

This chapter will seek to: reaffirm commitments made under the WTO Agreement on the Application of Sanitary and Phytosanitary Measures (SPS Agreement); and the continued use of the WTO dispute settlement procedures for any formal disputes regarding SPS measures. In addition, it will seek to establish a bilateral SPS mechanism to provide direction on identification, management, and resolution of SPS issues to avoid disputes.
As provided in the WTO Sanitary and Phytosanitary Measures Agreement, all countries maintain the right to take measures necessary for the protection of human, animal or plant life or health. All countries are required to ensure that any SPS measures are applied only to the extent necessary to protect human, animal or plant life or health, and are based on scientific principles.

Technical Barriers to Trade – TBT: Anticipated outcome and Potential environmental implications and provisions

This chapter will seek to affirm commitments made under the WTO Technical Barriers to Trade Agreement (TBT Agreement), promote greater cooperation in the field of standards, technical regulations and conformity assessment procedures, and address horizontal transparency issues, including notifications and participation in consultation processes.
The chapter will reaffirm WTO TBT rights and obligations, including the right of all countries to take measures necessary to ensure the protection of human health, animal or plant life, and the environment. Measures shall not be more trade-restrictive than necessary to fulfil such legitimate objectives.

Emergency action: Anticipated outcome and Potential environmental implications and provisions

This chapter will seek to enable either Party to take emergency actions, as prescribed under the agreement, in the event of certain circumstances (e.g. imports have increased in such quantities as a result of tariff phase-out, that they constitute a substantial cause of serious injury or threat to Canadian, or other Party, producers).
No significant changes to production or consumption are expected as a result of this chapter. There are no foreseen environmental impacts as a result of this chapter.
This chapter will not affect how Canadian environmental regulations are developed or implemented or how environmental objectives are set.

Telecommunications: Anticipated outcome and Potential environmental implications and provisions

This chapter will seek to ensure that the terms and conditions for access to and use of public telecommunications transport networks and services do not impede the parties’ market access commitments under the FTA, as well as providing an open and competitive market for telecommunications services.
There are no foreseen environmental impacts as a result of this chapter.
This chapter will not affect how Canadian environmental regulations are developed or implemented or how environmental objectives are set.

Financial services: Anticipated outcome and Potential environmental implications and provisions

This chapter of the agreement is expected to promote high quality, forward looking market access commitments and improve regulatory transparency in the financial services sector.
There are no foreseen environmental impacts as a result of this chapter.

Temporary entry: Anticipated outcome and Potential environmental implications and provisions

This chapter will seek to facilitate the temporary movement of business persons in support of bilateral trade in goods, services and investment by negotiating more liberal access by waiving regulatory requirements for labour market tests, etc.
This chapter will not affect how Canadian environmental regulations are developed or implemented or how environmental objectives are set. There are no foreseen environmental impacts as a result of this chapter

Competition policy: Anticipated outcome and Potential environmental implications and provisions

This chapter will seek to ensure that the benefits of trade and investment liberalization between Canada and CARICOM are not undermined by anti-competitive business practices.
Provisions should include basic commitments to adopt, maintain and enforce respective competition laws; to be consistent with the principles of non-discrimination, transparency and procedural fairness; to recognize the importance of cooperation and coordination among the competition authorities; and to exclude dispute settlement (state-to-state and investor-state) from the provisions on competition policy.
This chapter will not affect how Canadian environmental regulations are developed or implemented or how environmental objectives are set. There are no foreseen environmental impacts as a result of this chapter.

Monopolies and state enterprises: Anticipated outcome and Potential environmental implications and provisions

This chapter will seek to incorporate provisionsthat permit the designation of monopolies and stateenterprises but place disciplines on a party with respect to such entities.These include disciplines to ensure that a party does notcircumvent obligations under the agreement. Pursuant to the proposed chapter, monopolies or state enterprises must provide non-discriminatory treatment to investors of the other party, act in accordance with commercial considerations and not act in an anti-competitive manner outside of their monopoly designation. There are no foreseen environmental impacts as a result of this chapter. Canada will safeguard its ability to delegate governmental authority to monopolies and state enterprises.

Government procurement: Anticipated outcome and Potential environmental implications and provisions

This chapter of the agreement is only expected to contain government procurement transparency commitments.
Canada will safeguard its ability to maintain and expand the current framework of policies, regulations, and legislation for the protection of the environment in a manner consistent with its domestic and international obligations. There are no foreseen environmental impacts as a result of this chapter. This chapter will not affect how Canadian environmental regulations are developed or implemented or how environmental objectives are set.

Electronic Commerce: Anticipated outcome and Potential environmental implications and provisions

Provisions on e-commerce will seek to include rules guaranteeing a predictable environment for the conduct of electronic commerce, while preserving the government’s flexibility to pursue cultural and other social objectives, including the environment.
The amount of e-commerce conducted between the parties is not expected to increase substantially as a direct result of the FTA.
The only environmental impacts from these discussions would be indirect. If the expected cooperation activities increase the amount of e-services there could be positive and/or negative environmental impacts. Positive environmental impacts could include reduced demand for transportation. Negative environmental impacts could result from increased waste and energy usage. These impacts could be partially mitigated via effective environmental management practices.

Transparency: Anticipated outcome and Potential environmental implications and provisions

This chapter will seek to facilitate the administration and smooth operation of the Agreement by designating contact points in each Party to facilitate communication. It will also reiterate the Parties’ commitment to transparency and due process regarding matters covered by the Agreement. There are no foreseen environmental impacts as a result of this chapter.

Dispute settlement: Anticipated outcome and Potential environmental implications and provisions

This chapter will seek to include state-to-state dispute resolution procedures with the CARICOM countries based on the dispute settlement provisions of the NAFTA, but simplified and improved where possible. There are no foreseen environmental impacts as a result of this chapter.

Exceptions: Anticipated outcome and Potential environmental implications and provisions

The Exceptions Chapter will seek to set out agreed upon exceptions to the obligations contained in the FTA. These exceptions are permitted in order to ensure that the Parties to the FTA maintain policy flexibility in areas that the Parties recognize as legitimate such as environmental protection. Canada generally seeks to include the following exceptions: General Exceptions; National Security; Taxation; Disclosure of Information; Cultural Exemption; and WTO Waivers (including those related to the environment).
This chapter will contain provisions to ensure that Parties maintain their ability to adopt measures to protect human, animal or plant life, and measures relating to the conservation of exhaustible natural resources.

