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______________________________________________________________________________Stewart McKelveyDoing Business in Atlantic CanadaInternational TradeCHAPTER 5 – TRADE LAWInternational trade is a vital component of Canada’s economy – its exports account for over 40% of totalgross domestic product and an estimated one in four jobs in Canada is linked to its success in globalmarkets. Canada is a signatory to the North American Free Trade Agreement (“NAFTA”) with the UnitedStates and Mexico, under which the world’s largest free trade area was formed. Canada is also aparticipant in bilateral free trade agreements with Chile, Costa Rica and Israel. These agreements haveeliminated various barriers to the trade of goods and services between the participating countries.NAFTAUnder NAFTA, which came into effect on January 1, 1994, tariffs and trade barriers on goods which meet“rules of origin” requirements have gradually disappeared. Virtually all tariffs on goods traded betweenCanada and the United States were eliminated by January 1, 1998 and tariffs on most Mexican goodswere eliminated by January 1, 2003.The rules of origin basically stipulate that for goods to be traded free of tariffs, the materials and othercomponents used in their manufacture must originate in one of the member countries, and themanufacturing process itself must take place in a member country. The rules themselves are quitecomplex and provide for variations in the amount of regional content required, depending on the product.For example, automotive parts are required to have 50% North American content to qualify forpreferential treatment under NAFTA, but this content requirement will rise over time to between 60% and62.5%.An important point to note is that ownership of the manufacturer of goods does not affect the applicationof NAFTA’s rules, meaning that foreign-owned Canadian businesses are fully eligible to take advantageof the elimination of tariffs under NAFTA, provided that their goods satisfy the applicable rules of originrequirements.NAFTA also contains rules governing the cross-border trade in services provided by enterprises locatedin member countries. It stipulates that each member must treat service providers from other membercountries no less favourably than its own service providers. Service providers are not required toestablish a local office or otherwise be resident in a member country as a condition for the cross-borderprovision of a service. However, certain restrictions on cross-border services can be maintained wheresuch restrictions have been listed in an annex to NAFTA.Other Free Trade AgreementsOn January 26, 2008, Canada entered into a free trade agreement with the States of the European FreeTrade Association (“EFTA”). The European Free Trade Association consists of the Republic of Iceland,the Principality of Liechtenstein, the Kingdom of Norway and the Swiss Confederation.Also on January 26, 2008, Canada entered into bilateral agreements respecting the trade of agriculturalproducts with the Republic of Iceland, the Kingdom of Norway and the Swiss Confederation(“Agricultural Agreements”).At the time of writing, the EFTA and Agricultural Agreements had not yet been legislatively implemented.They will have the force of law upon the coming into force of the Canada – EFTA Free Trade AgreementImplementation Act.The EFTA and the Agricultural Agreements, once implemented, will establish a free trade area, inaccordance with their terms, which is comparable to NAFTA. Once passed, the Canada – EFTA FreeTrade Agreement Implementation Act will also amend the Canadian International Trade Tribunal Act, thePage 22