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Initial Environmental Assessment on the Trade in Services Agreement

Table of Contents

• 1. Executive Summary
  • Overview of Initial Environmental Assessment Findings
  • Next Steps
• 2. Overview of the Environmental Assessment Process
  • 2.1 Overview of the Environmental Assessment Process
  • 2.2 Scope of the TISA Initial Environmental Assessment
  • 2.3 Assessment Methodology
  • 2.4 Limitations of the Assessment
• 3. Overview of Canada’s Economic Relationship with Other TISA Members
  • 3.1 Canada’s Trade in Services with TISA Members
  • 3.2 Direct Investment in Services
• 4. The Government of Canada’s Environmental Objectives in Relation to Trade
• 5. Initial Environmental Assessment Findings
  • 5.1 Expected Economic Impact
  • 5.2 Likely Environmental Impacts of TISA
  • 5.3 Significance of Potential Environmental Impacts
  • 5.4 Enhancement and Mitigation Options
• 6. Environmental Sustainability Indicators
• 7. Conclusion

1. Executive Summary

On March 18, 2013, the Honourable Ed Fast, Minister of International Trade and Minister for the Asia-Pacific Gateway, announced that Canada would join the negotiations of the Trade in Services Agreement (TISA). The parties in these negotiations currently include 23 WTO members who share a strong interest in services and decided to negotiate an agreement amongst themselves to liberalize trade in services. The TISA’s membership currently consists of Australia, Canada, Chile, Chinese Taipei, Colombia, Costa Rica, the European Union (which comprises 28 member countries), Hong Kong China, Iceland, Israel, Japan, Liechtenstein, Mexico, New Zealand, Norway, Pakistan, Panama, Paraguay, Peru, South Korea, Switzerland, Türkiye and the United States.

As this agreement focuses on services as defined in the WTO, the Initial Environmental Assessment will also concentrate on the key economic sectors covered by the General Agreement on Trade in Services (GATS). In addition, the Initial Environmental Assessment will focus on the disciplines that are very likely to be included in the agreement at this point, which include Cross-Border Trade in Services, E-Commerce, Temporary Entry, and Services Investment as well as key sectors such as Financial Services, Information and Communications Technology Services, Environmental Services, Professional Services and Transport Services.

There is a strong correlation between open markets, economic development and environmental protection. Public support for trade liberalization in Canada is closely linked with expectations 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 free trade agreements is to preserve its ability to protect the environment. Where global and trans-boundary impacts due to increased free-trade-related economic activity resulting from a free trade agreement directly affect Canada’s environment, economy and health, the Government of Canada will seek to work with its economic partners to strengthen their national environmental management systems.

The Government of Canada is committed to conducting environmental assessments of all its trade negotiations. The objectives of an environmental assessment of trade negotiations are to assist Canadian negotiators to integrate environmental considerations into the negotiating process, and to address public concerns by documenting how environmental factors are being considered in the course of negotiations. Through the environmental assessment process, Canada hopes to ensure that proposed trade agreements contribute to the development of the Canadian economy in a sustainable manner.  Pursuant to the 2001 Framework for Conducting Environmental Assessments of Trade Negotiations (the “Framework”) ^Footnote1,this report constitutes Foreign Affairs, Trade and Development Canada’s (DFATD’s) Initial Environmental Assessment of the TISA negotiations. According to the Framework, the primary purpose of an Initial Environmental Assessment is to scope out the main environmental issues likely to arise as a result of the proposed agreement. This assessment focuses on potential economic and environmental impacts in Canada from a Trade in Services Agreement by exploring the links between services market access, investment and environmental regulation in Canada.  In other words, this assessment considers the effects of new services trade and investment in Canada that may result directly from the TISA. As such, this Initial Environmental Assessment does not seek to predict with certainty the specific outcomes of the TISA, such as new projects or investments. Instead, the Initial Environmental Assessment estimates possible environmental impacts using informed judgements of potential changes resulting from increased economic activity brought about by the TISA. 

Overview of Initial Environmental Assessment Findings

This Initial Environmental Assessment of the TISA negotiations is based on a qualitative analysis. Potential environmental impacts and their significance are discussed, along with opportunities for mitigation and enhancement. 
While studies have shown that there are substantial positive benefits to services liberalization, given the difficulty in quantifying services trade, it remains difficult to fully assess the environmental impacts of removing barriers to services trade. Although there is expected to be enhanced and more secure access for services trade and investment via the TISA, a substantial amount of services trade is already taking place between Canada and other TISA members. Canada has existing FTAs covering services and investment with six of the current 23 TISA members (United States, Mexico, Chile, Colombia, Panama and Peru). In addition to these FTAs, Canada has Foreign Investment Promotion and Protection Agreements (FIPA) with Panama, Peru and several EU Member States. This environmental assessment will therefore address the expected environmental impacts of any new trade that may result from the TISA.

Increased cooperation in the areas of labour mobility, regulatory cooperation and science and technology is expected to contribute to increased trade activity in the services sector. Most services benefiting from liberalization under the TISA would likely be in virtual areas (i.e. those without a physical component, such as legal advice), with less likelihood of negative environmental impacts. Negative environmental impacts such as increased energy usage and electronic waste (e-waste) caused by increased trade in services are expected to be mitigated by increases in environmentally sustainable practices in the services sector.  In addition, the TISA does not lower the right to regulate in areas of environmental protection and foreign investors will be bound by the same environmental regulations that govern domestic investors. Therefore, the Initial Environmental Assessment analysis indicates that the environmental impacts of TISA are expected to be only minor.

Next Steps:

In accordance with the Framework, the department will continue to receive comments from stakeholders and the public, and the Final Environmental Assessment will be released once negotiations conclude. As appropriate, the Final Environmental Assessment will include a discussion of any subsequent analysis undertaken and document comments received in response to the Initial Environmental Assessment concerning the potential environmental impacts of the agreement on Canada. 