Administration of the Agreement: Anticipated outcome and Potential environmental implications and provisions

This Chapter will seek to provide a framework for the overall management of the FTA and establish a mechanism for the effective resolution of disputes outside the formal dispute settlement mechanism. In so doing, the chapter establishes the Free Trade Commission, each Party’s obligation to appoint a Free Trade Coordinator, in addition to delineating the various committees, sub-committees and working groups created under the Agreement.
This chapter will contain provisions permitting the Parties to modify the list of Multilateral Environmental Agreements that supersede the trade agreement’s obligations.

A. Trade in Goods

Overview

This section is divided into two parts: first, the environmental impact of goods exported to CARICOM; and second, the impact of goods that imported by Canada from CARICOM members.

As tariffs are lowered and market access improves, it is expected that there could be an increase in the flow of some products currently being exported and opportunities for new products to be exported. The sectors chosen for study in this Initial EA are based on the government’s analysis of which Canadian exports are expected to benefit the most from the FTA, and input from industries that see opportunities for increased or new exports. It should be noted, however, that increases of Canadian exports to CARICOM, made possible by tariff elimination by CARICOM member countries, may reduce exports to other less profitable destinations, thus reducing the overall environmental impact associated with increased production.

CARICOM members are in the process of implementing a Common External Tariff (CET), whereby goods entering any member country will be assessed with the same tariff rate. The CET ranges from 0-20% for industrial goods and up to 40% for agricultural goods. The CET has been implemented by all CARICOM members, with the exception of Haiti and St. Kitts and Nevis. Exceptions to the CET are permitted for the Organization of Eastern Caribbean States (OECS) countries and for certain products of particular sensitivity to a CARICOM member. Consequently, a wide range of applied tariff rates continue to exist across member countries.

The pace of liberalization under the CET has been slow, as many CARICOM members rely heavily on import tariffs as a source of government revenue. Hence, as the CET is implemented, many governments are introducing import-related levies such as stamp duties, import surcharges, customs service charges and environmental taxes. An FTA would aim to address the application of such measures across the region in order to ensure greater transparency for Canadian exporters.

It should also be noted that Canada will seek to have the WTO GATT general exceptions for environmental measures incorporated into the trade agreement, including clarifications that they encompass exceptions for:

• environmental measures necessary to protect human, animal or plant life or health; and
• measures relating to the conservation of living and non-living exhaustible natural resources.

Goods Exported to CARICOM

Canada exports a variety of goods to all CARICOM members, but the majority of Canada’s current exports are concentrated among Jamaica, Trinidad and Tobago, Guyana, Barbados, the Bahamas and Haiti, which in 2007, made up approximately 80% of overall Canadian exports to CARICOM members.

In 2007, Canadian exports of goods to CARICOM totalled $656.3 million^{Footnote 11}, (up from $348 million in 2004) consisting primarily of wheat, iron and steel products, oil, fish, newsprint, copper wire, and pharmaceuticals. CARICOM was Canada’s 20th largest trading partner, representing about 0.2% of total goods exports or 0.8% of non-U.S. exports. Given the small percentage of total exports represented by CARICOM, an absolute increase would have little environmental impact.

Agriculture and Agri-Food

Agriculture and Agri-food trade between CARICOM and Canada reached $220.4 million in 2007. (Canadian exports to CARICOM totalled $162.3 million; while imports totalled $58.1 million). Canada’s main agri-food export is wheat, at a value of $53.2 million in 2007. French fries ($12.3 million), fresh potatoes ($11.9 million), pulses ($11.8 million) and frozen pork cuts ($10.3 million) are also important Canadian exports to the Caribbean region.

CARICOM agriculture tariffs are very high, with an average CET rate of 40%. A number of CARICOM members have excluded imports from the CET and given them tariff rates exceeding 100%. Tariffs for poultry cuts and mixtures of meat (including sausages) are as high as 196% in Barbados, and range between 20% and 40% in many other CARICOM countries. Other Canadian agri-food exports facing high tariffs include beef, fresh potatoes, and kidney beans (up to 40%), and wheat (up to 30%). If these tariff rates are lowered as a result of the FTA, this could result an increase in agriculture and agri-food exports to CARICOM and a subsequent change in economic activity.

From an environmental perspective, the most significant changes in agricultural production are changes that affect land use (e.g. cropland under summer fallow, use of marginal lands) and changes in livestock numbers. In addition, there may be some impact on groundwater aquifers and surface waters, depending on the location and scope of the change in agricultural activity. Overall, crop and livestock production are expected to increase only marginally if tariffs are significantly reduced or eliminated. It is also likely that such increases would occur primarily in regions where production is currently focused, i.e. the Prairie region. Canada’s agricultural production is of relatively low intensity and, thus, a slight increase in domestic production in order to meet growing CARICOM market demand would cause minimal environmental impact.

The environment is one of the five key priorities of Agriculture and Agri-Food Canada’s (AAFC) Agricultural Policy Framework (the “Agricultural Framework”) announced by the federal government in June 2002. Through the Agricultural Framework, federal, provincial and territorial governments aim to assist producers to accelerate the adoption of improved environmental practices. For example, AAFC funds various initiatives intended to improve the environmental performance of the agri-food sector, such as:

• Environmental Farm Planning (EFP): Farmers with EFPs are eligible to apply for financial and technical assistance to implement beneficial management practices through the National Farm Stewardship Program and Greencover Canada.
• Greencover Canada: Landowners can access a package of funding and technical assistance to help improve grassland-management practices, protect water quality, reduce greenhouse-gas emissions, and enhance biodiversity and wildlife habitat.
• National Agri-Environmental Standards Initiative: Producers will benefit from performance standards establishing the degree of desired environmental quality of air, water and soil in agricultural areas.
• The National Agri-Environmental Health Analysis and Reporting Program provides objective, science-based indicators to inform agricultural decision-makers, and help improve policies and programs aimed at addressing environmental issues faced by producers.
• National Farm Stewardship Program: Landowners can receive financial and technical assistance to implement on-farm beneficial management practices to address environmental risks identified in their Environmental Farm Plans.
• The National Land and Water Information Service is developing an Internet portal to provide land managers with information, data, tools and expertise to help them make sustainable land-use decisions.
• The Pesticide Risk Reduction Program develops and implements strategies, conducts research and develops alternative approaches to pest management.
• The Minor Use Program assists producers in accessing more environmentally friendly and efficient pest management technologies.
• Various ongoing programs built upon the work of the Prairie Farm Rehabilitation Administration, which delivers activities to ensure the sustainable use and conservation of agricultural soil and water resources, such as grassland management, irrigation, crop diversification and shelterbelt planning.

