Mr. Chairman and honourable members of the committee, thank you very much for inviting the representatives from the embassies here in Ottawa, the three EFTA states, to appear before this distinguished committee to express our views on this very important EFTA-Canada free trade agreement and see how it will open up opportunities by bringing down trade barriers for all countries involved.
The proposal to create a free trade area between Canada and the four member states of the European Free Trade Association was launched by the then Canadian Prime Minister Jean Chrétien in October 1997. The EFTA states warmly welcomed the Canadian initiative. Canada is an important trading partner for the EFTA states and free trade between the countries would be greatly beneficial for both sides. The negotiations with Canada have commanded a great deal of attention as Canada and the EFTA states are not only strong trading partners but also enjoy close cultural relations.
After exploratory meetings, the two sides embarked upon free trade negotiations in October 1998. Between 1998 and 2000, EFTA and Canada held 10 rounds of free trade negotiations. An agreement was reached on most issues, but the negotiations stalled in May 2000 because of a single issue, the dismantling of tariffs on ships, as Canada insisted on maintaining its customs duties on ships produced in the EFTA states.
After the negotiations stalled in early 2000, the EFTA side made several attempts to relaunch the negotiations. Even the fact that Norway abolished its subsidies for shipbuilding on December 31, 2000, did not pave the way for a conclusion of the free trade agreement. In an effort to find a solution that would make it possible to conclude the negotiations, the EFTA states tabled on January 30, 2004, a proposal for a generous scheme on the dismantling of tariffs on ships that should fully meet the concerns expressed by Canada in the negotiations. It involved a dismantling period for sensitive products of 15 years and, in addition to that, effective defence measures against possible future state aid.
On December 6, 2004, the then Prime Minister of Iceland, Mr. Halldór Ásgrímsson, sent a letter to the Canadian Prime Minister, , requesting immediate resumption of the talks. Prime Minister Martin replied on March 14, 2005, to the letter from the Icelandic Prime Minister that Canada had conducted a detailed review of its bilateral and regional trade and investment policy strategy, including its position on re-engaging with EFTA; however, due to the sensitive nature of the outstanding issues, it might be several weeks before Canada would be in a position to formally respond to EFTA's last proposal.
On May 4, 2006, we, the EFTA ambassadors in Ottawa, met with , Minister of International Trade in the present Government of Canada. At that meeting, Mr. Emerson indicated that the administration was preparing an internal report on the relations with EFTA and stock-taking with the aim of having a meeting with EFTA in September 2006. In our discussions with Minister Emerson, it became evident that he aimed to strengthen Canada's strategic opportunities in external trade by securing preferential access to new markets. At the same time, he underlined his concern regarding the Canadian shipbuilding industry, which would have to be stepped up and helped to become globally competitive.
The same concerns about the domestic shipbuilding industry were expressed by the then Minister of Industry,, when we, the ambassadors, met with him in August 2006. The subsequent stock-taking and informal discussions led up to formal negotiations, which now have resulted in a free trade agreement signed by respective ministers from Canada and the EFTA states.
Iceland's membership in EFTA in 1970 marked a turning point in Iceland's foreign relations. Through its membership, Iceland became a full participant in a free trade association, and for the first time Iceland undertook obligations on free trade in industrial products.
The agreement creating the European Economic Area, the EEA agreement, was negotiated between the European Community--the then member states--and seven member countries of the EFTA, and it was signed in May 1992. Subsequently, Switzerland decided not to participate, following a referendum, and three others joined the EU. The EEA agreement entered into force on January 1, 1994.