2. Overview of the Environmental Assessment Process

2.1 Overview of the Environmental Assessment Process

The Government of Canada is committed to conducting environmental assessments for all trade negotiations using a process that requires interdepartmental coordination and public consultations. The 2001 Framework for the Environmental Assessment of Trade Negotiations^Footnote2 details this process, and was developed in response to the 1999 Cabinet Directive on Environmental Assessment of Policy, Plan and Program Proposals^Footnote3. The Cabinet directive was later updated in 2010. Detailed guidance for applying the Framework is contained in the Handbook for the Environmental Assessment of Trade Negotiations^Footnote4 (the “Handbook”). The guidelines for implementing the Cabinet Directive require departments to describe, in appropriate detail, the scope and nature of environmental effects, both positive and negative, that could arise from implementing proposals and how these could impact the Federal Sustainable Development Strategy’s^Footnote5 goals and targets.

The Framework provides a process and methodology for conducting an environmental assessment of a trade negotiation. It is intentionally flexible so that it can be applied on a case-by-case basis according to the nature of the agreement being negotiated (e.g., multilateral, bilateral, regional). The objectives of the environmental assessment process of a trade negotiation, as outlined in the Framework are:

• 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; and
• to address public concerns by documenting how the environment is considered in the course of trade negotiations.

The Framework provides for three phases of assessment:

• Initial Environmental Assessment: a preliminary examination to identify possible key issues.
• Draft Environmental Assessment: if required, builds on the findings of the Initial Environmental Assessment and provides a detailed analysis of those issues.
• Final Environmental Assessment: takes place at the conclusion of the negotiations.

Its purpose is to identify how environmental considerations were integrated into the negotiation process in relation to enhancement and mitigation options identified in the Initial or Draft Environmental Assessment.

After each phase, a public report is issued along with a request for comments. Comments received are used to inform subsequent analysis. In the event that an Initial Environmental Assessment finds the environmental impacts of an agreement are expected to be none or minor, a Draft Environmental Assessment is not required. In those cases, environmental considerations continue to be integrated into ongoing discussions and a Final Environmental Assessment must still be completed.

If warranted by negotiators, follow-up and monitoring can be undertaken after the conclusion of an environmental assessment in order to review any mitigation or enhancement measures recommended in the Final Environmental Assessment.

2.2 Scope of the TISA Initial Environmental Assessment

The TISA is an agreement that is being negotiated by a limited group of like-minded WTO members to liberalize trade in services amongst themselves. The WTO members currently participating to this  initiative are Canada, Australia, the United States, the European Union (which comprises 28 member countries), New Zealand, Korea, Mexico, Chile, Colombia, Chinese Taipei, Japan, Hong Kong China, Norway, Switzerland, Pakistan, Israel, Peru, Costa Rica, Türkiye, Panama, Iceland, Liechtenstein and Paraguay. However, Canada already has FTAs covering services with six of these countries (United States, Mexico, Chile, Peru, Colombia and Panama). Therefore, this environmental assessment will address the expected environmental impacts of any new trade that may result from the TISA. While other interested WTO members could potentially join the negotiations and a concluded agreement would also be open for accession to other countries, this Initial Environmental Assessment will focus solely on the current 23 parties to the TISA. Any new analysis undertaken during the course of negotiations due to new or unanticipated issues will be documented and included in the Final Environmental Assessment.

As this agreement will focus on services as defined by the WTO, the Initial Environmental Assessment will also focus on the key economic sectors covered by the WTO General Agreement on Trade in Services (GATS). The negotiations are at a very early stage and it is too early to tell what the final TISA will cover. Therefore, the Initial Environmental Assessment will focus on the disciplines that are likely to be included at this point, which include Cross-Border Trade in Services, E-Commerce, Temporary Entry, and Services Investment as well as key sectors such as Financial Services, Information and Communications Technology Services, Environmental Services, Professional Services and Transport Services.

2.3 Assessment Methodology

The Initial Environmental Assessment is a forecasting exercise that allows for the identification of potential environmental effects resulting from trade negotiations. It also provides an opportunity to integrate environmental considerations while negotiations are ongoing.  It focuses on potential economic and environmental impacts the TISA might have on Canada by exploring the links between market access, investment and the environment. In other words, this assessment considers the environmental impacts of new services trade and investment in Canada that may result from the TISA, once implemented.

The data on trade in services tends to be scarce and inaccurate. DFATD is currently developing a new economic model for forecasting the economic benefits of the TISA. Therefore, this Initial Environmental Assessment of the TISA negotiations will focus on the qualitative analysis. It will provide a detailed analysis of the potential environmental impacts that might result from increased services trade and investment, using the four-stage methodology outlined in the Framework for conducting the Initial, Draft, and Final Environmental Assessments. Guidance on how to conduct each stage of the analysis is provided in the Handbook.

• Identification of the economic effect of the agreement to be negotiated. This stage identifies the trade liberalization activity of the agreement under negotiation. It examines what areas the potential agreement may include, 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 prioritize the issues to be assessed.
• Identification of the likely environmental impact of such changes. Once the economic effects of the proposed trade agreement have been estimated, the likely environmental impacts of such changes are approximated. Consideration is given to potential positive and negative impacts^Footnote6.
• 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 magnitude, level of risk, and possible synergies among the impacts. This study uses the following scale in relation to the criteria outlined above to describe significance: none, minor, moderate, high and extreme.
• Identification of enhancement/mitigation options to inform the negotiations. In the Initial Environmental Assessment, this stepis 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 free trade agreement.