Provincial environmental legislation and initiatives usually have a direct impact on farming operations. They include a range of mechanisms designed to encourage or require environmentally sound farming practices:

• extension services or funding to support specific practices, develop infrastructure, or diversify operations to reduce the environmental impact of agricultural production;
• information documents on beneficial management practices;
• regulations on reducing agricultural pollution;
• policies encouraging the development of on-farm environment plans;
• regulations on the development and operation of new or expanded livestock operations; and
• legislation to regulate the discharge of pollutants.

Efforts related to the above and other programs will help offset any negative environmental impact that may result from liberalized agricultural trade with CARICOM. In the event the environmental impacts as a result of the FTA turn out to be greater than expected, consideration will be given to expanding existing programs or creating new ones to deal with any negative effects.

Fish and Seafood Products

CARICOM represents Canada’s second largest export market in the Western Hemisphere for fish and seafood, after the United States, totalling $32.6 million in 2007. Canada’s main fish and seafood exports to CARICOM members were salted fish ($30.7 million) and frozen fish ($1.5 million).

CARICOM members currently apply high tariffs on imported fish and seafood products, averaging 24.6% among CARICOM member countries. High tariffs exist particularly in Barbados, where fresh fish and seafood are subject to a tariff of 40%, except for flying fish, tuna and mau mau, which are fished locally and subject to a 145% duty. While tariff elimination could encourage an increase in Canadian exports, such growth will be subject to supply restraints that ensure that fish and seafood products are harvested at a sustainable level. The Government of Canada, along with provincial and territorial governments, aboriginal organizations, coastal communities, other stakeholders and interested Canadians are committed to the conservation and sustainable development of Canada’s oceans through a variety of programs under the umbrella of the national Sustainable Development Strategy.

Canada’s fish management systems, as well as federal, provincial and territorial governmental measures, have been put into place to ensure the sustainability of Canada’s fisheries and the environmental integrity of its aquaculture operations so that any increased trade resulting from an FTA will have minimal environmental impact. Therefore, because there are effective environmental management systems and government measures in place, an increase in exports to CARICOM due to the FTA as a result of tariff liberalization in fish and seafood products is not expected to result in a significant negative or positive impact on the sustainability of fish stocks, or on Canada’s marine or freshwater environment.

Industrial Goods

In 2007, Canada’s most significant non-agricultural exports were iron ores and iron and steel products ($61.4 million), oil ($51.9 million), newsprint ($28.4 million), copper wire ($22.7 million), and pharmaceutical products ($20.9 million). Currently, Canadian exports face high tariffs for a number of these exports, including: pharmaceuticals (up to 15%); iron and steel structures (up to 5% in all countries and up to 60% in Barbados); and iron ores (up to 20%).

Forestry

Although newsprint is one of Canada’s most valuable industrial exports to CARICOM, CARICOM is not one of Canada’s largest export destinations for newsprint. In fact, less than 1% of Canadian newsprint exports are destined for these countries. As such, it is unlikely that any increased demand for newsprint resulting from the FTA would have a significant impact on production, and consequently, the environment.

Canadian governments at the federal, provincial and territorial levels have taken steps to ensure that our forests are managed in accordance with sustainable development principles. Canada’s commercial forest resources are largely managed by the provinces through forest management tenure agreements that strictly regulate harvesting, silviculture and forestry practices. These policies provide for regulatory and audit mechanisms based on sustainable development principles to ensure that timber is not harvested at rates exceeding a forest’s capacity to regenerate. Any marginal increase in production in those products on which a tariff would be lowered could be easily accommodated within current forest management programs.

Pharmaceuticals

The pharmaceutical industry is one of the most innovative and profitable industries in Canada, with low volume production concentrated on products of high value. Production of chemicals in Canada is very limited with inputs largely being imported. Given the nature of these products, any production would occur in an environmentally sealed facility. All of these factors result in an industry that has a very limited environmental impact.

The sector figures prominently as one of Canada’s top export priorities. However, it has historically had a negative trade balance with even stronger imports. Exports of pharmaceuticals to CARICOM represented merely 0.4% of Canada’s total exports to the world for pharmaceuticals in 2007, with the most significant trade in medicaments in measured doses or packed for retail use. While it is an important and growing sector of the Canadian economy, and the potential for increased future exports exists, increased access to the CARICOM region would not have a significant impact on production and/or the environment.

Mining

While an FTA with CARICOM may increase demand for Canadian minerals and metals products such as copper wire or iron ores due to the elimination of tariffs, it is unlikely that this demand will have a significant impact on mining activity in Canada and consequently, the environment. For example, although copper wire is one of the most notable mineral and metal exports to CARICOM, it comprises less than 2% of total Canadian copper wire exports.

In Canada, environmental protection is an important element of modern mining, which is oriented toward the safe and sustainable development of mineral resources, while ensuring that adverse environmental impacts are minimized. Before mining activities can commence, a company must submit a mine plan and a project environmental assessment, under the Canadian Environmental Assessment Act – and/or environmental assessment provincial or territorial legislation – that identifies all the activities that may impact upon the mine site environment and the actions that will mitigate these environmental impacts. No mine facility will be granted operating permits until territorial/provincial and federal governments are satisfied with the actions proposed under the project environmental assessment. The company must also include a plan for decommissioning the facility and reclaiming the land. The Canadian mining industry is committed to the continual development of innovative technologies and processes to ensure that mining activities are conducted in a manner that is as environmentally responsible and sustainable as possible.

Goods Imported from CARICOM

In 2007, Canada imported $1.5 billion in goods from CARICOM (up from $578 million in 2004), less than 0.4% of total imports for that year. These imports primarily consist of natural resource products, such as gold, aluminium oxide, methanol, crude and non-crude oil, as well as rum, lobster, apparel and fresh produce. Given the small percentage of total imports represented by CARICOM, an absolute increase would have little environmental impact.

