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Initial Environmental Assessment on the Negotiations to Expand Product Coverage under the WTO Information Technology Agreement (ITA) 

Table of Contents

1. Executive Summary

• 1.1 Overview
• 1.2 Initial Environmental Assessment Findings

2. The Environmental Assessment

• 2.1 Overview of the Environmental Assessment Process
• 2.2 Scope of the Environmental Assessment Process
• 2.3 Assessment Methodology

3. The Canadian ICT Sector

4. Trade and the Environment

• 4.1 The Government of Canada’s Environmental Objectives in Relation to Trade

5. Initial Environmental Assessment Findings

• 5.1 Anticipated Effects of an Expanded ITA
• 5.2 Potential Environmental Impacts and Significance
• 5.3 Mitigation and Environmental Enhancement Measures
• 5.4 Conclusion of Quantitative Assessment

6. Environmental Sustainability Indicators

7. Conclusion

1. Executive Summary

1.1 Overview

The multilateral trading system is central to Canada's trade interests and remains a cornerstone of Canada's international trade policy. As such, it is in Canada's interest to be actively engaged in the multilateral system so as to shape and strengthen it, including through initiatives to enhance market access in sectors of importance to Canada. In this context, the World Trade Organization (WTO) has long been a key part of Canada's trade policy agenda. Recently, a number of WTO Members have shifted their focus towards possible plurilateral initiatives – that is, initiatives involving a sub-set of WTO Members – which allow like-minded countries to pursue high-ambition outcomes in areas of mutual interest. One such example is Canada's participation in the negotiations to expand the product coverage of the WTO Information Technology Agreement (ITA).

The ITA is a plurilateral agreement on trade in information and communications technology (ICT) products. Originally concluded at the December 1996 WTO Ministerial Conference in Singapore, the ITA specifically provides for participating WTO Members to eliminate tariffs on ICT products covered under the Agreement on a most-favoured nation (MFN) basis. As the ITA is applied on an MFN basis, the benefits of tariff elimination by participating countries (currently 78 members, up from 47 members in 1996) accrue to all WTO Members and not just the participants of the ITA. Nearly all major ICT trading WTO Members are parties to the ITA, including Canada, China, the European Union, India, Japan, South Korea and the United States. Key players absent from the ITA include Argentina, Brazil, Chile, Mexico and South Africa.Seeking new ITA Members is also an important objective of the ITA expansion initiative.

Product coverage under the ITA has not been updated since the agreement entered into force in 1997 and hence, has not kept pace with advancements in technology and the development of new ICT products. Consequently, a wide range of ICT products (e.g., car navigation systems, radar apparatus, and communication satellites) are not covered by the ITA. In 2012, certain ITA Members began discussions on the possible expansion of ITA product coverage.

In order to ensure that Canada’s environmental protection mechanisms are strengthened through free trade, Canada typically negotiates trade-related environmental provisions in the context of free trade agreements. However, as this agreement is specific to trade in goods and only pertains to tariff elimination, no environmental provisions are being considered nor negotiated in the ITA expansion initiative. Nonetheless, Canada believes that trade and environmental protection can, and must, be mutually supportive. Consistent with this, Canada’s broad environmental objectives when entering into trade negotiations are:

• to preserve Canada’s ability to protect the environment;
• to ensure mutually supportive relationships between trade agreements and multilateral environmental agreements;
• to stimulate the efficient allocation of resources to generate positive environmental impacts;
• to strengthen respective national environment management systems; and
• to use this strengthened capacity to combat transboundary pollutants and the invasive species that directly affect Canada’s environment and economy and the health of Canadians.

The Government of Canada is committed to conducting environmental assessments of all of its trade negotiations, including the negotiations to expand ITA product coverage and membership. An environmental assessment of trade negotiations assists Canadian negotiators to integrate environmental considerations into the negotiating process, and documents how environmental factors are being considered in the course of negotiations. Through the environmental assessment process, Canada seeks to ensure that proposed trade agreements contribute to the development of the Canadian economy in a sustainable manner.

In accordance with the 2001 Framework for Conducting Environmental Assessments of Trade Negotiations (“the Framework”) ^{Footnote 1}, this report constitutes the initial environmental assessment of the negotiations to expand the ITA by the Department of Foreign Affairs, Trade and Development. 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 expansion of the ITA. This assessment focuses on potential economic and environmental impacts in Canada stemming from the expanded product coverage of the ITA, and associated increased trade, by exploring the links between increased market access for ICT products and potential environmental impacts in Canada. As such, this Initial Environmental Assessment does not seek to predict with certainty the specific outcomes of an expanded ITA, such as changes in specific trade patterns. Rather, the Initial Environmental Assessment estimates possible environmental impacts using informed judgment based on potential changes in economic activity resulting from an expanded ITA.