The environmental assessment of a trade negotiation requires interdepartmental collaboration^Footnote7. An interdepartmental committee is established to review the environmental assessment of each free trade negotiation and includes officials from government departments and agencies participating in the negotiations. This approach facilitates informed policy development and decision making throughout the negotiating process.

The environmental assessment process also includes consultations with the public, provincial and territorial governments and with the non-governmental Environmental Assessment Advisory Group (EAAG). The EAAG is made up of persons drawn from the business sector, academia and non-governmental organizations who provide advice in their own capacity on the DFATD assessment process. At the conclusion of each assessment phase (i.e. Initial, Draft and Final), environmental assessments are shared with provincial and territorial representatives and the EAAG for initial feedback before being released for public comment.
As required by the Framework, a Notice of Intent to conduct a Strategic Environmental Assessment of the TISA was published on April 20, 2013.  This notice invited interested individuals to submit their input for consideration in the drafting of the Initial Environmental Assessment by June 19, 2013. No public comments were received during this consultation phase.
The Government welcomes input and comments on all Initial Environmental Assessments. Input can be sent to:

E-mail:EAconsultationsEE@international.gc.ca
Fax: 613-992-9392
Mail: Environmental Assessment Consultations – Trade in Services Agreement
Trade Agreements and NAFTA Secretariat (TAS)
Foreign Affairs, Trade and Development Canada
Lester B. Pearson Building
125 Sussex Drive, Ottawa, ON, K1A 0G2

2.4 Limitations of the Assessment

As indicated previously, this Initial Environmental Assessment is a scoping exercise that attempts to determine whether significant environmental impacts are likely to occur as the result of the TISA. The qualitative assessment of potential environmental impacts is not an exhaustive examination of sectors of the economy or environmental issues. Instead, it is intended to provide an overview of the potential impacts of the trade agreement. Therefore, several cautionary notes are required concerning the interpretation of the reported environmental impacts.

• The purpose of this assessment is not to assess the environmental impact of economic growth, but rather of the economic activity and trade policy changes potentially resulting as a direct result of the TISA. There are many macro- and microeconomic forces at play that influence the pattern and flow of trade. The actual economic effects of the TISA will also depend on how various economic actors, producers, and consumers react to the new trade policy environment.
• This analysis focuses on overall impacts for Canada. It does not focus on distributional impacts by province/territory and/or region. Although net impacts might be positive, certain regions may be impacted differently.
• As the TISA negotiations are still at an early stage, there is a fair degree of uncertainty associated with identifying what the outcomes will be. The actual trade policy changes necessitated by a potential agreement may not be known until after the agreement is concluded and enters into force.
• Measures taken to protect the environment may cause other, unintended effects on society that have not been considered in this assessment due to their complexity to predict.For example, the phenomenon by which changed behaviour may offset part of the environmental gain (i.e. gains from energy efficiency can be subsequently negated by increases in energy use), also known as the “take-back” or “rebound” effect, has not been taken into account in this assessment.

3. Overview of Canada’s Economic Relationship with Other TISA Members

In early 2012, a group of like-minded WTO members began discussing new approaches to advance the liberalization of trade in services. Discussions revealed that the members of this group were willing to pursue an ambitious agreement on trade in services amongst themselves, as permitted under the GATS. These discussions gained momentum during the fall 2012 and, on March 18, 2013, the Honourable Ed Fast, Minister of International Trade and Minister for the Asia-Pacific Gateway, announced that Canada would join the TISA.

The TISA’s membership currently consists of the following 23 members: Australia, Canada, Chile, Chinese Taipei, Colombia, Costa Rica, the European Union (which comprises 28 members countries), Hong Kong China, Iceland, Israel, Japan, Liechtenstein, Mexico, New Zealand, Norway, Pakistan, Panama, Paraguay, Peru, South Korea, Switzerland, Türkiye and the United States.

Current TISA members represent a significant share of global economic output and, more specifically, trade in services. Their combined population is almost 1.6 billion and they generate a combined GDP of C$48.8 trillion, representing 67.6% of world GDP (see table 1 below). In 2012, TISA members exported close to C$3.3 trillion in services to the world, accounting for 75.7% of total world exports of services, and imported C$2.8 trillion in services, accounting for 66.4% of total world imports of services.

Table 1:GDP, Population, and Bilateral Trade with World

Country	GDPNote 1 (Billions C$)	PopulationNote 1 (Millions)	Services Exports to WorldNote 2 (Millions C$)	Services Imports from WorldNote 2 (Millions C$)	Services Trade Balance with World (Millions C$)
Australia	1,541.05	22.91	52,789.01	63912.83	-11,123.82
Canada	1,820.68	34.75	79,148.12	106,339.45	-27,191.33
Chile	268.06	17.40	12,620.80	15,054.48	-2,433.68
Colombia	368.86	46.60	5,237.57	10,572.56	-5,334.99
Costa Rica	45.09	4.67	5,577.15	2,034.16	3,542.99
European Union	16,663.64	505.50	1,856,159.69	1,534,070.01	322,089.68
Hong Kong China	263.15	7.18	123,409.51	57,359.63	66,049.88
Iceland	13.65	0.32	3,056.56	2,778.75	277.81
Israel	257.37	7.70	29,660.64	20,504.09	9,156.55
Japan	5,957.77	127.61	145,441.41	176,555.67	-31,114.26
Liechtenstein	4.82	0.04	n.a.	n.a	n.a.
Mexico	1,176.90	117.06	16,011.44	29,182.17	-13,170.73
New Zealand	169.76	4.44	10,030.56	11,105.73	-1,075.17
Norway	499.42	5.04	43,853.06	48,997.06	-5,144.00
Pakistan	225.46	178.91	6,556.05	8,159.32	-1,603.27
Panama	36.24	3.66	8,914.65	3,858.78	5,055.87
Paraguay	26.06	6.68	1,915.74	902.50	1,013.24
Peru	198.77	30.47	5,118.20	7,381.54	-2,263.34
South Korea	1,129.06	50.00	110,807.25	108,132.27	2,674.98
Switzerland	630.92	8.00	92,641.79	46,799.20	45,842.59
Taipei, Chinese	473.95	23.32	49,043.40	42,837.00	6,206.40
Türkiye	787.97	74.89	42,769.56	20,642.56	22,127.00
United States	16,237.75	314.18	640,052.30	441,518.32	198,533.98
TISA Total	48,795.70	1,590.82	3,340,814.45	2,758,698.08	582,116.37
World	72,186.04	6951.60	4,423,941.52	4,272,205.26
TISA World Share	67.6%	22.9%	75.5%	64.6%
Notes Note 1 1. Source: IMF, 2012 estimates. Liechtenstein data from World Bank, 2009. Note 1 Note 2 2. Source: World Trade Organization, 2012. Data for Paraguay is from 2011 Note 2