There are three special tariff arrangements that benefit some or all CARICOM members, namely, Canada’s General Preferential Tariff (GPT), CARIBCAN, and Canada’s Least Developed Countries (LDC) Initiative.

All CARICOM members currently benefit from Canada’s GPT treatment, which provides preferential access for most products. Exceptions include textiles, apparel, footwear, and a number of agricultural goods. Commonwealth Caribbean countries (all CARICOM members except Suriname and Haiti) benefit from further preferential treatment under CARIBCAN. In 2007, Canada extended duty-free treatment to roughly 97% of imports from CARIBCAN beneficiaries. Tariff rates on items not covered by CARIBCAN include textiles, apparel, footwear and certain agricultural products imported in excess of Canadian quota levels (see Agriculture and Agri-food section below).

Haiti is the only CARICOM member to benefit from Canada’s LDC tariff, which provides for duty-free access for all products, with the exception of supply managed goods.

Due to the fact that over 97% of imports^{Footnote 12} from CARICOM already enter Canada duty-free, it is not expected that there will be a significant increase in import volumes for goods originating from CARICOM members as a result of this FTA, and hence no significant environmental impact is expected.

Agriculture and Agri-Food

The only agriculture and agri-food imports originating from CARICOM members currently facing Most Favoured Nation (MFN) applied tariffs are over-quota supply managed (dairy, poultry and eggs) and non-supply managed (beef, wheat, barley and margarine) products. In 2007, CARICOM exported approximately $124,500 in cheese to Canada.

Canada’s longstanding position is not to provide improved market access to its FTA partners for over-quota supply managed goods. Given the very small amount of current non-supply managed over-quota trade (less than $400 in 2007), it is expected that there will be no negative environmental impact resulting from the removal of these tariffs.

Industrial Goods

Textiles, Apparel and Footwear

Canada’s position in all of its FTAs is that there be no non-agriculture exclusions, meaning that a Canada-CARICOM FTA would result in the eventual phase-out of Canada’s textiles, apparel and footwear tariffs.

Canada’s current imports of textiles, apparel and footwear originating in CARICOM members ($19.5 million) account for only 0.1% of Canada’s total global imports from that sector in 2007 ($14.2 billion). While there is some potential for CARICOM to increase its market share for textile, apparel and footwear products in the Canadian market, it is doubtful whether any type of improved preferential access would be sufficient for CARICOM members to compete in a significant way with offshore competitors such as China and Least Developed Countries, the latter of which do not face any textile, apparel or footwear duties. It is therefore expected that there will be no negative economic or environmental impact resulting from the eventual phase-out of Canada’s textiles, apparel and footwear tariffs.

Conclusion

In conclusion, given the small proportion of Canada’s overall trade represented by CARICOM, as noted above, the absolute increases in trade engendered by the trade agreement would have little environmental impact on Canada.

A detailed list of federal, provincial and territorial legislation and regulations that may enhance positive environmental impacts or mitigate against negative environmental impacts of trade agreements is attached as Appendix 1 of this report.

B. Trade in Services

Overview

Canada and the CARICOM countries have a relatively strong services trade relationship valued at $3.8 billion. While Canada is interested in market access across the entire spectrum of service sectors, its service market access priorities for the top four CARICOM economies (Barbados, Guyana, Jamaica and Trinidad and Tobago) are professional services, research and development services, computer and related services and the temporary entry of business persons. As temporary entry of business persons is a priority for Canadian business, an FTA with CARICOM will seek to include comprehensive provisions to allow for the entry and stay of a range of categories of business persons including professionals.

Canada has much to gain in terms of market access in services in these negotiations, given the low quality of the General Agreement on Trade in Services (GATS) commitments at the WTO, and GATS offers made to date by CARICOM Members. Not only will an FTA with CARICOM give Canadian service suppliers improved access in key sectors of interest, it will also give Canadian service suppliers preferential access over other WTO Members, particularly the United States, with whom they do not have an FTA.

CARICOM is a region of interest for Canadian service suppliers as evidenced by the current commercial activity that is already taking place. For example, in Barbados, there are approximately fifty insurance companies, 200 professional services consultants and seventy environmental services providers already active in the country. A substantive chapter on services in a prospective Canada-CARICOM FTA would provide assurances that the regulatory regime would not become more restrictive in the future and will also enhance business opportunities which may be closed to Canadian service providers.

Notwithstanding potential difficulties, there is sufficient scope to advance Canadian interests bilaterally under a FTA with respect to market access and to rules development on a number of fronts. A comprehensive approach would likely yield benefits beyond GATS to both parties. Canada is seeking to negotiate with CARICOM a quality, comprehensive chapter on services which will include provisions on domestic regulation, transparency, and professional services/mutual recognition. In addition, there will be separate chapters and provisions on telecommunications, financial services, ecommerce and temporary entry. A negative list approach to the listing of non-conforming measures would provide both Parties with improved market access and regulatory transparency beyond our respective existing commitments under the GATS. In general, Canada and CARICOM share the same approach regarding the scope of cross-border trade in services.

On market access, Canada will not negotiate commitments on any services related to health, public education, social services or culture. In addition, Canada will ensure that its position at all stages of these negotiations will be fully consistent with our right to regulate and to introduce new regulations on the supply of services in order to meet national policy objectives, including environmental protection. Moreover, Canada will seek to have the WTO GATS general exceptions for environmental measures incorporated into the trade agreement, including clarifications that they encompass exceptions for environmental measures necessary to protect human, animal or plant life, or health.

Likely Economic Impact of the Canada-CARICOM FTA

While studies have shown that there are substantial positive benefits to services liberalization, it remains difficult to assess with certainty the impacts of specific trade negotiations in specific services sectors. Services barriers take the form of domestic regulations – i.e. requirements for local partners, foreign ownership restrictions, citizenship, residency and licensing requirements and opaque or non-transparent rules/regulations – and assessing the economic impacts of removing such barriers to services trade is difficult. In addition, the definition of services trade reaches beyond cross-border flows to include three additional modes of supply: consumption abroad (e.g. international tourism), commercial presence (e.g., a branch office operating in a country outside of country of ownership), and the movement of natural persons (e.g., engineers or architects working abroad).