1.2 Initial Environmental Assessment Findings

As the original ITA and the expanded ITA are limited in scope to ICT goods, this initiative only affects a small sub-set of trade in goods. The elimination of tariffs is expected to bolster the presence of Canadian ICT exporters in participating ITA Member markets and increase imports of these products into Canada. The Canadian ICT sector, although important to Canada’s domestic economy, nonetheless assumes a relatively small role in the context of Canada's overall global trade flows. This would continue to be the case even if considerable trade growth resulted from the expansion of the ITA. As such, this agreement would be expected to have a moderate overall economic impact on the domestic Canadian economy. Any environmental impact resulting from increased imports from WTO Members is expected to be minimal and should be easily accommodated within Canada’s existing environmental regime.

2. Environmental Assessment

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 Framework details this process, and was developed in response to the Cabinet Directive on Environmental Assessment of Policy, Plan and Program Proposals (“the Cabinet Directive”).^{Footnote 2}Detailed guidance for applying the Framework is contained in the Handbook for the Environmental Assessment of Trade ^{Footnote 3}(“the Handbook”). The guidelines for implementing the Cabinet Directive require government 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^{Footnote 4} goals and targets.

The Framework provides a process and methodology for conducting the 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. The objectives of the environmental assessment process of a trade negotiation, as outlined in the Framework, are:

• to assist Canadian negotiators in integrating environmental considerations into the negotiating process by providing information on the environmental impacts of a proposed trade and/or investment agreement; and
• to document how environmental factors are being 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 in order to reflect how the environment was considered throughout the process.

After the conclusion of each phase, a public report is issued along with a request for comments.  In the event that an initial environmental assessment finds little likelihood of significant environmental impact occurring as a result of an agreement, 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. In accordance with the Framework, a draft environmental assessment will not be undertaken for this negotiation. However, the Department will continue to receive comments from stakeholders and the public and a final EA will be released after negotiations conclude.
After the conclusion of the EA process, follow-up and monitoring may be undertaken in order to review any mitigation or enhancement measures that would be recommended in the final environmental assessment.

2.2 Scope of the Environmental Assessment Process

Given that environmental assessments are meant to assist and inform the Canadian negotiating team during active negotiations, this assessment focuses on the expansion of product coverage in the ITA rather than considering elements stemming from the original Agreement concluded in 1996. As such, all incremental changes to the existing ITA are being assessed to identify and evaluate their potential impact on Canada’s environment and to consider any concerns raised by stakeholders (including the public). As the original ITA was negotiated prior to the adoption of the Cabinet Directive, no environmental assessment was conducted at that time.

Other interested WTO Members could potentially join the current ITA expansion negotiations, or could accede post-implementation. In this context, this Initial Environmental Assessment will focus only on the current participants of the ITA expansion negotiations. Any new analysis undertaken during the course of negotiations due to new or unanticipated issues such as an additional country joining the negotiations after the public release of this initial environmental assessment will be documented and included in the final environmental assessment.

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 as well as providing an opportunity to integrate environmental considerations while the negotiations are ongoing. It focuses on potential economic and environmental impacts in Canada from the expansion of the ITA by exploring the links between market access and the environmental impacts in Canada. In other words, this assessment considers the environmental impacts of new trade in Canada that may result directly from the expansion of the ITA.

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. This stage identifies the trade liberalization activity of the agreement under negotiation. It examines what 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^{Footnote 5}.

• 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 some of the criteria outlined above to describe significance: none, minimal, moderate, high, and extreme.

• Identification of enhancement/mitigation options to inform the negotiations. The Initial Environmental Assessmentis 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 agreement.

The environmental assessment of a trade negotiation requires interdepartmental collaboration.^{Footnote 6} An interdepartmental committee is established to review the environmental assessment of each 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) – composed of stakeholders, including representatives from the business sector, academia, and non-governmental organizations.

As required by the Framework, a was published on April 8, 2013.  This notice invited interested individuals to submit their input for consideration in the drafting of this Initial Environmental Assessment by June 5, 2013. A limited number of comments were received during the consultation phase.

Comments received during the initial consultation period pertained to the finite supply of rare earths and minerals, as well as the potential for less stringent environmental standards and weak labour codes in other ICT producing countries which could place Canadian firms at a competitive disadvantage. The concerns were that the true costs, being environmental and labour, of producing goods in other countries and imported into Canada were not necessarily reflected and as a result could put pressure on Canadian firms to cut its costs. These concerns have been noted, however the issues raised fall outside of the scope of the ITA expansion negotiations. The ITA is strictly a tariff elimination agreement and does not cover or address other issues such as the environment and labour. However, Canada has actively worked to address environmental concerns stemming from the growth of the ICT sector through the regulations and initiatives discussed in the following sections.

The Government welcomes input and comments on all Initial Environmental Assessments. Input can be sent to:

E-mail: EAconsultationsEE@international.gc.ca
Fax: 613-992-6002
Mail: Tariffs and Goods Market Access Division (TPG)
Foreign Affairs, Trade and Development Canada
John G. Diefenbaker Building
111 Sussex Drive, Ottawa, ON, K1N 1J1

3.  The Canadian ICT Sector^{Footnote 7}

Canada's ICT sector is diverse with approximately 33,500 companies employing over 500,000 workers, comprising 3.2% of total employment in Canada. Canadian ICT companies are largely export oriented with 60% of ICT products manufactured in Canada destined for markets abroad.  Canadian companies are actively involved in ICT manufacturing, wholesaling, computer and communication and software services.