3.1 Canada’s Trade in Services with TISA Members

Canada already has a close trade relationship with many TISA members. Indeed, Canada already has FTAs covering services with the United States, Mexico, Chile, Colombia, Panama and Peru. Canada also recently reached an agreement in principle with the European Union on a Comprehensive Economic and Trade Agreement, which covers services as well. Canada has FTAs with Jordan, Israel, Iceland, Norway, Liechtenstein and Switzerland, but these agreements do not cover trade in services. In addition, Canada is negotiating FTAs covering services with the following TISA members: Korea, Japan and Costa Rica. Finally, many TISA members, including Canada, are involved in the TPP negotiations (Australia, Chile, Mexico, New Zealand, Peru, Japan and the United States), which also covers services trade.

In 2011^Footnote8, Canada exported C$69.8 billion worth of services to TISA member countries, accounting for 83.3% of Canada’s total services exports to the World, and imported C$90.1 billion, accounting for 84.6% of Canada’s total services imports from the World. Canada experienced trade deficits in services with the majority of the TISA members, with the largest deficits coming from the United States (C$14.7 billion), European Union (C$3.1 billion), and Hong Kong China (C$1.9 billion). Canada’s trade deficit in services with TISA members occurred primarily in travel services, with a deficit of C$15.0 billion. When Canadians travel abroad during the winter months they import travel services from their destination countries. The United States, Europe, and Mexico are the preferred destinations for Canadian travellers and these countries realized trade surpluses with Canada of C$13.1 billion, C$1.5 billion, and C$1.5 billion respectively.

In the global market for commercial services, Canadian commercial services are very competitive with a surplus with TISA members of 1.4 billion in 2011.  In the same year, Canada exported C$44.1 billion in commercial services to TISA members with the majority (C$ 31.9 billion) being received by the United States. The only TISA members with whom Canada experienced a significant trade deficit in commercial services were Switzerland (well known for its strength in financial services) and Japan, with a combined deficit of C$626.0 million. However, Canada maintained a positive trade balanced relative to other TISA members.

Canada’s trade in transportation services experienced a moderate deficit of C$6.6 billion with TISA members in 2011. One of Canada’s largest deficits in transportation services was with the United States at C$2.2 billion, reflecting Canada’s reliance on US shipping companies to export Canada’s merchandise to the United States. Canada also had significant trade deficits in transportation services with Hong Kong China (C$2.3 billion) and the European Union (C$1.9 billion), two regions with whom Canada experienced merchandise trade deficits.

Table 2: Canadian Trade in Services to TISA members, 2011 (millions C$)^{Note 1}

Partner	Total Services	Travel Services	Commercial Services	Transportation & Government Services
Australia
Exports	1,319	462	566	291
Imports	814	299	374	142
Trade Balance	505	163	192	149
Chile
Exports	189	26	142	21
Imports	111	25	44	43
Trade Balance	78	1	98	-22
Colombia
Exports	167	52	75	41
Imports	60	27	15	18
Trade Balance	107	25	60	23
Costa Rica
Exports	38	7	27	5
Imports	83	37	11	35
Trade Balance	-45	-30	16	-30
European Union
Exports	14,965	3,064	8,373	3,527
Imports	18,105	4,547	8,000	5,557
Trade Balance	-3,140	-1,483	373	-2,030
Hong Kong China
Exports	1,311	543	249	519
Imports	3,225	206	194	2,825
Trade Balance	-1,914	337	55	-2,306
Israel
Exports	235	85	95	55
Imports	128	63	22	43
Trade Balance	107	22	73	12
Japan
Exports	1,275	341	306	627
Imports	1,490	203	733	554
Trade Balance	-215	138	-427	73
Mexico
Exports	800	215	442	143
Imports	2,127	1,724	164	239
Trade Balance	-1,327	-1,509	278	-96
New Zealand
Exports	162	60	81	21
Imports	154	95	20	39
Trade Balance	8	-35	61	-18
Norway
Exports	368	41	214	112
Imports	348	35	133	180
Trade Balance	20	6	81	-68
Pakistan
Exports	146	96	16	35
Imports	60	9	4	47
Trade Balance	86	87	12	-12
South Korea
Exports	764	274	171	318
Imports	358	80	34	243
Trade Balance	406	194	137	75
Switzerland
Exports	1,758	217	1,370	171
Imports	1,831	135	1,569	127
Trade Balance	-73	82	-199	44
Taiwan
Exports	389	204	62	122
Imports	549	40	33	477
Trade Balance	-160	164	29	-355
Türkiye
Exports	81	28	21	32
Imports	130	84	6	40
Trade Balance	-49	-56	15	-8
United States
Exports	45,867	7,071	31,909	6,887
Imports	60,551	20,202	31,330	9,018
Trade Balance	-14,684	-13,131	579	-2,131
TISA
Exports	69,834	12,786	44,119	12,927
Imports	90,124	27,811	42,686	19,627
Trade Balance	-20,290	-15,025	1,433	-6,700
World
Exports	83,850	16,624	52,071	15,155
Imports	106,468	32,974	48,517	24,977
Trade Balance	-22,618	-16,350	3,554	-9,822
TISA World Export Share	83.3%	76.9%	84.7%	85.3%
TISA World Import Share	84.6%	84.3%	88.0%	78.6%
Notes Note 1 1. Source: IMF, 2012 estimates. Liechtenstein data from World Bank, 2009. Note 1

