- External Affairs Canada, Canada-United States Free Trade Agreement, December 10, 1987. The treaty is implemented in the United States by the United States-Canada Free-Trade Agreement Implementation Act of 1988, P.L. 100–449, and in Canada by the Canada-United States Free Trade Agreement Implementation Act, S.C. 1988, c.65.
- Energy, Mines and Resources Canada, The National Energy Program (1980). The Program, which was implemented through various pieces of federal legislation, had amongst its central goals the achievement of energy independence for Canada, an increased Canadian-ownership component in the energy industry, and the at-least-partial insulation of Canadian domestic energy prices from the vagaries of international markets. Much of the program—including its most controversial elements—was subsequently rescinded; an important contributing factor to this retreat was the fall in oil prices during the 1980s.
- Discussed infra.
- Shakes and Shingles, ITC Inv. No. TA-201–52, US1TC Pub. 1826 (1986).
- ITC Inv. No. 731-TA-374; after a preliminary determination of injury by the International Trade Commission (see Potassium Chloride from Canada, USITC Pub. No. 1963 (1987)) and a preliminary determination of sales at less than fair value by the Department of Commerce (52 Fed. Reg. 32,151 (1987)), Commerce entered into an agreement with the Canadian producers by which the latter agreed to revise their export prices to the United States (53 Fed. Reg. 1393, 1416 (1988)).
- Although the United States concern with natural resources and national security certainly predates the oil crisis: see Haglund, “The Political Dimensions of Resources Trade: The Case of National Security”, in Saunders (ed.), Trading Canada's Natural Resources (1987), 13.
- General Agreement on Tariffs and Trade, T.I.A.S. No. 1700, 55 U.N.T.S. 194. Art. XXIV:8(b) defines a free-trade area as one in which trade barriers “are eliminated on substantially all the trade between the [parties] in products” (emphasis added). The FTA clearly meets this definition; this GATT Article is referred to explicitly in Art. 102 of the FTA.
- Chapters 17 and 14, respectively.
- Chapter 16.
- Because of the prospective nature of the investment chapter, the special treatment of investment in the oil and gas and uranium industries—a very sensitive political issue in Canada—is essentially grandfathered under the Agreement.
- There is one important change in the FTA coverage of goods compared to the GATT; the latter probably does not extend to embrace trade in electricity, which could be considered a service rather than a good. The FTA, however, includes electricity explicitly in its coverage: Art. 901 (2)(a) includes by reference heading 27.16 of the Harmonized Commodity Description and Coding System, “Electrical Energy”.
- As specified in Annex 401 to the Agreement. This compares with an initial provision of twelve years in the European Community, five years for the Australia-New Zealand Closer Economic Relations Agreement (ANZERTA), and eight years for the phasing in of the cuts agreed to during the Tokyo Round of multilateral trade negotiations. In the case of fresh fruits and vegetables, provision is made for applying temporary duties in special circumstances for a further ten years after 1990: Art. 702.
- The concept of effective protection refers to the following type of situation. Assume a particular processed commodity costs $1.00 a kilogram to produce, of which $.50 is accounted for by some basic natural resource input. If the tariff on imports of that input is zero, but the tariff on the processed commodity is $.10 per kilogram, this affords a nominal level of tariff protection to domestic processors of 10 per cent. However, because the processing industries in both countries have access to the resource inputs on essentially the same terms, the costs on which the processors can actually compete are the remaining $.50 per kilogram, that is, the value added. the effective level of protection afforded by the tariff should therefore be taken as a percentage of this value added, yielding an effective tariff of 20 per cent. This problem is most likely to occur in industries where there is limited room for competition on non-price factors such as product differentiation. Examples of such industries are most readily found in the processing of natural resources.
- Chapter 3.
- Annex 301.2 (1) accepts as the common basis for tariff classification the Harmonized Commodity Description and Coding System of the Customs Co-operation Council.
- Arts. 403, 406.
- Chapter 6 of the Agreement affirms and to some extent improves upon the GATT Agreement on Technical Barriers to Trade.
- Chapter 13 of the Agreement goes well beyond the GATT Agreement (usually referred to as the GATT Code) on Government Procurement in its reach and specificity.
- By Art. 408. Such taxes are not a common policy tool in Canada; however, Canada's use of this device in the past with respect to energy exports to the United States (discussed infra) has been the source of friction. The Article imposes no new constraints on the United States, where export taxes are already constitutionally prohibited: U.S. Const., Art. 1, s. 9, cl. 5.