In 2011, the ICT sector contributed $63 billion to Canada's GDP, largely due to exports. Since the implementation of the ITA, Canada's total trade in the ICT sector has nearly doubled from $26.9 billion in 1996 to $50.9 billion in 2011. All of Canada's top trading partners in the ICT sector, with the exception of Mexico, are ITA participants including, China, the European Union, Japan, Malaysia, Thailand, South Korea, and the United States.

Canadian ICT manufacturing has continued to be an important segment of Canada’s overall ICT sector. The manufacturing segment employs over 80,000 people across Canada, with over 90% of these manufacturing companies representing small and medium sized enterprises employing less than 100 people. In 2011, the manufacturing sector generated revenues of $21.8 billion and exports of $12.8 billion. Of the $12.8 billion generated from exports, approximately $5 billion is not currently covered by the ITA.

In addition to ICT manufacturing, the Canadian ICT sector has expanded in recent years into the value-added and knowledge-intensive segments, including services, and research and development. The ICT services sector is primarily focused on software development, computer and communication services, and technological research, development and innovation. In 2011, ICT services employed nearly 400,000 workers with industry revenues of $102 billion. ICT services have thus been a driving force in the growth of the broader ICT sector in Canada, accounting for 70% of the sector’s growth since 2002.

Canadian ICT research, development and innovation is focused specifically on data processing and communications equipment (e.g. computers, tablets, smart and cellular phones), electronic components, software and computer services. With research and development expenditures of $5.3 billion in 2011, the ICT sector represented the largest sectoral performer of research and development in Canada, accounting for 34% of all private sector research and development investments.

4. Trade and the Environment

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

The Government of Canada is committed to ensuring that its trade negotiations consider environmental sustainability so as to encourage supportive trade and environmental objectives. The importance of mutually supportive 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 elimination of trade barriers plays a key role in facilitating the exchange of environmentally friendly technologies.

Canada’s objectives, relative to the environment, during trade agreements negotiations are:

• to preserve Canada’s ability to protect the environment while enhancing trade relationships;
• to ensure mutually supportive relationships between trade agreements and multilateral environmental agreements;
• to stimulate the efficient allocation of resources to generate positive environmental impacts;
• to strengthen respective national environmental management systems; and
• to use this strengthened capacity to work collaboratively to combat environmental issues of mutual interest such as transboundary pollutants and invasive species that directly affect Canada’s environment and economy and the health of Canadians.

At the same time, an increase in global economic integration and investment may have an impact on Canada’s domestic Federal Sustainable Development Strategy (FSDS) goals and targets.^{Footnote 8} The environmental assessment of this trade negotiation is consistent with the overarching objectives of the FSDS to make 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 significant 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 projects as a result of new trade and investment, are sufficient to mitigate any identified impacts caused by the proposed agreement. It also enables negotiators to examine the need for additional mitigation efforts. The objective is to ensure that the implementation of trade agreements minimizes negative environmental impacts while at the same time contributing to the economic well-being of Canadians.

As with all agreements, Canada will remain compliant with its obligations under multilateral environmental agreements such as: the Convention on International Trade in Endangered Species of Wild Fauna and Flora, the Montreal Protocol on Substances that Deplete the Ozone Layer, the Basel Convention on the Control of Transboundary Movements of Hazardous Wastes and their Disposal, the Rotterdam Convention on the Prior Informed Consent Procedure for Certain Hazardous Chemicals and Pesticides in International Trade, and the Stockholm Convention on Persistent Organic Pollutants^{Footnote 9}.

5. Initial Environmental Assessment Findings

5.1 Anticipated Effects of an Expanded WTO ITA

An expanded ITA is expected to establish commercially significant provisions related to market access for ICT products through the elimination of MFN bound and applied tariffs. The largest trade gains resulting from this initiative are expected in areas with relatively high recent trade volumes that face significant tariff barriers.

Furthermore, the expansion of the ITA is expected to bolster Canadian trade for covered ICT products. Nevertheless, the ICT sector assumes a small role in the context of Canada’s overall global trade flows. This would continue to be the case even if considerable trade growth resulted from this initiative.

5.2 Potential Environmental Impacts and Significance

5.2.1. Introduction

This Initial EA report is based on a quantitative analysis prepared by the Department’s Office of the Chief Economist using trade and tariff data to calculate the average trade-weighted tariff as well as a partial equilibrium model^{Footnote 10} for calculating the welfare effects of increased Canadian imports from ITA members. The intent of this quantitative analysis is to determine the anticipated economic effects, and by extension the environmental impacts that an expanded ITA could have on Canada.