3.2 Direct Investment in Services

Data on Canada’s international direct investment position in services is limited to the three largest TISA members in terms of GDP (United States, European Union and Japan)^Footnote9. Preliminary data for 2011 indicate that Canada’s direct investment abroad (CDIA) in services to the three largest TISA members totalled C$289.5 billion. The majority of this CDIA in services was directed towards the United States and the European Union which together represented 67.8% of Canada’s overall direct services investment abroad. In the same period, preliminary data demonstrate that foreign direct investment (FDI) into Canada’s services industries from the three largest members of TISA was valued at C$176.9 billion and accounted for 86.5% of total FDI in Canada’s service industries from the world.

There has been a net outflow of direct investment in services in Canada since 1994. In addition, in 2011, Canadians were net investors (C$112.6 billion) with the three largest TISA members.

Table 3: Canada’s International Investment Position in Services, 2011 (millions C$)^{Note 1}

Partner	Canadian Direct Investment Abroad in Service Industries	Foreign Direct Investment in Canada in Service Industries
United States	173,825	119,352
Japan	0	3,540
European Union	115,626	53,966
Other OECD Countries	0	13,157
All Other Foreign Countries	122,489	14,398
Total	411,940	204,413
Notes Note 1 1. Source: Statistics Canada. Data for other TISA members not available. Note 1

4. The Government of Canada’s Environmental Objectives in Relation to Trade

Canada’s approach to trade and environment is to encourage economic development while supporting environmental sustainability. Typically, in its bilateral and regional free trade agreements, Canada seeks to include firm commitments in the agreement that foster good environmental governance and reinforce the concept that trade and environment policies can and must be mutually supportive. The importance of this mutually supportive relationship between trade and environmental outcomes is underscored by the strong correlation between open markets, economic development and environmental protection. A strong, rules-based trading system and efficiently regulated markets are key building blocks for economic growth and development. The reduction of trade barriers may facilitate the exchange of environmentally friendly technologies, and the establishment of rules for services investment helps create conditions for facilitating the transfer of technology.

Canada’s broad environmental objectives in entering into the negotiation of trade agreements are:

• to stimulate the efficient allocation of resources to generate positive environmental impacts;
• to preserve Canada’s ability to protect the environment;
• to ensure mutually supportive relationships between trade agreements and multilateral environmental agreements;
• to strengthen respective national environmental management systems.

At the same time, an increase in global economic integration and investment may have an impact on Canada’s Federal Sustainable Development Strategy (FSDS)’s goals and targets^Footnote10. The environmental assessment of this trade negotiation is consistent with FSDS’s purpose of rendering environmental decision-making more transparent and accountable; specifically, integrating environmental concerns with economic and social considerations in government decision-making.

The identification of likely and important environmental effects of a proposed trade agreement enables negotiators to consider whether existing mechanisms, such as federal, provincial and territorial regulatory frameworks and environmental assessments of new trade development projects are sufficient to mitigate any identified potential impact as a result of a proposed agreement and to examine the need for additional mitigation. The objective of the assessment is to ensure that the implementation of trade agreements minimizes potential negative environmental impacts while at the same time contributes to the economic well-being of Canadians.

It is also worth noting that, as with all trade agreements, Canada intends to negotiate obligations in the TISA which are consistent with Canada’s obligations under multilateral environmental agreements.

5. Initial Environmental Assessment Findings

Services are important for the Canadian economy as this sector supports Canada’s transformation toward a more knowledge-based economy with high-quality, high-paying jobs. It also represents a large and growing share of Canada's economy. In 2012, services accounted for 70% of Canada’s GDP and are responsible for over three of four jobs.

Canada believes that reducing trade barriers under the TISA could help to promote new opportunities for Canadian businesses and build support for global trade rules. Canada also believes that the TISA could build support for even greater liberalization in trade in services in the future and contribute to reinvigorating multilateral services negotiations.

5.1 Expected Economic Impact

Services are a key component of global value chains as they help promote value-added activities in different markets. Restrictions on service activities are rarely imposed at the border. Instead, barriers often arise beyond the border as a result of domestic regulation of the provision of services. Examples of such barriers are: barriers to commercial establishment, the number/type of services that can be provided, and discrimination in favour of domestic companies. In addition, the definition of services trade goes beyond cross-border flows to include three additional modes of supply: consumption abroad, commercial presence, and the movement of natural persons.

While studies have shown that there are substantial positive benefits to services and investment liberalization, it remains difficult to assess the economic impacts of removing barriers to services trade and investment. A number of international organizations and think tanks are currently looking at ways in which global services trade could be better quantified, but the “virtual” nature of most services transactions poses a major challenge.