Despite these difficulties, work is ongoing in this area. For example, several studies using CGE modeling suggest that there would be welfare gains to be made from services liberalization. For Canada, recent studies estimate that even a partial global reduction of services barriers in the WTO context could lead to gains in the range of 2.8% of GDP or U.S. $20 billion^{Footnote 13}, while deeper liberalization that includes investment liberalization would lead to gains in the range of 14.9% of GDP or U.S. $84 billion^{Footnote 14}.

The gains identified above are based on a multilateral approach. The gains to be made from the Canada-CARICOM FTA would therefore be smaller. For the purposes of the Initial EA of the Canada-CARICOM FTA, the analysis has been based on the expected results of an agreement with CARICOM that includes a comprehensive services chapter, as well as separate chapters and provisions on telecommunications, financial services, e-commerce and temporary entry. CARICOM service sectors of particular interest to Canada include professional services, research and development services, computer and related services and the temporary entry of business persons. Canada is seeking the removal of existing unjustifiable, trade restrictive regulatory barriers in these and other sectors.

Likely Environmental Impacts of the Economic Changes

Generally, the kinds of environmental impacts that could result from the economic activities of increased trade in service sectors include effects on air and water pollution, land and biodiversity conservation, and effects on the atmosphere and climate. Environmental effects common to all service sectors include the consumption of energy for heating, lighting and vehicle and equipment use which may result in air pollution and release of GHGs, and the production of waste, including paper, refuse, sanitary waste, and chemical by-products from office equipment. In sectors such as environmental services and telecommunication services, positive environmental impacts are anticipated. In addition to examining such elements, given the nature of services trade, the analysis of the environmental effects must also consider the impacts of services trade liberalization in areas where the potential for negative impact may seem negligible but where over time the impact will prove more significant. Analysis of elements such as smokestack effects, direct and indirect effects, and upstream and down stream effects is necessary to capture the potential cumulative effects.

Significance of the Environmental Impacts

While an FTA with CARICOM is expected to provide increased market access into Canada, it is unlikely that there will be a substantial increase in trade in services as a result of these negotiations. Canada is already quite open in most services sectors and no domestic regulatory changes are expected as a result of an FTA with CARICOM. Though there may be some increased services exports to CARICOM, the environmental impacts are not expected to be significant, and can be balanced by mitigation options.

Enhancement and Mitigation Options

As noted above, while an FTA with CARICOM will improve bilateral market access and, to an extent, increase trade in services, we can expect minimal or moderate environmental impact. Any potential impacts can be partially balanced by mitigation options and opportunities for environmentally-sustainable growth, including technology innovation and industry best practices. Furthermore, depending on the sector, mitigation options include the use of fuel efficient vehicles, alternative fuels, paper conservation within the office, recycling of various materials, corporate policies on “green procurement”, limiting access to ecologically-sensitive tourist areas, consumer education and promotion of sound environmental practices. In addition, increasingly, changes and improvements to environmental legislation and industry awareness of environmental issues are helping to offset potential negative impacts of services trade liberalization. Consultations will continue to be undertaken to help ensure that our ability to regulate for the protection of the environment is not undermined or weakened.

C. Investment

Overview

Canada has a robust investment relationship with CARICOM. In 2006^{Footnote 15}, the stock of Canadian direct investment in, or flowing through, the markets of CARICOM members registered $52.9 billion, representing an increase of 52.4% over 2001 investments. This figure represents 10.1% of total Canadian direct investment abroad in 2006. Most of the investment is in the offshore financial services sector and is “flowing through” CARICOM to other destinations. CARICOM has doubled the stock of investment in Canada to $760 million in 2006, from $460 million in 2001. A Canada-CARICOM FTA with investment provisions will provide a more secure and predictable environment for businesses.

Likely Economic Impact of the Canada-CARICOM FTA

Over the past several years, Canadian investment in CARICOM has been on an upward trend as more Canadian companies discover opportunities in a diverse array of industries. While most of the investments “flow through” CARICOM, many Canadian companies play a significant role in the financial services sector in Barbados, Bahamas, and Trinidad & Tobago, the tourism industry in Jamaica and the Eastern Caribbean, and natural resource sectors in Guyana, Suriname and Trinidad & Tobago. Investors from CARICOM have also recognized the prospects that the Canadian market offers, with the stock of CARICOM investment in Canada increasing by 65% from 2001 to 2006. In spite of this increase, CARICOM remains a modest source of FDI for Canada, representing only 0.2% of the total stock of incoming FDI in 2006.

While the existence of investment provisions as part of the FTA should be a positive and important factor in investor’s decisions on whether to invest in the territory of the other party, it will be but one of many factors considered in any investment decision. In addition, Canada already has a relatively open investment regime. As such, large changes in investment patterns are not expected to result from these negotiations.

Therefore, the results of the Initial EA indicate that significant changes to investment flows into Canada are not expected as a result of these negotiations, in absolute terms and as compared to the total flow of investment to and from Canada from all sources. As such, the economic effects in the form of increased incoming investment from CARICOM in Canada as a result of the FTA are expected to be minimal, in relation to overall flows.

Likely Environmental Impacts of the Economic Changes

The likelihood and significance of the environmental impact of expected economic changes would depend on the degree of increase in investment, the sectors of the investment, and the measures in place to protect the environment in relation to those activities.

As noted above, CARICOM’s stock of investments in Canada is modest. While over the long term the investment provisions are expected to contribute to a favourable business climate conducive to growth of two-way investments, increases will depend on investors’ individual assessments of the opportunities and risks. CARICOM is not anticipated to become a significant source of new investment into Canada as a direct result of the investment provisions in the FTA. Therefore, it is concluded that the environmental effects on Canada of the investment chapter of the Canada-CARICOM FTA will be minimal to non-existent.

Significance of Environmental Impacts

Investment from CARICOM represents only a very small proportion of total foreign investment in Canada. In view of the current trend, even a significant economic change in investment from CARICOM would be small in scale compared to the overall level of investment in Canada, and any environmental impact is expected to be minor, if not negligible. Furthermore, the Canada-CARICOM FTA negotiations are not expected to substantially change the already open Canadian investment regime.

Enhancement and Mitigation Options

In the event that the Canada-CARICOM FTA results in significant increased FDI in Canada, potential environmental impacts will be mitigated by laws that bind foreign investors to the same environmental regulations that govern domestic investors. Proposed projects resulting from inward investment would be subject to applicable environmental assessment legislation, including the Canadian Environmental Assessment Act and provincial/territorial environmental assessment legislation.