The EEA was maintained because of the wish of the three remaining countries--Norway, Iceland, and Liechtenstein--to participate in the internal market while not assuming the full responsibilities of EU membership. The establishment of the EEA in 1994 was a major step we took together with other EFTA countries at the time. The EEA provided access to the EU's internal market, with freedom of movement of goods, services, labour, and capital in the whole area. We consider the EEA to be a remarkable success and a durable arrangement. We follow developments within the EU very closely. After all, the EU is by far our biggest trading partner, and some of our closest friends are members. We wish the EU well and want to see it succeed in its endeavours. However, there are no pressing reasons for Iceland to join the union. Indeed, there are certain matters, such as the EU's common fisheries policy, that would make joining highly problematic. Active participation in international cooperation, freedom of trade, and increased access to markets are prerequisites for the future strengthening of Icelandic industries.
Now, as before, the number of business opportunities is greatest where growth is fastest. For this reason, we are looking further afield than our traditional trading partners. With EFTA, Iceland has negotiated free trade agreements with numerous countries in Africa, South America, and Asia.
In all, Iceland is now a party to free trade agreements with 53 states, with a total of one billion inhabitants. It can be expected that Colombia, Peru, Thailand, and the states of the Gulf Cooperation Council will join that number through agreements with EFTA. This year EFTA will begin free trade negotiations with India. Bilateral negotiations between Iceland and China on a free trade agreement are well under way.
Iceland and Canada have shared close and friendly ties over a long period of time. A large proportion of the Icelandic population, actually about 20% of all Icelanders, migrated to Canada during the latter part of the 19th century and the early part of the last century. Today we find, by far, the largest Icelandic population outside Iceland in Canada, and estimates are that the number of Icelanders in the Canadian Icelandic community exceeds 100,000.
Trade volume between our countries has been moderate, but it is our belief that there is an ever-increasing interest by the Icelandic private sector to expand activities in Canada. The same can be said about Canadian interests in Iceland. The new EFTA-Canada free trade agreement will definitely have a very positive snowball effect.
Bearing in mind the profound friendship and long-lasting cultural and human relations between Iceland and Canada, two components have been strikingly lacking: a more active and productive trade relationship, and direct air communications. Today we have to travel by air through the United States or even London, England, to get between Iceland and Canada. Fortunately, this will change when Icelandair starts operating its scheduled flights to Toronto and Halifax on a year-round basis this coming spring. Thanks to the new open skies policy of the Canadian government, an air services agreement between Iceland and Canada is finally in place and being implemented. This fact is undoubtedly going to contribute greatly to two-way commercial links between our countries.
From our perspective, the free trade agreement will provide great benefits for trade between Canada and Iceland and EFTA as a whole. l would like to mention just a few arguments in this respect.
The creation of a free trade area would be beneficial for both sides, since it would improve access to the markets of the other side. It would thus create reciprocal advantages and increase geographical diversification of trade—among others, in the offshore sector, where closer cooperation might lead to meaningful know-how transfer, to the benefit of the Canadian industry.
Fair and open world trade will benefit everyone, and on those premises Iceland is participating in the Doha negotiations, which, unfortunately, could be making better progress. The fact that the Doha Round has progressed rather haltingly has made it even more important for countries to gain market access through preferential free trade agreements.
The relations between Canada and the EFTA countries are close and important from both an economic and a cultural perspective.
The free trade agreement between the two sides would provide an opportunity for enhanced cooperation between industries of the two sides.
For Canada, the agreement would be the first free trade agreement with European partners. Such a linkage with countries in Europe outside the EU could be a milestone towards the establishment of enhanced economic ties with European economies.
The conclusion of a free trade agreement with Canada would send a positive signal to EFTA's economic operators and make the Canadian market more attractive to them.
For the EFTA states, a free trade agreement with Canada would be the second such agreement with a NAFTA partner, after the one with Mexico, which has been in force since 2001. The conclusion of a free trade agreement with EFTA would in particular eliminate discrimination faced by Canadian exporters vis-à-vis current EFTA free trade partners such as, inter alia, the EU, Korea, and Mexico.
In addition to giving the parties preferential access to each other's markets, the agreement provides for cooperation between the two sides in the area of trade facilitation.