Canada currently has FTAs which cover services trade and investment with six of the current 23 TISA members (United States, Mexico, Chile, Colombia, Panama and Peru). As these FTAs already provide for substantive obligations and commitments in the area of services trade and investment, it is not expected that the TISA would significantly increase the volume of services trade and investment with these countries. However, some of the rules that are under consideration for inclusion in the TISA may go beyond Canada’s trade agreement model, and could enhance the commitments that we currently have with some of our FTA partners. In addition to FTAs, Canada has FIPAs with Panama, Peru and several EU Member States. For the remaining TISA members (Australia, the European Union, New Zealand, Korea, Chinese Taipei, Japan, Hong Kong China, Norway, Liechtenstein Switzerland, Pakistan, Israel, Türkiye, Iceland, Paraguay and Costa Rica), services trade and investment take place based on the commitments they made under the GATS. For these markets, the TISA would provide improved regulatory transparency, market access and legal stability beyond their respective existing commitments under the GATS. The TISA would therefore make it easier for Canadian services suppliers and investors, especially small and medium size enterprises, to pursue new markets, favouring long-term growth and prosperity in Canada.

Finally, it is expected that the TISA will result in increased transparency of regulations, improved access through temporary entry for a range of service providers and investors, as well as frameworks for the negotiations of mutual recognition agreements and provisions respecting professional licensing and qualification requirements and procedures. This increased cooperation in the areas of labour mobility and regulatory cooperation is expected to contribute to increased activity in the services sector trade. At this point, the sectors of the Canadian economy that are expected to benefit from the TISA include engineering services, financial services, architecture services, energy and mining services, environmental services, as well as information and communication technology (ICT) services.

5.2 Likely Environmental Impacts of TISA

As trade in services tends to be intangible, the environmental effects of increased trade are difficult to quantify and predict. This is especially true as not all commercial transactions are recorded as they cross the border. That said, although the net effect on the environment will be difficult to assess qualitatively or quantitatively, we can expect the overall impacts on the environment to be minor.

The environmental impacts that could result from increased trade in services would likely be indirect. For example, liberalization in trade in services could result in an increased production of goods, as consumption increases, and therefore have a negative impact on the environment. This increased consumption could be explained by two forces. First, the TISA is expected to provide enhanced market access for the services industry, which would likely increase the demand for the goods essentials to this industry, such as paper and computers. It could also result in increased demand for commercial premises. Secondly, services are increasingly essential for the production of goods. For example, designing and engineering services are essential to the production of cars. In addition, the production and trade in goods would be much less efficient without good distribution and communication services. As a result, liberalization in trade in services could reduce the production costs of many goods, thus reducing their price. There are also cases where, liberalization in trade in services could potentially cause an increase in pollution generated by certain industries. Examples of this scenario could include the case where the liberalization of mining services would boost the mining industry, which might have negative environmental impacts. However, Canada has a comprehensive environmental management framework in place which would serve to potentially mitigate environmental impacts in relevant sectors. Additionally the TISA will not affect Canada’s right to further regulate in areas of environmental protection.

Similarly, the TISA could, in principle, increase fish and seafood exports and lead to some environmental impacts. However, Canada has a fisheries management system in place at federal, provincial and territorial levels of government that aims to ensure the sustainable use of Canada’s fisheries, irrespective of market demand and hence independent of the impact of the TISA.

In the other hand, most cross-border services benefiting from liberalization under the TISA would likely be in virtual areas (i.e. those without a physical component, such as professional advice), with less likelihood of negative environmental impacts. In addition, liberalization in professional, scientific and technological services could also have a positive impact on the environment, as Canada can be expected to gain from access to innovations, state-of-the-art and “green” technologies, as well as best practices. For example, liberalization in the sector of engineering services could allow a Canadian company to hire a foreign firm specializing in the design of environmentally efficient goods to design “greener” machinery for the mining sector, or in the use of more environmentally friendly building techniques in the construction industry. By the same logic, liberalization in services could indirectly serve to bring “green” products to market faster at a lower cost.

In sectors such as telecommunications services and e-commerce, it is possible that positive environmental impacts may be achieved as more environmentally sustainable goods and services are adopted. For example, in sectors such as telecommunications services and electronic commerce, positive environmental impacts can be anticipated through greater use of cross-border communications technologies (i.e. the internet/email, fax, teleconference, and videoconference) and by facilitating virtual transactions of goods and services. In the area of goods in particular, it would become easier for consumers to buy products such as software, online music or virtual books, thus reducing the need for their physical production (CDs and books).

While the TISA might also lead to an increase in the movement of natural persons, it is difficult to evaluate the environmental impact it would have. Indeed, while the movement of persons associated with services trade is captured in business travel statistics, these records are not industry-specific and are thus difficult to attribute to increases or decreases in specific service sectors. That said, we can assume that liberalization of the movement of natural persons – where the service is delivered with the presence of a natural person – combined with the increased trade in services that could result from TISA, could have a negative impact on the environment as it would increase the demand for means of transportation such as cars, buses and planes. On the other hand, liberalization in the movement of natural persons – which improves labour mobility – could favour the cooperation and exchange of knowledge in environment related fields, having a potentially positive effect on the environment over the long term.

5.3 Significance of Potential Environmental Impacts

While the TISA is expected to provide increased market access for services, Canada is already quite open in most services sectors. Services transactions between Canada and the other TISA members are already occurring either under existing bilateral FTAs or via the GATS. Therefore, the environmental impacts of the TISA – positive or negative – are expected to be only minor. In addition, potential negative environmental impacts can be offset by mitigation options and opportunities for environmentally sustainable growth, including technological innovation and industry best practices.

Concerning services investment, a balance between the need to regulate and the need to facilitate open investment is important. The TISA is not expected to substantially change the already largely open Canadian investment regime. Given that the TISA is limited to services related investment, environmental impacts are expected to be consistent with the impacts described for trade in services.

Finally, 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. Therefore, there are effective environmental management systems and government measures in place, and no changes to these policies are anticipated as a result of the TISA negotiations. Consequently, the TISA is not expected to result in a significant negative or positive impact on the sustainability of fish stocks, nor on Canada’s marine or freshwater environment.