- Omnibus Trade and Competitiveness Act of 1988, P.L. 100–418.
- R. Dobell, in foreword to Percy and Yoder, The Softwood Lumber Dispute and Canada-US Trade in Natural Resources (1987), at xv; emphasis added.
- Chapter 9.
- GATT Art. XX(g).
- GATT Art. XXI.
- The most notable of these is of course the agreement on energy sharing concluded amongst OECD countries in 1974: Agreement on an International Energy Program, Paris, November 18, 1974, (1975) 14 InternationaI Legal Materials I, T.I.A.S. No. 8278, as amended (hereinafter IEP).
- The Western Accord, an Agreement between the Governments of Canada, Alberta, Saskatchewan and British Columbia on Oil and Gas Pricing and Taxation, March 1985. The Accord is reproduced in Canada Energy Law Service 30–1801.
- Agreement Among the Governments of Canada, Alberta, British Columbia and Saskatchewan on Natural Gas Markets and Prices, October 31, 1985. The Agreement is reproduced in Canada Energy Law Service 30–1806.
- The legislative and regulatory measures which have characterised the retreat from government regulation in petroleum, natural gas and electricity in Canada are reviewed in some detail in Hudec and Quinn, “Energy Aspects of the Canada-United States Free Trade Agreement” (1989) 2 Canadian Petroleum Tax Journal 1, at 15–25.
- This is accomplished in Art. 401, the general provision dealing with the elimination of tariffs.
- At the time of the Agreement there were no tariffs on either side of the border on natural gas, electricity or uranium (with the exception of US customs user fees). The United States did impose tariffs on crude oil, ranging from 5.25 to 10.5 cents per barrel and a tariff of 52.5 cents per barrel on jet fuel and gasoline. Canada imposed no tariff on crude oil or gasoline imports.
- See Arts. 407–409. In fact, it may be more accurate to describe the provisions in Chapter 4 as the mirror of those in the energy chapter. The latter provisions were negotiated first and were subsequently incorporated as the general provisions in Chapter 4: “Analysis of Chapter Nine of the US-Canada Free-Trade Agreement, Concerning Trade in Energy”, Memorandum prepared by the staff of the US Department of Energy and the office of the US Trade Representative (Mimeo, 1988), at 7.
- Art. 902(1).
- Emphasis added. Moreover, Art. XI of the GATT is entitled “General Elimination of Quantitative Restrictions”, at least casting some doubt on whether minimum-price requirements would come within this heading.
- Pursuant to the Gas Resources Preservation Act, S.A. 1984, c. G-3.1, as am, s.4. The Act imposes no constraints on the Cabinet's decision whether or not to grant the permit.
- One recent reference to this practice is found in “Ontario rejects Alberta core market gas stance”, Oilweek, September 5, 1988, at 3.
- Authorised in 1974 by the Petroleum Administration Act, S.C. 1974–75–76, s.7; now Energy Administration Act, R.S.C. 1985, c. E-6.
- Authorised in 1981 as an amendment to the Excise Tax Act and now found in Excise Tax Act, R.S.C. 1985, c. E-15, Part V.
- Critical shortages of essential products.
- Conservation of exhaustible natural resources.
- Export restrictions on materials for a domestic processing industry where domestic prices are being held below world prices as part of a governmental stabilisation plan.
- Products in general or local short supply.
- National security.
- Art. 904(a).
- Art. 904(b).
- Art. 904(c).
- One area where the national security exception has been invoked frequently is with respect to the uranium industry. Both Canada and the United States have engaged in protectionist measures in this regard, with Canada protecting its processing sector (albeit not for reasons of national security), and the United States protecting its mining industry. These protectionist measures are mutually eliminated by Annex 902.5. The Annex also eliminates, with respect to Canada, the US prohibition on exportation of Alaskan oil, although this is unlikely to have any practical significance.
- Supra, note 25.
- The FTA addresses the possibility of conflict between the two agreements by providing that the IEP will prevail over the FTA to the extent of any inconsistency (Art. 908).
- Subsequent to the Agreement, the ERA's responsibilities were taken over by a newly-created Office of Fossil Energy (OFE).