The Government of Iceland has now prepared and presented to the Icelandic Parliament the proposal for ratification of the EFTA-Canada free trade agreement. It is expected to receive universal support in Parliament and will be passed in April.
l will not elaborate further, but to conclude, l take the opportunity to welcome this free trade agreement as a significant milestone in advancing and forging the cordial relationships that have existed so long between Canada and the four EFTA countries.
Thank you, Mr. Chairman.
Thank you very much, Mr. Chairman and honourable members of the Standing Committee on International Trade. Thank you very much for allowing me the opportunity to give an opening statement from a Swiss perspective.
From the Swiss side, we are very pleased about the signing of the long-awaited EFTA-Canada free trade agreement. We are sure it will further strengthen the economic relations between our highly developed economies. For Switzerland, Canada is a very important trading partner, in fact the most important trading partner after the European Union, the U.S., Japan, China, and Hong Kong.
I'm sure that once the agreement is in force, Canada will become an even more important export market for Switzerland and the other EFTA states, and vice versa, the EFTA states for Canada. By the way, Canada will be the largest free trade partner of the EFTA states after the European Union.
The conclusion of the EFTA-Canada free trade agreement is a major achievement. Given that the world is evolving quickly and areas beyond trading goods are of increasing importance in international economic relations, we will be able to add more value to the package by further developing the agreement in due time, as foreseen by the various evolutionary clauses relating to services, investment, public procurement, and other second-generation issues.
For Switzerland, a country dependent on exports with diversified markets worldwide, the conclusion of free trade agreements with important partner countries, alongside membership in the WTO and the contractual relations with the European Union, is one of the three main pillars in its policy of market liberalization and of improving the general conditions for foreign trade.
Now I have some remarks regarding possibilities.
Switzerland and Canada can expect advantages specifically in those areas where tariffs are eliminated or reduced. Apart from a few exceptions, the tariffs on industrial goods will be eliminated in the trade between the EFTA states and Canada. In addition, both sides committed to important tariff reductions for processed agricultural products and for certain basic agricultural products.
Previous studies on the impact of existing free trade agreements for Switzerland show that trade with its free trade partners, exports and imports, grows on average significantly faster than trade with the rest of the world. We expect to see similar development in the case of the EFTA-Canada free trade agreement.
Now I have some remarks about the ratification process regarding Switzerland.
Domestic requirements allow Switzerland and Liechtenstein to apply trade agreements provisionally until the Swiss and Liechtenstein parliaments have approved them. This possibility is also foreseen in the EFTA-Canada free trade agreement; see article 41 of the agreement.
This device allows an agreement concluded by Switzerland to enter into force as soon as the partner countries have accomplished internal procedures in view of ratification. Otherwise the entry into force of such agreements would have to wait for the spring session, 2009, of the Swiss Parliament following the signing of an agreement, as the Swiss Parliament ratifies such agreements only once a year as part of the annual report on Swiss foreign economic policy submitted by the federal council to Parliament each January. In the case of the EFTA-Canada free trade agreement, this would mean that the agreements could only enter into force on June 1, 2009.
According to our information, the ratification process on the Canadian side is foreseen to be concluded by autumn this year; in Iceland, as the ambassador mentioned, it will be quite soon; and Norway will have concluded the ratification procedures by then as well. This would allow an entry into force of the EFTA-Canada free trade agreement and the bilateral agricultural agreements by January 1, 2009. Switzerland and Liechtenstein would apply the agreements provisionally from the day of the entry into force until the decision taken by Parliament in March 2009 and would notify accomplishment of their internal procedures immediately thereafter.
These are some remarks regarding the ratification process. I will finish with perhaps one remark.
I have read the transcript of the meeting of the standing committee on March 10. There was discussion or some kind of surprise that Switzerland would be the fifth largest investor from abroad, and I can confirm to you that is really the case. So Switzerland is, after the U.S., the U.K., France, and the Netherlands, the fifth largest investor in Canada, before Japan and Germany. That is just as confirmation, because on March 10 I think there was some surprise about this. I can confirm that it's true.