5.4 Enhancement and Mitigation Options

Services sectors tend to be heavily regulated. Governments at different levels, as well as professional associations that have been delegated self-regulating authority, have implemented and maintained regulations governing the provision of services. Generally, such regulations establish and maintain a legal framework to serve various public-policy purposes, including the protection of the environment. With respect to specific service sectors, changes and improvements in procedures, equipment and technology lessen possible impacts, as do environmental legislation and industry awareness of environmental issues. Canada’s extensive environmental regulatory framework is expected to help mitigate potential impacts and will seek to ensure that increased economic activity resulting from the TISA would not jeopardize its commitment to sustainable development.

Fisheries and Oceans Canada develops and implements Integrated Fisheries Management Plans^Footnote11 for each fishery, which integrates conservation, management and scientific objectives and outlines the required measures to conserve and manage a fishery. Controls^Footnote12 are subject to regulation and enforcement. In addition, provinces also have programs in place to manage some categories of fish under their responsibility. With respect to potential environmental impacts that may result from increased services investment, they will be mitigated by laws that bind foreign investors to the same environmental regulations that govern domestic investors.

In the oil and gas sector, there are both federal and provincial laws, regulations and programs in place to protect the environment. For example, the Canada Oil and Gas Operation Act^Footnote13 aims, among other things, to promote the protection of the environment with respect to the exploration and exploitation of oil and gas. On its side, Alberta has a well-developed regulatory regime for the energy sector which includes environmental considerations of oil and gas activities^Footnote14. Alberta has also put in place an agency that oversees environmental monitoring across the province, including in the oil sands region^Footnote15. In addition to the federal and provincial regulations, changes in procedures and technology (such as using directional and horizontal well drilling) lessen the possible environmental impact by reducing the number of roads, power lines and pipelines needed for a site. The sector also uses low-impact seismic technologies in environmentally sensitive terrain. New procedures and technologies can also help prevent potential oil spills which could have serious environmental impacts.

In the construction sector, there is a wide range of environmental protection guidelines, tools, and techniques applicable to engineering works. These include facility design and site selection measures, energy conservation measures, and on-site measures to control soil erosion, manage wastes, and control pollutants. For example, the Super E® strategic initiative is a housing standard which utilizes state of the art construction techniques that promote energy conservation as well as environmentally responsible construction and healthy housing.^Footnote16 Finally, in the tourism sector, environmental damage can be limited by controlling access to ecologically-sensitive sites and limiting the number of visitors in certain areas based on capacity to accommodate, without pollution, loss of wildlife habitat, or other damage. 

There are also private sector mitigation options, including paper conservation within the office, greater use of cross-border trade facilitating means (i.e. the internet/email, fax, teleconference, and videoconference), recycling of various materials, and corporate policies on sustainable procurement.  While these activities are within the scope of the private sector, government policy can lead in the adoption of such practices, specifically through the greening of government procurement strategies. Nothing will prevent Canada from regulating services in the public interest on a non-discriminatory basis regarding environmental protection.

6. Environmental Sustainability Indicators

Along with federal, provincial and territorial legislation related to protecting the environment, Canada tracks its performance on key environmental sustainability issues including climate change and air quality, water quality and availability, and protecting nature as outlined in the Federal Sustainable Development Strategy. As well, the Federal Government monitors environmental issues, such as waste management, in support of sustainability.

Environmental sustainability indicators focus on the following areas:

Biodiversity: Conserving biodiversity and using biological resources in a sustainable manner are essential parts of Canada's effort to achieve sustainable development.  The Canadian Biodiversity Strategy reaffirms that governments in Canada must create the policy and research conditions that will lead to the conservation of biodiversity and the sustainable use of biological resources. The Canadian Biodiversity Strategy, along with the complementary Biodiversity Outcomes Framework, guide action at all levels that will enhance the ability to ensure the productivity, diversity and integrity of natural systems and, as a result, the ability as a nation to develop sustainably.

Air Contaminants and Greenhouse Gases: Air pollution is a broad term applied to any chemical, physical, or biological agent that modifies the natural characteristics of the atmosphere. Examples include particulate matter and ground-level ozone. Air pollutants fall into four main categories: criteria air contaminants (e.g. SO2, NOx, volatile organic compounds), persistent organic pollutants (e.g. dioxins and furans), heavy metals (e.g. mercury) and toxins (e.g. benzene).

The Federal Government, along with other levels of government, industry, non-government organizations, and individuals have taken action to reduce emissions of harmful air pollutants from human sources.

The Canadian Council of Ministers of the Environment (CCME) serves as a principal forum for collaboration on environmental strategies, norms, and guidelines. The recently approved Air Quality Management System (AQMS)^Footnote17 is a comprehensive approach for reducing air pollution in Canada.  It is the product of close collaboration by the federal, provincial, and territorial governments and stakeholders.  The AQMS includes new Canadian Ambient Air Quality Standards, local air quality management by provinces in air zones, coordination of regional and transboundary issues through air sheds, and industrial emissions requirements for key sectors and equipment groups.  It is currently in the implementation stage.

For greenhouse gases (GHGs), the Federal Government is taking a sector-by-sector regulatory approach to reducing GHG emissions towards the national emission reduction target of 17% below 2005 levels by 2020.  The Government is aligning efforts with the United States where appropriate, given the integrated nature of our economies. Regulations are already in place for transportation and coal-fired electricity.