- Natural Gas Pipeline Company of America, 37 F.E.R.C. ¶ 61, 215 (1986). For a discussion of the case, see Madigan, “The Impact of U.S. Regulatory Policy on the Export of Canadian Natural Gas to the United States” in Saunders, supra, note 6, 295, and Battram and Lock, “The Canada/ United States Free-Trade Agreement and Trade in Energy” (1988) 9 Energy Law Journal 327, at 338–39.
- Natural Gas Pipelines, ibid., at 61, 545; emphasis in the original.
- Indeed, in the original decision in this matter the presiding administrative law judge held that the established practice was to accept such costs on an “as-billed” basis: 35 FERC ¶ 63,054 (1986).
- Although the FERC subsequently indicated that such was not its intention: in a clarifying opinion, the Commission responded to charges that its actions constituted an “unwarranted intrusion into Canadian regulatory matters” by insisting that it “has not questioned the prudence of any of the Canadian costs, deferring to the Canadian determinations. However, [it] cannot automatically permit the resale of Canadian gas at rates fixed by the Canadian authorities.” Natural Gas Pipeline Company of America, 39 FERC ¶ 61,218 (1987), at 61,767 (emphasis added).
- That is, actions by the FERC, the ERA (now OFE) or the NEB.
- Art. 905(1). The Agreement is not absolutely clear about the consequences in the event these consultations are unsuccessful. However, a more general right to request consultations on any measures affecting the operation of the Agreement is found in Art. 1804. The failure of these consultations may lead to a referral to a Canada-United States Trade Commission (Art. 1805) and, if the Commission cannot resolve the matter within 30 days, possible referral to binding arbitration (Art. 1806). While Chapter 9 of the Agreement is silent on this point, it is reasonable to surmise that the same consequences would attach to a failure of Art. 905 consultations.
- Annex 905.2(2). This is a limited concession, however. There is only an undertaking to grant access on terms as favourable as those granted to other utilities outside the Pacific Northwest; clearly the bigger problem facing BC Hydro is the discrimination in favour of other Pacific Northwest utilities. An additional provision which affirms that Bonneville and BC Hydro “will continue to negotiate mutually beneficial arrangements” (Annex 905.2(4)) has been characterised as “little more than wishful thinking”: Battram and Lock, supra, note 50, at 363.
- Annex 902.5(4). Although the NEB is still mandated to consider future Canadian needs in approving energy reports, this requirement has decreased dramatically in significance in recent years in line with the general move to a market orientation in energy trade.
- Annex 905.2(1). This refers to the requirement imposed on applicants for power export licences to provide evidence, inter alia, that the export price would not be “materially less than the least cost alternative” in the export destination: National Energy Board Part VI Regulations, CRC 1978, c. 1056, as am., s. 6(2)(z)(iii).
- See Blue, “Implications of the Free Trade Agreement for Canadian Electricity Exports”, in Gold and Leyton-Brown (eds.), Trade-Offs on Free Trade, The Canada-US Free Trade Agreement (1988), 254 at 261.
- National Energy Board Part VI Regulations, CRC 1978, c. 1056, as am., s.6(2)(z).
- See National Energy Board, In the matter of an application under the National Energy Board Act of Hydro-Québec for exports to the New England Utilities (Hearing Order EH-1-87), Reasons for Decision, May 1987. The decision is discussed in Blue, supra, note 59, at 260.
- Blue, for example, is of this opinion: ibid., at 261.
- Ibid.
- Of course, there have been elements of this approach in certain aspects of American energy policy as well—particularly with respect to uranium—but it has not been a primary goal in recent years. If, however, one anticipates an energy glut to be the prevailing norm over the next several years, then it might well be instructive to reflect on past experiences with US protectionism in the petroleum sector; see Plourde, “Oil Import Charges and the Canada-US Free Trade Agreement”, in Gold and Leyton Brown, supra, note 59, 233 at 235–36.
- The last of these is not strictly speaking a remedy directed at unfair trade practices. However, insofar as it tends to be viewed as a weapon in a common arsenal directed at foreign competition, it is grouped here with the other two remedies.
- For a discussion of this problem with respect to countervail actions, see Percy and Yoder, supra, note 21, at 6–16; for a more general discussion of the interaction of trade policy and politics in the United States, see Baldwin, The Political Economy of US Import Policy (1985).
- This has been the case for US measures designed to curb imports of speciality steel.