Three potential expanded ITA product coverage scenarios are considered in this quantitative analysis with tariff analysis and welfare calculations conducted for each scenario. The three product coverage scenarios provide insight into the scope of potential benefits that could be received by consumers from tariff elimination. This quantitative analysis further demonstrates that any benefits from an expanded ITA will result in minimal environmental impacts. The magnitude of the environmental impact has been shown to be generally related to the economic effects of a trade agreement. The goal of this quantitative analysis is to provide a cost-benefit analysis of the addition of new products to the ITA and suggest which product coverage scenario would most benefit the interests of Canadian consumers, producers and the Canadian environment.

5.2.2. Data & Methodology

For each of Canada’s trading partners, bilateral trade flow data for existing ITA products and potential new ITA products was acquired from the Global Trade Atlas database for the years 2010 to 2012. A three year average of the trade flows is taken for each of the product coverage scenarios as well as for the already existing ITA items. Total tariffs on the trade flows are calculated for the new items being considered for inclusion in the ITA. The trade-weighted average tariff provides a projection of the total amount of duties saved that would occur if all tariffs on items in the product coverage scenarios were reduced to zero. The countries considered represent almost 80 percent of Canada’s global ICT trade and consist of  Australia, China, Costa Rica, the European Union, Hong Kong, Israel, Japan, Malaysia, Mauritius, New Zealand, Norway, Philippines, Singapore, South Korea, Switzerland, Taiwan, Thailand, and the United States.

This model calculated welfare gains by focusing on the economic effects of trade liberalization in the Canadian ICT sector. All tariffs used in this model are MFN applied tariffs. Additional details on the elasticities of demand, supply, and substitution as well as other details on the methodology of this analysis are available upon request.

5.2.3. Canadian Imports of ITA products

Canada is a technologically-advanced economy that relies on the provision of ICT products from global markets. This has resulted in Canada becoming the twelfth-largest importer of ICT products in the world.^{Footnote 11} Canadian ICT imports from ITA members covered by the existing ITA regime averaged C$16.8 billion per year from 2010 to 2012 and has averaged a yearly growth rate of 1.5 percent since the ITA was implemented.

The largest categories of ICT products imported into Canada under the existing ITA regime are those of computers and data storage, parts and accessories, and telecommunications (see figure 1). While computers and data storage makes up the majority of the imports, telecommunications has been the fastest growing sector of goods imported since the ITA was implemented with an average yearly growth rate of 9.9%. The growth in telecommunication imports is due to the drastic changes that have occurred in the Canadian telecommunication sector over the past 15 years as production has shifted from domestic manufacturers to foreign smart phone producers.

Adding items from the first product coverage scenario to Canada’s imports of goods currently covered under the ITA would increase Canada’s imports of ICT products by C$38.0 billion. The expanded items would include the new categories of photographic plates, film and paper, and flight simulation products with the majority of the increases coming from the existing categories of parts and accessories, instruments and apparatus, and machinery. Under the second product coverage scenario the number of products in the expansion is reduced and the products covered under this scenario would be worth C$35.9 billion in Canadian imports. Product coverage scenario 3 proposes the smallest number of new products to be covered in an expanded ITA and would be worth C$30.7 billion in Canadian imports.

Table 1: Product Cover Scenario Summaries for Canadian Imports, millions C$

Partner	Existing ITA	Product Coverage Scenario 1		Product Coverage Scenario 2		Product Coverage Scenario 3
	Imports*	Imports*	Trade Weighted Average MFN Tariff	Imports*	Trade Weighted Average MFN Tariff	Imports*	Trade Weighted Average MFN Tariff
China	8,915.3	8,670.1	0.9%	8,473.7	0.9%	7,472.6	0.7%
U.S.	4,593.4	17,883.6	0.6%	16,416.7	0.5%	13,559.7	0.5%
EU	788.3	4,532.9	0.2%	4,242.8	0.2%	3,650.0	0.2%
Taiwan	684.5	1,162.9	0.3%	1,114.4	0.3%	869.8	0.3%
S. Korea	502.2	611.1	0.3%	599.2	0.3%	541.9	0.2%
Japan	377.6	2,314.1	0.2%	2,253.1	0.2%	2,046.2	0.2%
Malaysia	331.8	914.0	0.2%	909.9	0.2%	851.8	0.1%
Thailand	236.1	672.1	0.2%	669.6	0.2%	659.5	0.1%
Singapore	142.7	266.6	0.1%	259.8	0.1%	241.0	0.1%
Philippines	64.5	143.7	0.2%	143.6	0.2%	138.1	0.2%
Total	16,786.1	38,027.9	0.6%	35,902.0	0.5%	30,661.4	0.4%

*Trade flows are taken as an average of 2010 to 2012, Global Trade Atlas data.

Using a trade-weighted calculation for collected duties based on MFN applied tariffs, the distribution of duties that would be assessed among ITA members does not vary much among the three product coverage scenarios. For all product coverage scenarios, the top three regions from which Canada imports are U.S., China, and the EU – which together account for over 80 percent of Canada’s imports from ITA members and 90 percent of all duties Canada collected on the import of goods from an expanded ITA. When weighted for trade flows, the countries that face the highest barriers when exporting to Canada are the U.S. and China with a trade weighted average tariffs of 0.6 percent and 0.9 percent, respectively. However, these estimates represent an upper bound, particularly with imports from the U.S., which would generally benefit from duty-free access under the NAFTA provided the products meet the rules under the NAFTA (e.g., rules of origin). 