The investment chapter of the FTA with the CARICOM is based on the government of Canada’s model Foreign Investment Protection Agreement (FIPA). The current FIPA model includes provisions that clarify the government’s right to regulate in the public interest, which includes the ability to regulate for the protection of the environment. The model FIPA also includes a general exception that permits a Party to adopt or maintain measures necessary to protect human, animal or plant life or health, the environment and safety, or measures primarily aimed at the conservation of exhaustible natural resources, provided that such measures are not applied in an arbitrary or unjustifiable manner and are not disguised restrictions on trade or investment. We anticipate that the final agreement will not have a negative effect on Canada’s ability to develop and implement environmental policies and regulations.

VI. Conclusion

Given the government’s view that trade and environment policies should be mutually supportive, it is Canada’s practice to pursue trade agreements in a manner consistent with, among other things, environmental protection and conservation. Undertaking environmental assessments is an effective way to address potential environmental impacts that may result from the negotiations of a trade agreement. The EA process is a mechanism through which the Canadian environment may be better protected in trade negotiations. It does this by assisting decision makers in understanding environmental implications of trade policy and by improving overall policy coherence at the national level.

In tandem with the FTA negotiations with CARICOM, a separate but parallel environmental agreement is being pursued. This agreement will be consistent with the focus on strengthening the domestic environmental management systems found in existing side agreements to which Canada is a party (including NAFTA, Chile and Costa Rica). It is envisaged that this agreement will contain commitments to high levels of environmental protection and effective enforcement of domestic environmental laws, including through cooperative activities.

The conclusion of the Canada-CARICOM FTA will strengthen the existing commercial relationship enjoyed by the Parties. In addition, the anticipated new economic activity resulting from the trade agreements is expected to yield meaningful economic benefits for Canada through improved market access into CARICOM for Canadian goods, services and investment, as well as provisions that will ground the trading relationship between Canada and CARICOM in a coherent rules-based system, thereby making it more predictable and secure.

Nevertheless, these economic effects, while important, will be very modest relative to Canada’s overall economic activity, and as a consequence, the environmental impact will be minimal. For goods, services and investment the absolute increase in economic activity caused the increases in trade flows will be small in comparison with the overall size of the Canadian economy. Moreover, in the area of services, opportunities to mitigate any environmental impact will exist. In addition, any new inward investment into Canada will face Canadian environmental regulations, and Canada will seek the preservation of the right to regulate in the public interest. Finally, general exceptions across the entire FTA will be sought which exempt environmental measures from the FTA’s provisions.

In these circumstances, according to the Framework, the Draft EA phase is not required and the Department will proceed directly to the Final EA. Further analysis will be carried out if information becomes available that would warrant further consideration. Indeed, should the negotiations with CARICOM take a path that might lead to environmental effects not yet explored in this study, steps will be taken to ensure that they are assessed. In addition, the findings of the Initial EA, published herein, as well as any new public comments received, will continue to inform Canadian negotiators.

In accordance with the Framework, the Final EA will be conducted based on the outcome of the negotiations, and the findings will be reported publicly. As such, it will include a discussion of any new analysis and comments received in response to the Initial EA regarding the anticipated environmental impacts of the agreement on Canada.

Finally, following the conclusion of the Final EA report after the trade negotiations are completed, follow-up and monitoring could, if warranted, be undertaken in order to review any mitigation or enhancement measures recommended by the Final EA report. Monitoring and follow-up activities can be undertaken anytime during the implementation of a concluded trade agreement in order to gauge the performance of its provisions from an environmental perspective.

Appendix 1: Environmental Legislation and Regulations

Below is a non-exhaustive list of federal, provincial and territorial legislation^{Footnote 16} and regulations that may enhance positive environmental impacts or mitigate against negative environmental impacts of trade agreements.

Laws of General Application

Federal

Canada Emission Reduction Incentives Agency Act

Canada National Parks Act

Canada Shipping Act

Canadian Environmental Assessment Act (CEAA)

Canadian Environmental Protection Act, 1999 (CEPA)

• Biological Test Method: Reference Method for Determining Acute Lethality of Effluents to Daphnia magna (EPS 1/RM/14)
• Biological Test Method: Reference Method for Determining Acute Lethality of Effluents to Rainbow Trout (EPS 1/RM/13)
• Biological Test Method: Test of Larval Growth and Survival Using Fathead Minnows (EPS 1/RM/22)
• Biological Test Method: Test of Reproduction and Survival Using the Cladoceran Ceriodaphnia dubia (EPS 1/RM/21)
• Code of Practice for the Reduction of Chlorofluorocarbon Emissions from Refrigeration and Air Conditioning Systems
• Domestic Substances List (SOR/94-311)
• Environmental Assessments of Priority Substances Under the Canadian Environmental Protection Act
• Environmental Code of Practice for Base Metals Smelters and Refineries (First Edition, March 2006)
• Environmental Code of Practice for Elimination of Fluorocarbon Emissions from Refrigeration and Air Conditioning Systems
• Environmental Code of Practice for Integrated Steel Mills (EPS 1/MM/7 - March 2001)
• Environmental Code of Practice for Non-Integrated Steel Mills (EPS 1/MM/8 - March 2001)
• Environmental Code of Practice for the Reduction of Solvent Emissions from Dry Cleaning Facilities (CCME-EPC/AITG-50E)
• Environmental Code of Practice for Vapour Recovery in Gasoline Distribution Networks (CCME-EPC/TRE-30E)
• Environmental Code of Practice on Halons (Code of Practice EPS 1/RA/3E)
• Federal Above-ground Storage Tank Technical Guidelines (P.C. 1996-1233)
• Federal Underground Storage Tank Technical Guidelines
• Guidance Document for Flow Measurement of Metal Mining Effluents (April 2001)
• Guidance Document for the Sampling and Analysis of Metal Mining Effluents (April 2001)
• Guide to Understanding the Canadian Environmental Protection Act, 1999 (October 27, 2004)
• Guidelines for the Implementation of the Pollution Prevention Planning Provisions of Part 4 of the Canadian Environmental Protection Act, 1999 (CEPA 1999) (February 2001)
• Guidelines for the Notification and Testing of New Substances: Chemicals and Polymers (REPEALED) (August 2001)
• Guidelines for the Use of Information Gathering Authorities Under Section 46 of the Canadian Environmental Protection Act, 1999 (March 2001)
• Guidelines for Volatile Organic Compounds in Consumer Products (2003)
• Implementation Guidelines for Part 8 of the Canadian Environmental Protection Act, 1999 – Environmental Emergency Plans (September 2003)
• List of Toxic Substances Authorities (SOR/94-162)
• National Emission Guidelines for Stationary Combustion Turbines (CCME-EPC/AITG-49E)
• National Pollutant Release Inventory and Municipal Wastewater Services (May 2003)
• New Source Emission Guidelines for Thermal Electricity Generation (Canada Gazette, Part I, January 4, 2003)
• Non-domestic Substances List (Canada Gazette, Part I)
• Notice with Respect to Reporting of Greenhouse Gases (GHGs) for 2005 (Canada Gazette Part I, March 12, 2005)
• Notice with Respect to Reporting of Greenhouse Gases (GHGs) for 2006 (Canada Gazette, Part I, July 15, 2006)
• Notice with Respect to Selected Substances Identified as Priority for Action (Canada Gazette Part I, March 4, 2006)
• Notice with Respect to Substances in the National Pollutant Release Inventory for 2005 (Canada Gazette, Part 1, February 19, 2005)
• Notice with respect to substances in the National Pollutant Release Inventory for 2006 (Canada Gazette Part I, February 25, 2006)
• Reporting For The Domestic Substances List
• Toxic Substances Management Policy : Persistence and Bioaccumulation Criteria
• Toxic Substances Management Policy : Report on Public Consultations