So thank you very much for your attention, and Mr. Chairman, I will end my comments here. Thank you for allowing me to provide a brief overview. I'm ready to respond to questions.
Mr. Chairman and honourable members of the committee, thank you very much for allowing me the opportunity to provide you with some information regarding the free trade agreement between Canada and the member states of EFTA: Iceland, Liechtenstein, Switzerland, and Norway.
The signing of the free trade agreement between Canada and EFTA in Davos, Switzerland, on January 26, 2008, marked the happy conclusion of lengthy and at times challenging negotiations.
The free trade agreement between Canada and EFTA is among the most important free trade agreements EFTA has ever concluded. Canada is an important economic partner for the EFTA states. In 2006 Canada was EFTA's fifth largest trading partner regarding trading goods, after the EU, the United States, Japan, and China. As for Norway, Canada is our third largest trading partner in goods, after the EU and the U.S. It goes without saying that concluding a free trade agreement with Canada has been a matter of great priority to us.
Why do we have regional or preferential trade agreements? It's a broadly held view that multilateral, non-discriminatory trade liberalization is the economic ideal. However, as we are currently experiencing, the multilateral process is often cumbersome and slow. We believe the regional trade agreements, like the one concluded between Canada and EFTA, can be good and useful supplements to the multilateral process.
The Canada-EFTA trade agreement is an agreement amongst some of the world's most developed economies, and it will surely bring new market opportunities for all parties involved. This potential can be realized further by expanding the agreement to cover new areas such as trade in services, as is foreseen. The Canada-EFTA free trade agreement covers trade in non-industrial products, including fish and other marine products and processed agricultural products. Selected basic agricultural products are covered by agreements concluded bilaterally between Canada and Iceland, Norway, and Switzerland at the same time as the free trade agreement.
The agreement aims at liberalizing and facilitating trade in goods in conformity with the relevant WTO provisions. Most industrial goods, including fish and other marine products, will benefit from duty-free access to the respective markets as of the entry into force of the agreement. The elimination of barriers to trade and duty-free access to industrial products of each others' markets is expected to boost trade flows between Canada and EFTA countries.
The agreement also includes references to existing WTO obligations in areas such as services, investment, and public procurement. General principles regarding competition law and policy are also set out in the agreement. The Canada-EFTA joint committee, established by the agreement, will supervise the application of the agreement, which also provides for binding arbitration.
Canada is already a key trading partner for EFTA, and the agreement is expected to bring further growth and diversification in bilateral trade. Total goods trade between EFTA and Canada amounted to $8.7 billion U.S. in 2006, up 10% in nominal value terms from the previous years. EFTA's exports to Canada in 2006 were worth $6 billion U.S., up 4% from the previous year in nominal value terms. EFTA's imports from Canada totalled $2.7 billion U.S., up 26% from the previous year.
EFTA's leading imports from Canada in 2006 were nickel and articles thereof, pharmaceuticals, machinery, and mechanical appliances. Norway's main export to Canada in 2006 were mineral fuels and oil, followed by machinery and mechanical appliances. Switzerland's most important exports to Canada consisted of pharmaceuticals, organic chemicals, farm machinery, and mechanical appliances. In 2006 Iceland exported mainly fish, crustaceans, machinery and mechanical appliances to Canada. Bilateral investment stocks between EFTA and Canada reached more than $22 billion Canadian dollars in 2006.
As mentioned previously, Canada is Norway's third largest trading partner for goods, after the EU, and the U.S. Norwegian exports to Canada are dominated by oil and petroleum products. But even if one disregarded this, Canada is Norway's sixth largest trading partner for goods. The import of goods from Canada is growing more rapidly than Norwegian exports to Canada. The largest imports are nickel and articles thereof, machinery, electrical machinery, ores, slag, ash, and optical instruments.