The imported products that have faced the highest tariffs and have the greatest potential for gains include optical media for recording sound, plastics for ICT manufacturing, television reception apparatus, video recording apparatus, polymer adhesives for ICT manufacturing, and lead acid storage batteries.

Table 2: Top Canadian Imports of Expanded ITA Items, millions C$

HS6	Description	Imports*	Trade Weighted Average MFN Tariff	Product Coverage Scenario Membership
852340	Optical media for recording sound	1,291.7	2.4%	1,2,3
852190	Video recording or reproducing apparatus	476.0	3.3%	1,2,3
852872	Reception apparatus for color television	402.5	5.0%	1,2
392310	Boxes, cases, crates &similar articles of plastic	316.0	6.4%	1,2
350691	Adhesives based on polymers	239.5	6.4%	1
850720	Lead-acid storage batteries	231.8	6.5%	1,2,3
851981	Sound recording apparatus	164.6	4.1%	1,2,3
852859	Monitors, withouttelevision reception apparatus	147.4	5.7%	1,2,3
851840	Audio-frequency electric amplifiers	126.7	6.4%	1,2,3
851829	Loudspeakers	117.0	6.3%	1,2,3

*Trade flows are taken as an average of 2010 to 2012, Global Trade Atlas data.

5.2.4. Canadian Exports of ITA products

The global ICT exports market is dominated by the U.S., China and several other Asian countries. Canada ranks as the twenty-third largest exporter of ICT products in the world.^{Footnote 12} Canadian ICT exports to ITA Members averaged C$3.6 billion per year from 2010 to 2012 and has seen an average yearly decline of 1.7 percent since the ITA was implemented.

The largest categories of ICT products exported from Canada to ITA members consist of parts and accessories, computers and data storage, and telecommunications (see figure 2). In the 15 years since the ITA was implemented, the share of each product category as a percentage of total Canadian exports to ITA members, has remained relatively stable with no category of items averaging a yearly change of more than 4 percent. The only categories to average significant yearly changes were computers and data storage (-3.2 percent) and telecommunications (-2.6 percent).

Adding the items of product coverage scenario 1 to Canada’s exports of products currently covered under the ITA would increase Canada’s exports of ICT products by C$20.4 billion. Photographic plates, film and paper and flight simulation products are again added to the existing ITA product categories with the existing categories of parts and accessories, instruments and apparatus, and machinery experiencing the majority share of new exports to ITA members.

For the expanded products of product coverage scenario 1, Canadian exporters could face duties charged by importing countries of C$326.6 million for a trade weighted average tariff of 1.6 percent based on MFN applied tariffs. The largest trade-weighted average tariffs faced were on Canada’s exports to South Korea and Thailand which have domestic ICT manufacturers that benefit from the protection provided by high trade barriers. An expansion of the ITA would provide Canadian producers with greater market access and provide fairer competition within these Asian markets.

The second product coverage scenario includes C$18.7 billion of Canadian exports and duties paid of C$287.5 million for a trade-weighted average tariff of 1.5 percent. With the move to scenario 2, the trade-weighted average tariff falls as well as the amount of Canadian exports that would be covered. Expansion of the ITA under scenario 2 would provide C$39.1 million less in potential gains to Canadian exporters than under scenario 1.

Product coverage scenario 3 provides the smallest coverage and accounts for C$15.3 billion worth of exports and duties paid of C$211.0 million for a trade-weighted average tariff of 1.4 percent. In this scenario all countries reach their lowest levels of trade-weighted average tariffs charged to Canadian exporters, producing the fewest potential gains for Canadian exporters of all three product coverage scenarios. With the fewest number of products covered, scenario 3 provides C$115.6 million dollars less in potential gains to Canadian exporters than scenario 1 which has the largest coverage.

Table 3: Policy Scenario Summaries for Canadian Exports, millions C$

Partner	Existing ITA	Product Coverage Scenario 1			Product Coverage Scenario 2			Product Coverage Scenario 3
	Exports*	Exports*	Import Duties	Trade Weighted Average MFN Tariff	Exports*	Import Duties	Trade Weighted Average MFN Tariff	Exports*	Import Duties	Trade Weighted Average MFN Tariff
U.S.	2,395.7	13,489.0	193.1	1.4%	12,232.0	167.8	1.4%	9,688.5	120.8	1.2%
EU	619.2	2,373.4	43.7	1.8%	2,151.8	38.5	1.8%	1,797.3	30.8	1.7%
China	164.9	1,889.3	35.4	1.9%	1,812.0	31.4	1.7%	1,639.1	26.1	1.6%
Singapore	80.0	285.3	0.0	0.0%	274.4	0.0	0.0%	227.4	0.0	0.0%
Hong Kong	69.1	650.5	0.0	0.0%	633.8	0.0	0.0%	604.7	0.0	0.0%
Australia	56.4	259.2	5.0	1.9%	249.0	4.6	1.9%	205.8	3.8	1.8%
Japan	54.8	446.8	0.5	0.1%	403.0	0.1	0.0%	356.6	0.0	0.0%
S. Korea	50.3	307.8	17.0	5.5%	298.5	16.3	5.5%	224.8	10.6	4.7%
Norway	33.5	73.3	0.0	0.0%	67.5	0.0	0.0%	52.0	0.0	0.0%
Malaysia	24.6	128.0	2.1	1.6%	122.9	2.0	1.7%	110.6	1.9	1.7%
Total	3,621.7	20,363.5	326.6	1.6%	18,686.3	287.5	1.5%	15,271.8	211.0	1.4%

*Trade flows are taken as an average of 2010 to 2012, Global Trade Atlas data.