Canadian Food and Drugs Act

Canadian Nuclear Safety and Control Act

Department of the Environment Act

Emergencies Act

Energy Efficiency Act

Hazardous Materials Information Review Act

• Application for a Claim for Exemption

Hazardous Products Act

•  

National Round Table on the Environment and the Economy Act

Northwest Territories Water Act

Nuclear Fuel Waste Act

Pest Control Products Act

Railway Safety Act

Safe Containers Convention Act

Territorial Lands Act

• Territorial Land Use Regulations (C.R.C., c. 1524)

Transportation of Dangerous Goods Act

Yukon Environmental and Socio-Economic Assessment Act

Provincial/Territorial

Ontario Environmental Protection Act

• Regulation 222/07 Environmental Penalties

Environmental Assessment Act

• R.R.O. 1990, Reg. 334 General

Dangerous Goods Transportation Act

Environmental Bill of Rights, 1993

• O. Reg. 681/94 - Classification of Proposals for Instruments
• O. Reg. 73/94 - General

Quebec Environment Quality Act, Ministry of the Environment Act, Transport Act

Nova Scotia Environment Act, Environmental Assessment Regulations

New Brunswick Clean Environment Act, Environmental Impact Assessment Regulation, Transportation of Dangerous Goods Act

Manitoba Sustainable Development Act, Environment Act, Dangerous Goods Transportation and Handling and Transportation Act

British Columbia Environmental Management Act, Environmental Assessment Act, Transportation of Dangerous Goods Act

Prince Edward Island Environmental Protection Act

Alberta Environmental Protection and Enhancement Act, Environmental Assessment Regulation, Dangerous Goods Transportation and Handling Act

Saskatchewan Environmental Assessment Act, Environmental Management and Protection Act, Dangerous Goods Transportation Act,

Newfoundland and Environmental Protection Act,

Labrador Regulations, Dangerous Goods Transportation Act

Northwest Territories , Environmental Rights Act, Transportation of Dangerous Goods Act

Yukon Environment Act, Environmental Assessment Act and Regulations, Dangerous Goods Transportation Act, Yukon Environmental and Socio-Economic Assessment Act, Yukon Act

Nunavut Transportation of Dangerous Goods Act

Laws impacting air

Federal

Motor Vehicle Fuel Consumption Standards

Provincial/Territorial

Ontario Environmental Protection Act

• Regulation 419/05 – Air Pollution – Local Air Quality
• Regulation 194/05 – Industry Emissions – Nitrogen Oxides and Sulfur Dioxide
• Regulation 127/01 – Air Contaminant Discharge Monitoring and Reporting
• Regulation 397/01 – Emissions Trading
• Regulation 496/07 – Cessation of Coal Use – Atikokan, Lambton, Nanticoke and Thunder Bay Generating Stations
• Regulation 535/05 – Ethanol in Gasoline
• R.R.O. 1990, Regulation 356, Ozone-depleting Substance Regulations

Nova Scotia Air Quality Regulations, Ozone Layer Protection Regulations

New Brunswick Clean Air Act, Air Quality Regulation, Ozone-depleting Substances Regulation

Manitoba Ozone-depleting Substances Act

British Columbia Ozone-depleting Substances and Other Halocarbons Regulation, BC ,

Prince Edward Island Transboundary Pollution (Reciprocal Access) Act

Alberta Clean Air Act, Ozone-depleting Substances Regulation

Saskatchewan Clean Air Act and Regulations, Ozone-depleting Substances Control Regulations

Newfoundland and Labrador ,

Laws impacting flora and fauna

Federal

Arctic Wildlife Act

Canada Wildlife Act

Migratory Birds Convention Act, 1994

• Order Extending the Time for the Assessment of the Status of Wildlife Species (SOR/2006-115)
• Order Extending the Time for the Assessment of the Status of Wildlife Species (REPEALED) (SOR/2003-215)

Provincial/Territorial

Ontario Fish and Wildlife Conservation Act, Forestry Act

Crown Forest Sustainability Act, 1994

Pesticides Act

Endangered Species Act

Wilderness Areas Act

Quebec Wildlife Conservation and Development Act, Natural Heritage Conservation Act, Act Respecting Threatened or Vulnerable Species, Pesticides Act, Tree Protection Act

Nova Scotia Wildlife Habitat and Watercourses Protection Regulations, Endangered Species Act, Fisheries and Coastal Resources Act, Forests Act, Forest Sustainability Regulations

