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November 26, 1999 (10:25 a.m. EST) No. 256
CANADA AND CHINA SIGN HISTORIC BILATERAL WTO AGREEMENT
Minister for International Trade Pierre S. Pettigrew today announced that Canada and China have reached an agreement on a wide range of market access issues related to China's entry into the World Trade Organization (WTO). Mr. Pettigrew signed the agreement today in Toronto with Chinese Minister of Foreign Trade and Economic Co-operation Shi Guangsheng.
"This agreement is good news for both Canada and China," said Mr. Pettigrew. "It provides significant access to the Chinese market for not only large, but also small and medium-sized Canadian enterprises, and brings China one step closer to membership in the WTO."
In the agreement, China, Canada's fourth largest trading partner, has committed to reducing tariffs on imports of Canadian industrial products and to liberalizing access into China's burgeoning services market, including telecommunications and financial services. China will also significantly improve access for many agricultural goods, including canola, canola oil, wheat, barley and malt. These commitments will come into effect once China is admitted to the WTO.
"This agreement will open doors for our goods and services and dramatically increase our growing presence in China, a valuable market of 1.2 billion people," said Raymond Chan, Secretary of State (Asia-Pacific).
In 1998, Canada's exports to China were valued at $2.5 billion. The top export items in 1998 were: various grains, seeds and fruits, wood pulp, cereals and fertilizers, accounting for over 55 percent of all Canadian exports to China.
China must still complete negotiations in Geneva on an overall framework to finalize its entry into the WTO. It must also negotiate a number of bilateral market access agreements with other WTO members.
"Canada has always been a strong supporter of China's accession to the WTO," said Minister Pettigrew. "We look forward to playing a constructive role in helping complete China's accession."
Next week, Mr. Pettigrew will discuss the possibility of launching a new round of WTO negotiations when he attends a meeting of the world's trade ministers in Seattle, Washington.
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A backgrounder on the Agreement is attached.
For further information, media representatives may contact:
Sylvie Bussières
Office of the Minister for International Trade
(613) 992-7332
Naseem Nuraney
Office of the Secretary of State (Asia-Pacific)
(613) 995-1852
Media Relations Office
Department of Foreign Affairs and International Trade
(613) 995-1874
Backgrounder
HIGHLIGHTS OF THE CANADA-CHINA BILATERAL WTO AGREEMENT
The Canada-China agreement covers agricultural products, industrial products, and all service sectors, and comes into effect after China officially joins the WTO. A separate understanding was reached on key sanitary and phytosanitary issues affecting trade in agricultural goods.
Goods Summary
• Canada negotiated tariff reductions on a wide range of Canadian priority industrial and agricultural goods, which had an export value of $1.5 billion in 1998.
• China's tariffs on Canadian priority goods will fall from an average of 12.5 percent to an average of 5.2 percent over an average period of two and a half years. For those high-tech products covered by the Information Technology Agreement (such as telecommunications equipment), China will eliminate all tariffs within five years.
Agriculture
• China will significantly improve access for imports of canola, canola oil, wheat, barley, malt, feed peas, alfalfa pellets, North American ginseng and whiskey.
• In a limited number of sensitive sectors, China will adopt tariff rate quotas (TRQ). Under a TRQ, a low tariff is established on import volumes up to a certain level, after which a higher tariff is triggered.
• Only two Canadian priorities will be affected by TRQs:
• Canola Oil: The TRQ, which will be eliminated within six years, will start at 600 000 tons upon accession and will rise to 1.13 million tons in five years. Canola oil will face the same tariff level as its main competing oil, soyabean oil. No TRQ will apply to canola seed.
• Wheat: The TRQ is 7.3 million tonnes, rising to 9.3 million tonnes within four years.
• Sanitary and Phytosanitary (SPS) Issues: In parallel with the WTO accession negotiations, a separate understanding was reached between the Canadian Food Inspection Agency and China's State Administration on Entry-Exit Inspection and Quarantine on longstanding Canadian concerns about Chinese SPS rules affecting Canadian exports of beef, pork, poultry and seed potatoes. China agreed to a clear timetable for addressing these concerns on the basis of sound science.
Industrial Goods
• The average tariff for Canadian industrial products, including paper products, chemicals and aerospace products, will fall from 10.3 to 4.5 percent over an average of 2.8 years.
• China will participate in the Information Technology Agreement and eliminate all tariffs on products covered by this agreement.
• Potash: Potash exports amounted to $258 million in 1998, making it Canada's largest non-agricultural export to China. China will guarantee its current interim tariff on potash, and remove its import quota and import licencing requirements.
Services
• China will provide improved access to foreign service suppliers in a wide range of service sectors. In those sectors where they have made commitments, China has agreed not to make the operating environment for current service suppliers more restrictive ("grandfathering"). This will protect Canadian service providers currently authorized to operate in these sectors in China from additional restrictions.
Telecommunications Services
• China made commitments in all telecommunications services - fixed, wireless, and satellite - with time and geographic phase-in provisions.
• China will allow foreign investment through joint ventures. China will allow 49 percent foreign investment in all telecommunications services and will allow 50 percent ownership for value added and paging services.
• China will sign the entire Reference Paper on Regulatory Principles for Basic Telecommunications.
Financial Services
• China will provide significant liberalization for banking and life insurance.
• Banking: China will remove all geographic and customer restrictions over five years. Foreign banks can engage in local and foreign currency business anywhere in China with both Chinese and foreign customers.
• Life Insurance: China will gradually lift geographic restrictions, expand the scope of activities of foreign insurers, and allow 50 percent foreign ownership. Licences will be awarded solely on the basis of prudential requirements; there will be no economic needs test.
• Securities: Foreign firms will be allowed to form joint ventures to provide fund management services. Equity limits will rise from 33 to 49 percent within three years.
Professional Services and Engineering Consulting Services
• China will also remove many of the restrictions which currently limit foreign provision of legal services, engineering consulting services, and other professional services.
Environmental Services
• China will allow foreign investment in this sector and will not discriminate against foreign suppliers of environmental services.
Distribution (including both wholesaling and retailing)
• China made significant commitments to liberalize distribution (and auxiliary activities such as freight forwarding, advertising, and technical testing and analysis) which will facilitate Canadian business interests in China. China will not maintain minimum capital requirements in this sector, which means China's rules will not discriminate against small and medium-sized enterprises (SMEs). China also agreed to allow foreigners to distribute fertilizer within five years.
What Happens Next?
China will have to complete negotiations on systemic issues and finalize the Protocol of Accession in the WTO Working Party on China. At the same time, bilateral negotiations will continue with WTO members who have not reached agreement with China. Once both the multilateral and bilateral negotiations are complete to the satisfaction of all members of the WTO, China will be able to enter this organization as a full member.
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