The exported products that have faced the highest tariffs and have the greatest potential for gains include photographic plates, film and paper, plastics for ICT manufacturing, Liquid Crystal Devices, electrical cabinets, and appliances for boilers and tanks. All of these products have been charged tariffs of over USD$15.0 million with chemical products facing the highest charges at USD$53.8 million.

Table 4: Top Canadian Exports of Expanded ITA Items, millions C$

HS6	Description	Exports*	Trade Weighted Average MFN Tariff	Product Coverage Scenario Membership
847989	Machines and mechanical appliances, n.e.s.	595.0	1.4%	1,2
854370	Electrical machines and apparatus	563.8	2.3%	1,2,3
853710	Boards, cabinets for electrical control	553.8	3.1%	1,2,3
848071	Injection type moulds for rubber or plastics	497.4	2.7%	1,2,3
848180	Appliances for pipes, boiler shells, tanks, and vats	465.2	3.3%	1,2,3
382490	Chemical products and preparations	440.1	2.9%	1
901380	Liquid crystal devices, n.e.s.	432.2	4.5%	1,2,3
847790	Parts of machinery for working rubber or plastics	398.1	2.7%	1
392310	Boxes, cases, crates &similar articles of plastic	322.2	3.2%	1,2
392190	Plates, sheets, film, foil and strip, of plastics	292.1	5.3%	1,2

*Trade flows are taken as an average of 2010 to 2012, Global Trade Atlas data.

5.2.5. Canadian Welfare Gains and the Environment

The welfare and environmental effects from an expanded ITA are considered through the analysis of tariff elimination on products under consideration for inclusion in the expanded ITA using the partial equilibrium model. The model calculates welfare gains to Canada based on the increase of Canadian imports from foreign exporters and the effect foreign competition has on domestic producers. Welfare gained by Canadian producers exporting abroad can only be captured by more general methods that are beyond the scope of this study. Although this study does not directly examine environmental impacts from an expanded ITA, conclusions are drawn based on welfare effects for Canadians.

Plurilateral trade agreements, like the ITA, tend to provide net welfare gains. The increase in Canadian welfare that occurs from the expansion of the ITA is limited by the fact that Canada’s existing MFN applied tariffs on the items being considered in the ITA expansion are already low and there is thus a relatively small change in tariffs when MFN tariffs are eliminated in each of the three product coverage scenarios. As such, it is also expected that there will be minimal environmental impact as a result of the limited welfare gains.

A complete elimination of tariffs on items of product coverage scenario 1 would be projected to increase imports from ITA members by 1.15 percent with domestic shipments of the selected products decreasing by 0.26 percent, which would be offset by a reduction in imports from non-ITA members of 0.57 percent. Total welfare gains under scenario 1 would amount to almost C$1.0 million.

Elimination of tariffs on items of product coverage scenario 2 would be projected to increase Canadian welfare by C$721.6 thousand with imports from ITA members increasing by 1.01 percent, domestic shipments of the selected products decreasing by 0.23 percent, and a reduction in imports from non-ITA members of 0.51 percent.

Lastly, implementing tariff elimination on the items of policy coverage scenario 3 would be projected to produce welfare gains worth C$446.6 thousand with imports from ITA members increasing by 0.84 percent, domestic shipments of the selected products decreasing by 0.22 percent, and a reduction in imports from non-ITA members of 0.49 percent.

Table 5: Francois-Hall Modeling Results of the 3 Policy Scenarios

Policy Scenario	Welfare Gains (thousands C$)	Change in Domestic Shipments of Selected Products	Change in Imports from ITA Countries	Change in Imports from Non-ITA Countries
Policy Scenario 1	975.1	-0.26%	1.15%	-0.57%
Policy Scenario 2	721.6	-0.23%	1.01%	-0.51%
Policy Scenario 3	446.6	-0.22%	0.84%	-0.49%

5.3 Mitigation and Environmental Enhancement Measures

While minimal environmental impact is expected from increased imports and exports of ICT products due to an expansion of the ITA, should there be any discernable environmental impacts, the Government of Canada has a number of programmes and regulations in place intended to improve the environmental performance of the ICT sector in Canada. End-of-life, e-waste, recycling and disposal programmes and regulations are a fundamental component of the Government of Canada’s initiatives to sustainably develop the Canadian ICT sector. Key initiatives are:

• Canadian Environmental Protection Act, 1999
  • Export and Import of Hazardous Waste and Hazardous Recyclable Material Regulations, 2005
  • Interprovincial Movement of Hazardous Waste Regulations, 2002
  • Polychlorinated Biphenyls (PCB) Waste Export Regulations, 1996
• Energy Efficiency Act, 1992
• Guideline for the Disposal of Federal Surplus Electronic and Electrical Equipment
• Many of the aforementioned programmes and regulations are administered by the provinces and territories

An overview of these initiatives are outlined below:

The Canadian Environmental Protection Act, 1999

The Canadian Environmental Protection Act (CEPA), 1999, is the cornerstone of Canada's environmental legislation and an important part of Canada's broader legislative framework aimed at preventing pollution and protecting the environment and human health. The goal of CEPA is to contribute to sustainable development; that is, development that meets the needs of the present generation without compromising the ability of future generations to meet their own needs. The Government of Canada is currently reviewing three existing pieces of legislation, the Export and Import of Hazardous Waste and Hazardous Recyclable Material Regulations, 2005, the Interprovincial Movement of Hazardous Waste Regulations, 2002, and the PCB Waste Export Regulations, 1996, under the CEPA. The new regulatory framework will ensure that electrical and electronic equipment (commonly referred to as e-waste), being exported or imported for disposal, recycling or reuse is managed in an environmentally sound manner.

Export and Import of Hazardous Waste and Hazardous Recyclable Material Regulations

The Export and Import of Hazardous Waste and Hazardous Recyclable Material Regulations (EIHWHRMR) apply to all individuals and businesses that export from, import into, or transit within Canada, for recycling or disposal purposes, wastes or materials that are considered to be hazardous under the EIHWHRMR. Included are, for example, generators, receivers, carriers, brokers, agents, and transfer stations. E-waste shipments are subject to control if they meet specific conditions outlined under the EIHWHRMR.  Under the Regulations, Environment Canada requires notification (including consent) and movement tracking of e-waste shipments destined for countries where electronic waste is defined as hazardous and prohibited for import or transit.

Interprovincial Movement of Hazardous Waste Regulations

The Interprovincial Movement of Hazardous Waste Regulations, currently under review, controls the movements of hazardous waste between provinces and territories by prescribing the use of a tracking system. The goal of the Interprovincial Regulations is to ensure that the Canadian manifest tracking system and hazards classification conditions for waste are maintained for the interprovincial movements of hazardous wastes.

Polychlorinated Biphenyls (PCB) Waste Export Regulations

The Polychlorinated Biphenyls (PCB) Waste Export Regulations allow Canadian owners of PCB waste to export such wastes to the U.S. for treatment and destruction (excluding landfilling) when these wastes are in concentrations equal to or greater than 50 parts per million. The Regulations require that advance notice of proposed export shipments be given to Environment Canada. If the PCB waste shipment complies with the Regulations for the protection of human health and the environment, and authorities in any countries or provinces through which the waste will transit do not object to the shipment, a permit is sent from Environment Canada to the applicant authorizing the shipment to proceed.

 Energy Efficiency Act, 1992

Canada's 1992 Energy Efficiency Act is a key part of Canada's environmental action plan. Regulations have been developed under the Act to establish minimum energy efficiency standards for energy-consuming products, including major electrical appliances. The Energy Efficiency Regulations apply to products imported to Canada and traded between provinces/territories.

Guideline for the Disposal of Federal Surplus Electronic and Electrical Equipment

The federal e-waste strategy was launched in February 2010 by Public Works and Government Services Canada in collaboration with Environment Canada. The strategy was put in place to ensure that federal e-waste does not contribute to the global issue of improper e-waste disposal and the associated negative impacts on human health, environment and information security. The Government of Canada disposes of a broad range of electronic and electrical equipment. For fiscal year 2011-2012 federal government spending in this area was estimated to be $1.2B and included computer, laboratory, medical, security, telecomm, audio-visual, and office equipment.

The strategy emphasizes reuse first, leverages existing disposal mechanisms and recognizes industry initiatives in order to provide for the environmentally sound and secure recycling of all federal surplus electronic and electrical equipment. The Guideline for the Disposal of Federal Surplus Electronic and Electrical Equipment was developed to articulate the strategy and direct the appropriate execution of the e-waste disposal process in a manner consistent with the Treasury Board Directive on Disposal of Surplus Materiel and the Policy on Government Security.

Provincial/Territorial Programmes

Canadian Council of Ministers of the Environment (CCME)

The Canadian Council of Ministers of the Environment (CCME) is the primary minister-led intergovernmental forum for collective action on environmental issues of national and international concern. Environment Canada works closely with provinces and territories, under the auspices of the CCME to support the development of the Extended Producer Responsibility (EPR) programs for different products, including e-waste and spent lead-acid batteries (SLABs).  This collaboration led to the development of: (1) Canada-wide Principles for Electronics Product Stewardship; and (2) a Canada-Wide Action Plan on EPR that commits jurisdictions to working towards managing a number of products, including electronics and electrical equipment, in operational EPR programs by 2015.