New Brunswick Endangered Species Act, Fish and Wildlife Act,

Manitoba Forest Act, Wildlife Act, Fisheries Act, , Endangered Species Act

British Columbia , Fisheries Act, , , Fish Protection Act

Prince Edward Island Wildlife Conservation Act, Fisheries Act

Saskatchewan Forest Resources Management Act, Wildlife Act, Wildlife Habitat Protection Act , Fisheries Act

Northwest Territories Wildlife Act

Yukon Wildlife Act, Migratory Birds Convention Act, Fisheries Act, Forest Protection Act

Laws impacting water and fisheries

Federal

Arctic Waters Pollution Prevention Act

Canada Marine Act

Canada National Marine Conservation Areas Act

• Guidelines for Canadian Drinking Water Quality 1978
•  (PDF*, 153.67 KB)

•  (PDF^*, 221.77 KB)

• (R.S.C. 1985, c. I-20)

Lac Seul Conservation Act

Navigable Waters Protection Act

Provincial/Territorial

Nutrient Management Act, 2002

• O. Reg. - 267/03 General

Safe Drinking Water Act, 2002

• O. Reg. 128/04 - Certification of Drinking Water System Operations and Water Quality Analysts
• O. Reg. 242/05 - Compliance and Enforcement
• O. Reg. 172/03 - Definitions of "Deficiency" and "Municipal Drinking Water System"
• O. Reg. 171/03 - Definitions of Words and Expressions Used in the Act
• O. Reg. 170/03 - Drinking Water Systems
• O. Reg. 248/03 - Drinking Water Testing Services
• O. Reg. 453/07 - Financial Plans
• O. Reg. 188/07 - Licensing of Municipal Drinking Water Systems
• O. Reg. 252/05 - Non-Residential and Non-Municipal Seasonal Residential Systems that do not serve designated facilities
• O. Reg. 169/03 - Ontario Drinking Water Quality Standards
• O. Reg. 243/07 - Schools, Private Schools and Day Nurseries

Clean Water Act, 2006

• O. Reg. 286/07 - Miscellaneous
• O. Reg. 284/07 - Source Protection Areas and Regions
• O. Reg. 288/07 - Source Protection Committes
• O. Reg. 287/07 - Terms of Reference
• O. Reg. 285/07 - Time Limits

Lakes and Rivers Improvement Act

• O. Reg. 454/96 Construction

Sustainable Water and Sewage Systems Act, 2002

Pesticides Act

• R.R.O. 1990, Reg. 914 General

Quebec Watercourses Act, Water Resources Preservation Act

Nova Scotia Water Resources Protection Act, Wildlife Habitat and Watercourses Protection Regulations,

New Brunswick Clean Water Act, Water Quality Regulations, Watercourse Alteration Regulations

Manitoba Conservation Agreements Act, Water Protection Act,

British Columbia Water Act, Water Protection Act, Groundwater Protection Regulation

Prince Edward Island Water and Sewage Act

Alberta Water Act, Surface Water Quality Guidelines

Saskatchewan Water Regulations, Groundwater Conservation Act

Newfoundland and Labrador Water Resources Act

, Water Resources Agreements Act

Laws impacting land and non-renewable resources

Federal

Motor Vehicle Fuel Consumptions Standards (Not in Force)

Provincial/Territorial

Ontario Environmental Protection Act

• Regulations 101-104
• Regulation 153 – Record of Site Condition (Brownfields)
• Deep Well Disposal Regulation (Regulation 341)
• Regulation 347 – Waste Management – General
• Waste Management – PCBs Regulation (Regulation 362)

Waste Diversion Act, 2002

• O. Reg. 273/02 Blue Box Waste
• O. Reg. 542/06 Municipal Hazardous or Special Waste
• O. Reg. 33/08 Stewardship Ontario
• O. Reg. 85/03 Used Oil Material
• O. Reg. 84/03 Used Tires
• O. Reg. 393/04 Waste Electrical and Electronic Equipment

Waste Management Act, 2002

Planning Act

Greenbelt Act, 2005

• O. Reg. 59/05 Designation of Greenbelt Area

Nutrient Management Act, 2002

Oak Ridges Moraine Conservation Act, 2001

• O. Reg. 1/02 Designation of the Oak Ridges Moraine Area
• O. Reg. 141/02 Municipalities that are required to prepare and adopt official plan amendments under Subsection 9 (2) of the Act
• O. Reg. 140/02 Oak Ridges Moraine Conservation Plan

Places to Grow Act, 2005

• O. Reg. 416/05 Growth Plan Areas
• O. Reg. 311/06 Transitional Matters - Growth Plan for the Greater Golden Horseshoe, 2006

Aggregate Resources Act

• O. Reg. 244/97 General

Mining Act

• O. Reg. 6/96 Assessment Work
• O. Reg. 113/91 General
• O. Reg. 240/00 Mine Development and Closure under Part VII of the Act

Oil, Gas and Salt Resources Act

• O. Reg. 245/97 Exploration, Drilling and Production

Quebec Mining Act

Nova Scotia Asbestos Waste Management Regulations, PCB Management Regulations, Wilderness Areas Protection Act, Petroleum Management Regulations, Energy Resources Conservation Act

New Brunswick Topsoil Preservation Act, Petroleum Product Storage and Handling Regulation, Regional Solid Waste Commissions Regulation, Energy Conservation Act, Mining Act, Oil and Natural Gas Act

Manitoba Waste Reduction and Prevention Act, Manitoba ,

British Columbia Environment and Land Use Act, Contaminated Sites Regulation, Special Waste Regulation, Waste Discharge Regulation, Hazardous Waste Regulation, Forest Act, Forest and Range Practices Act

Prince Edward Island Oil and Natural Gas Act

Alberta Release Reporting Regulation, Release Regulation, Waste Control Regulation, Conservation and Reclamation Regulation, Coal Conservation Act, Energy Resources Conservation Act, Oil and Gas Conservation Act, Oil Sands Conservation Act, Pipeline Act

Saskatchewan Environmental Spill Control Regulations, Hazardous Substances & Waste Dangerous Goods Regulations, Mineral Industry Environmental Protection Regulations, Conservation and Development Act, Oil and Gas Conservation Act

Newfoundland and Labrador Well Drilling Regulations, , Waste Reduction and Recovery Act

Northwest Territories Forest Protection Act, Waste Reduction and Recovery Act

Yukon Oil and Gas Act, Yukon Surface Rights Board Act

Laws impacting trade