Canada generally has low applied tariff rates and already offers zero tariffs on a number of products that are central to Norwegian exports, such as fish and artificial fertilizers.
Regarding the Norwegian ratification process, the parliamentary bill for the ratification of the Canada-EFTA agreement is currently under way. According to plan, this will be presented to Parliament during the first half of May 2008. We cannot predict with certainty how long it is going to take for Parliament to pass the bill, but the assumption is that this will be done by the end of the parliamentary session in June. Ratification by the cabinet, king, and council will follow. The ratification will be notified through the depositary, which will then notify all parties to the agreement.
We are aware there have been concerns about Norwegian subsidies to the shipping industry. The subsidy measures that were previously in place to support the Norwegian shipbuilding industry no longer exist. Ordinary shipbuilding support was terminated in 2000. A temporary measure was introduced in 2003 as a result of the case brought by the EU against Korea in the WTO. This measure was in effect from March 15, 2003, until March 31, 2005. Currently the Norwegian shipbuilding industry is not subsidized. Norway has no plan to reintroduce such subsidies.
The Canada-EFTA trade agreement provides Canada with very beneficial conditions by allowing the phase-out period for tariff eliminations for several ship products. The phase-out period is up to 15 years for most sensitive ship types.
I would like to underline that EFTA's general position is always zero tariff on industrial products from day one. Consequently, Canada has been granted extraordinary concessions in this respect. I would also like to stress that a phase-out period like this for some industrial products is very rare in free trade agreements with developed countries.
Mr. Chairman, I will end my comments here. Thank you for allowing me to provide the committee with this information.
I welcome questions from you and honourable members of the committee, and I will do my best to answer them.
I can make a start, perhaps.
As I said earlier, Iceland has a variety of small businesses. Of course, we are strongest in maritime food production. We are quite capable of producing machinery for the fishing industries in the world, and we have been successful in exporting these machines. We are already doing that to maritime Canada; we have quite strong business relations with Newfoundland and Nova Scotia in particular. I think this will be reinforced even further with the new free trade agreement. I see this basically in fish and fish products and in the machinery and manufactured goods used by the fishing industries.
Then there is a certain potential in outerwear clothing. We have some 18% tariffs on these manufactured goods going to Canada now, and when this is abolished, we will have a stronger position in that field.
On the other hand, for Canada we have actually, over a number of years now, imported twice as much from Canada in dollars as we have exported from Iceland to Canada, so this has been very beneficial trade for you. It has been going up and down a little. We have had years that showed temporary expansion of Canadian exports into Iceland above these normal levels, so to speak. That is when building the machinery for the aluminum smelters that Alcoa and Alcan have been building up in Iceland was going on.
Also, the purchase of two or three Dash 8 aircraft from Canada counts considerably in these figures. It has been the case in the last few years that we have been purchasing aircraft from Canada, and we are actually having one built now, a maritime surveillance aircraft for our coast guard that is being manufactured here in Canada. This has been going up and down a little.
But it has been rather cumbersome to conduct these relations because of the fact that the people have had difficulties in even travelling between our countries. It has been very inhibitive for many of the businessmen to not have easy connections to come over here. Still, I think this is developing in a positive direction.
For Canada, apart from these items that I mentioned, you have been exporting paper to Iceland, exporting prefabricated houses and materials for house building. I'm sure this will increase when the tariffs are abolished. You are getting a much stronger position in the Icelandic market vis-à-vis the EU. We have no tariffs on the EU groups, and now you will be enjoying the same position for your goods, according to the agreement.
As for agricultural products that have been included in the bilateral agreement with Iceland, french fries are quite important for Canada, and now you will have more beneficial situations on the Icelandic market with french fries from New Brunswick or Nova Scotia than the EU will have, since tariffs on the EU french fries are 76%, but the Canadian french fries will carry 46% import duties. These are little protective measures for the Icelandic agriculture.