Light duty vehicle regulations for model years 2011-2016 came into force in October 2011, and draft regulations for model years 2017 and beyond were published in December 2012. Regulations have also been finalized to reduce GHG emissions from new on-road heavy-duty vehicles and engines for model years 2014-2018.  In September 2012 the Government of Canada released final regulations to reduce emissions from the coal-fired electricity sector. These will impose stringent standards on new coal-fired generation units and on units that have reached the end of their economic life. They will come into effect on July 1, 2015 and will encourage the phase-out of traditional coal-fired generation and transition towards lower- or non-emitting types of generation. The Government of Canada continues to work with other levels of government, industry and stakeholders to develop GHG regulations for the oil and gas sector, and other major-emitting industries. The Federal Government is focused on a realistic approach to GHG regulations that will reduce emissions while continuing to create jobs and encouraging the growth of the Canadian economy.

Waste: The quantity of solid waste generated in Canada includes waste disposed in landfills and incinerators plus waste diverted for recycling and composting. The generation and management of solid waste raise important environmental, economic and social issues for Canadians.

In Canada, the responsibility for managing and reducing waste is shared among the federal, provincial, territorial and municipal governments. The federal government, in particular, administers controls on the transboundary movements of hazardous wastes and hazardous recyclable materials in accordance with the Basel Convention and relevant OECD decisions on wastes.  It also establishes best practices and implements measures, as needed, to manage the potential release of toxic substances during their life-cycle, including from end-of-life products and waste management activities.

The CCME is one forum where provincial, territorial and federal environmental authorities work together to develop policies, guidance and tools to advance the environmentally sound management of wastes in Canada and encourage waste minimization. For example, under the CCME, members have adopted the Canada-wide Action Plan on Extended Producer Responsibility, the Sustainable Packaging Strategy and guidelines for hazardous waste landfills. Together they continue exploring opportunities for collaborative solutions related to waste management.

Chemicals: Chemical substances are widely used to improve the quality of our lives and their presence can be observed in the environment and in living organisms. Most of these chemical substances are not harmful to the environment or human health.

The Government of Canada manages chemical substances of concern to protect human health and the environment through the Chemicals Management Plan. Canada’s Chemicals Management Plan was launched in 2006, and is jointly managed by Environment Canada and Health Canada. Chemical substances of concern are assessed and measures are put in place to eliminate or minimise potential risks of those found to be toxic. Monitoring and surveillance activities under Canada’s Chemicals Management Plan are national in scope, and are therefore discussed further below.

National Monitoring and Tracking Programs:In addition to the initiatives outlined in specific areas above, Canada has established several ongoing monitoring programs for the environment. Ongoing monitoring and tracking programs provide valuable data and information about Canada’s performance on key environmental sustainability issues.

These include, but are not limited to:

• Monitoring and Surveillance Activities under Canada's Chemicals Management Plan – A key element of the Chemicals Management Plan is the monitoring and surveillance of levels of harmful chemicals in Canadians and their environment. Environmental and human biomonitoring and surveillance are essential to identify and track exposure to hazards in the environment and associated health implications.
• National Pollutant Release Inventory – The Inventory is Canada's legislated, publicly accessible inventory of pollutant releases (to air, water and land), disposals and transfers for recycling.
• Canadian Environmental Quality Guidelines^Footnote18 – The Guidelines have been established by the CCME to provide nationally endorsed science based goals for the quality of atmospheric, aquatic, and terrestrial ecosystems.
• Canadian Environmental Sustainability Indicators (CESI)^Footnote19 – This program provides data and information to track Canada’s performance on key environmental sustainability issues including climate change and air quality, water quality and availability, and protected nature. The environmental indicators are based on objective and comprehensive information and convey environmental trends in a straightforward transparent manner. Indicators are added and updated throughout the year as new data become available.

These initiatives provide valuable data and information for tracking Canada’s performance on key environmental sustainability issues. They ensure that international, national, regional, and local trends are readily accessible and transparently presented to all Canadians and will continue to be used to track sustainability when the TISA is implemented.

7. Conclusion

The TISA would represent the world’s largest services market. Its 23 members have a combined GDP of nearly C$49 trillion — more than two-thirds (68 percent) of the world’s GDP. In 2012, TISA members exported close to C$3.3 trillion in services to the world. While services are not subject to tariffs, they can still be subjected to discriminatory barriers such as nationality requirements and restrictions on foreign investment. Furthermore, in many countries, laws and regulations are not transparent or predictable. These barriers often exceed those for goods.  Consequently, the TISA is a good opportunity to improve market access, legal stability and transparency for services trade and investments. This would especially benefit small and medium-sized enterprises that need stability and predictability in the global environment – through clear rules for services trade – to pursue new markets and continue to grow.

Canada’s approach to trade and environment is to encourage economic development while supporting environmental sustainability. This Initial Environmental Assessment is part of the process designed to ensure that negotiations of trade agreements include appropriate consideration of environmental impacts. The Initial Environmental Assessment is designed to scope out the main environmental issues likely to arise as a result of the proposed agreement. To that end, this report assessed environmental impacts by performing a qualitative analysis to help negotiators and the Canadian public to better understand potential economic and environmental impacts from an agreement. 

As the TISA focuses on services as defined in the WTO, the Initial Environmental Assessment also concentrates on the economic sectors covered by the GATS. This analysis identified potential impacts for which increased trade in services could have on the environment, and concluded that the environmental impacts of TISA are expected to be only minor. In addition, opportunities for mitigation of negative impacts and enhancement of positive impacts were also discussed. 

Pursuant to the Framework, the next phase of the environmental assessment process will be to conduct a Final Environmental Assessment. The Final Environmental Assessment will include a discussion of any subsequent analysis undertaken and document any comments received in response to the Initial Environmental Assessment concerning the anticipated environmental impacts of the agreement on Canada. The Final Environmental Assessment will be released after negotiations conclude.

Following the conclusion of the Final Environmental Assessment report, follow-up and monitoring could, if warranted, be undertaken in order to review any mitigation or enhancement measures ultimately recommended by the Final Environmental Assessment 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.