The EPR program also covers SLABs as an automotive product and was identified in the Phase 1 product group. It commits jurisdictions to working towards developing and regulating the development of EPR programs for implementation and operation by industry stewards, and includes a list of priority products for action within six years of the plan’s adoption in 2009. Furthermore, many provinces, for example British Columbia, Manitoba and PEI, have implemented provincial stewardship programs for the recycling and management of SLABs.

Although EPR programs can vary from product-to-product, they all share one fundamental characteristic, producers and/or distributors are involved in the post-consumer management of their specific products (e.g. SLABs), product categories (e.g. electronic products) or waste streams (e.g. packaging).

Other Provincial/Territorial Programmes

Provinces and territories may also choose to develop provincial/territorial wide standards for ICT and electronic goods as well as e-waste management programmes. Currently, nine provinces have regulations in place requiring Extended Producer Responsibility and stewardship programs for e-waste. As provincially regulated Extended Producer Responsibility (EPR) programs for e-waste mature, greater quantities of e-waste will be processed in recycling facilities that are using sound environmental, occupational health and safety practices and regulations.

5.4. Conclusion of Quantitative Assessment

An expanded ITA will enhance Canada’s market access abroad, particularly in countries where Canada does not have a free trade agreement. Expanded coverage of ICT products under the ITA would provide Canadian ICT manufacturers and exporters enhanced duty-free access to markets such as China, South Korea, and Thailand which currently place the highest tariffs on goods exported to their markets. For the three policy scenarios considered above, Canadian exporters face MFN applied tariffs that are about three times higher than those tariffs faced by ITA members when they export to Canada.

An expanded ITA would increase the welfare of Canada, with a wider coverage of new products being more beneficial than the scenarios with a restricted number of goods. Welfare gains from Canadian tariff elimination and an increase in imports are expected to be minimal due to Canada’s already low tariff structure for ICT products. While welfare gains from an increase in imports are small, they are still positive suggesting that further expansion of free trade under the ITA would be net positive. Although exports are not explicitly modeled in this study, exports of ICT products are expected to increase significantly under the three scenarios provided in Table 3; however, ICT goods only represent a fraction of goods traded by Canada. Increased production and exports in ICT products resulting from and expanded ITA is expected to have minimal impact. Furthermore, given that Canadian exporters face higher MFN tariffs abroad than other countries face when exporting to Canada, suggests that Canada would benefit from greater market access gains abroad than other countries would when exporting to Canada.

Although environmental impacts were not directly examined in this quantitative analysis, it is concluded that there will be minimal environmental impact as a result of the expanded ITA. In general, environmental impact is correlated to the welfare gains resulting from a trade agreement. The analysis demonstrates through three scenarios that Canada will have limited welfare gains in the expanded ITA and will therefore have limited environmental impact on the Canadian environment. Any potential environmental impacts that may arise will be mitigated by existing programmes, legislation and regulation.

6.0 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. In addition, the Federal Government works on monitoring of environmental issues, such as waste management, in support of sustainability.  Areas of focus include:

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^{Footnote 13} 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 toxics (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)^{Footnote 14} 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 elimination target of 17% below 2005 levels by 2020.  The Government is aligning efforts with the U.S. where appropriate, given the integrated nature of our economies.

Waste

The quantity of solid waste generated in Canada includes wastes disposed in landfills and incinerators plus wastes 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. ^{Footnote 15} 

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 the 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^{Footnote 16} – The Guidelines have been established by the Canadian Council of Ministers of the Environment (CCME) to provide nationally endorsed science based goals for the quality of atmospheric, aquatic, and terrestrial ecosystems.

• Canadian Environmental Sustainability Indicators (CESI)^{Footnote 17} – 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 and 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 once the expanded ITA is implemented.

7. Conclusion

An expanded ITA is expected to increase the product coverage of the current agreement, in addition to increasing participation to include other WTO Members. This initiative could provide new opportunities to the Canadian ICT sector, including research and development, services, wholesaling, manufacturing and retail sectors. While an expanded ITA will accrue benefits to all WTO Members, it is also expected to bolster Canadian trade on the ICT products covered. Nevertheless, the ICT sector assumes a small role in the context of Canada’s overall global trade flows. This would continue to be the case even if considerable trade growth resulted from this initiative.

Based on the findings of this Initial Environmental Assessment, environmental impacts arising from the expansion of the ITA, once fully implemented, are expected to be minimal. Moreover, Canada currently has domestic environmental management initiatives in place aimed at addressing a wide range of environmental impacts that may arise as a result of this agreement.

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 and comments received in response to the Initial Environmental Assessment concerning the anticipated environmental impacts of the agreement on Canada, as well as a record of how the Initial Environmental Assessment was incorporated into the negotiations. In addition, given that the scope of ITA product coverage expansion is still under negotiation, the Final Environmental Assessment will provide more precision on any possible environmental impacts.

Following the conclusion of the Environmental Assessment, follow-up and monitoring, could be undertaken, if warranted, to review any mitigation or enhancement measures identified. 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.