- Emergency action refers to the remedy anticipated in Art. XIX of the GATT—often referred to as contingent protection or the escape clause—under which states may impose import restrictions on particular products where a sudden surge of these seriously harms, or threatens to harm, the domestic industry. In the United States, the remedy appears as 19 U.S.C. §§ 2251–54.
- Although preliminary investigations and recommendations are made by the US International Trade Commission, the President must ultimately approve the invocation of any measures under this remedy, although in theory his refusal to comply with ITC recommendations could be overturned by Congress. In practice the President usually refuses to grant relief; his decision in this respect has never been overturned by Congress. Attempts to include in the Omnibus Trade Act significant constraints on the President's powers in this respect were largely unsuccessful.
- Art. 1101; emphasis added.
- Art. 1101(2)(b)(c).
- Art. 1102(1); it is further clarified that “imports in the range of five percent to ten percent or less of total imports would normally not be considered substantial.”
- Arts. 1102(5) and 1101(4) respectively.
- Art. 1103; the arbitration panel is set up pursuant to the same provision (Art. 1806) referred to earlier (supra, note 55) with respect to the general dispute procedures in chapter 18; unlike the general dispute resolution process, however, this procedure can only be invoked for actual, rather than proposed, actions.
- As a matter of GATT law it is at least doubtful whether bilateral emergency actions are ever permissible.
- There is a large literature on the constitutional implications of the FTA in Canada. Although the prevailing view is that the federal government probably has the authority to implement the Agreement, there is considerable doubt as to the exact constraints which the Agreement may impose on provincial actions. For discussions of this aspect with specific reference to natural resources, see Hudec and Quinn, supra, note 25; Blue, supra, note 59; and Saunders, “The Canadian Resource Sector: Some Implications of the Free Trade Agreement”, in Gold and Leyton-Brown, supra, note 59, 216, at 221–222.
- On the reasoning that it does not create trade-distorting advantages in a particular industry.
- Final Negative Countervailing Duty Determination, Anhydrous and Aqua Ammonia from Mexico, 48 Fed. Reg. 28,522 (1983). For a discussion of this and other related decisions on discriminatory natural resource pricing, see Yoder, “United States Countervailing Duty Law and Canadian Natural Resources”, in Saunders, supra, note 6, 81, at 86–87.
- Cabot Corporation v. United States, 620 F.Supp.722 (1985).
- Final Negative Countervailing Duty Determinations; Certain Softwood Lumber Products from Canada, 48 Fed. Reg. 24,159 (1983).
- Preliminary Affirmative Countervailing Duty Determination; Certain Softwood Lumber Products from Canada, 51 Fed. Reg. 37,453 (1986).
- Canada-United States Memorandum of Understanding on Softwood Lumber, December 30, 1986. The Memorandum is grandfathered by the Free Trade Agreement, Art. 2009.
- The following discussion examines the impact in countervailing duty cases; however, antidumping duties are handled in an equivalent way in Chapter 19, and a discussion of these would proceed mutatis mutandis. As noted earlier, however, these rules have not given rise to the same objections in Canada as have the US actions with respect to subsidisation.
- An initial period of five years and a two-year extension.
- Art. 1902(2)(d)(ii); there are other requirements as well, including notification, consultation, and a requirement that any amendment applying to the goods of the other party must specify as much: Art. 1902(2)(a),(b),(c).
- Established pursuant to Annex 1901.2.
- Art. 1903 (1).
- Art. 1903 (3).
- Art. 1904 (1).
- Art. 1904 (2). Emphasis added. Similarly, the panel is instructed to apply “the general legal principles” of those courts: Art. 1904(3).
- Supra, note 20.
- For a description of some of these, including measures to deal specifically with natural resource subsidies, see Barshefsky, Diamond and Ellis, “Foreign Government Regulation of Natural Resources: Problems and Remedies Under United States International Trade Laws” (1985) 21 Stanford Journal of International Law 29.
- By the inclusion of a new “special rule” to this effect: Omnibus Trade and Competitiveness Act of 1988, P.L. 100–418, §1312, amending 19 U.S.C. §1677(5).
- Historically, Canada has not employed its countervail laws against US industry; one exception was a successful countervail action against American corn producers in 1987. There is, however, some sentiment that this situation may change as a result of recent changes in the administration of Canadian countervail law.
- Art. 1906.
- Art. 2106.
- Art. 1906.
Journal of Energy & Natural Resources Law
Volume 8, 1990 - Issue 1-4