August 4, 2009 (10 a.m. EDT)
No. 214

Minister Day Announces Canada-Peru Free Trade Agreement

The Honourable Stockwell Day, Minister of International Trade and Minister for the Asia-Pacific Gateway, today announced that the Canada-Peru bilateral free trade agreement (FTA) came into effect on August 1, 2009.

“Ensuring free and open trade is vital to international efforts to halt the global recession,” said Minister Day. “Our economic prosperity depends on creating new opportunities through open markets, and this free trade agreement with Peru will provide such opportunities with one of the most dynamic economies in Latin America.”

Canadian producers will benefit from the elimination of tariffs on exports into Peru. Many agricultural exports such as wheat, barley, lentils and peas will receive immediate duty-free status. The FTA provides enhanced market access in service sectors that are of interest to Canada, including mining, energy and professional services. Canada’s banking, insurance and securities sector will also benefit from greater access to the Peruvian marketplace.

Parallel agreements on labour cooperation and on the environment also came into effect on August 1. The labour agreement commits Canada and Peru to respecting and enforcing international labour standards such as the elimination of child and forced labour, freedom of association and the right to bargain collectively. The environment agreement commits both countries to substantially increase environmental protection, to enforce their respective environmental laws, and to refrain from diminishing these laws or reducing their enforcement to encourage trade and investment.

This is the second trade agreement Canada has implemented this year: in June, Canada’s FTA with the European Free Trade Association (EFTA) came into force. Canada’s Economic Action Plan focuses on helping Canadian businesses and investors succeed in world markets. The ambitious trade agenda includes negotiations to improve market access to diverse countries in Europe, Asia, the Americas and the Middle East.

In 2008, two-way merchandise trade between Canada and Peru reached $2.8 billion. Peru is also an important investment partner for Canada, holding Canadian investment stock worth an estimated $2.35 billion at the end of 2008.

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A backgrounder follows.

For further information, media representatives may contact:

Mélisa Leclerc
Director of Communications
Office of the Minister of International Trade and Minister for the Asia-Pacific Gateway
613-992-6186

Trade Media Relations Office
Foreign Affairs and International Trade Canada
613-996-2000

Backgrounder

Canada’s Free Trade, Labour Cooperation and Environment Agreements with Peru

Canada-Peru Free Trade Agreement

The Free Trade Agreement (FTA) provides commercial benefits to Canadian and Peruvian business. Benefits include:

Better market access through elimination of tariffs on goods

Peru will immediately eliminate tariffs on 95 percent of current Canadian exports, with most remaining tariffs to be eliminated over a five- to ten-year period. Products that will receive immediate duty-free access to Peru include wheat, barley, lentils, peas and selected boneless beef cuts, a variety of paper products, and machinery and equipment.

Canada will immediately eliminate 97 percent of its tariffs on Peruvian imports. The remainder will be eliminated over a three- or seven-year period, with the exception of over-quota tariffs on dairy, poultry, eggs and refined sugar, which are excluded from tariff reductions. A tariff-rate quota will be applied to refined sugar.

Better market access for service providers

The FTA provides enhanced market access in service sectors that are of interest to Canada, including mining, energy and professional services. Canada and Peru have also signed an agreement on comprehensive disciplines within the financial services sector, including banking, insurance and securities. Professional associations in each country will work toward the negotiation of mutual recognition agreements, with priority granted to the engineering profession.

Promotion of two-way investment between Canada and Peru

The agreement incorporates existing provisions from the Canada-Peru Foreign Investment Promotion and Protection Agreement, and locks in market access for Canadian investors to provide them with greater stability, transparency and protection for their investments. Strong obligations are included to ensure the free transfer of capital related to investment, to protect against unlawful expropriation and to provide for non-discriminatory treatment of Canadian investments. In addition, investors now have access to binding international arbitration to resolve disputes.

Better access to government procurement contracts

The FTA gives Canadian and Peruvian suppliers improved market access in the area of government procurement. It guarantees Canadian suppliers the right to bid on a broad range of goods, services and construction contracts carried out by Peru’s central government entities. It also ensures that practices remain transparent and fair for suppliers.

Maximized opportunities through trade-related cooperation

The Canada-Peru FTA will contribute to Peru’s economic development by creating new market opportunities for exports of Peruvian goods and services, and by providing a positive environment for Canadian direct investment. Since Peru is a developing country, many of its products already enter Canada duty-free. The FTA acknowledges Peru’s status as a developing country in several ways, for example, by allowing Peru more time than Canada to phase out tariffs on products.

To complement Canada’s development cooperation objectives with Peru, and to help maximize the benefits of the agreement, the FTA includes a chapter on trade-related cooperation to facilitate trade-related capacity initiatives. These efforts aim to strengthen Peru’s ability to maximize the agreement’s benefits.

Furthermore, Peru has been identified as a country of focus for the Canadian International Development Agency’s development assistance program. The goal of this program is to help trade partners and potential trade partners in the Americas maximize the opportunities and benefits of increased trade and investment.

Promotion of corporate social responsibility and anti-corruption measures

The agreement encourages Canadian and Peruvian businesses operating within either country’s borders to respect and follow internationally recognized standards, practices and principles related to corporate social responsibility. On March 26, 2009, the Government of Canada introduced Building the Canadian Advantage, a new corporate social responsibility strategy to help Canadian companies implement these standards, practices and principles. The FTA also includes measures designed to combat bribery and corruption.

Canada-Peru Agreement on Labour Cooperation

Through the labour cooperation agreement (LCA), Canada and Peru commit to ensuring that their laws respect the International Labour Organization (ILO) Declaration on Fundamental Principles and Rights at Work, adopted in 1998. To further protect workers, Canada and Peru have also committed to improving occupational health and safety standards and to reviewing minimum employment standards such as minimum wages and hours of work. Migrant workers will now receive the same legal protection as domestic workers. The agreement also includes a clause to prevent either country from encouraging trade or investment at the expense of worker protection.

Canada and Peru are obligated to respect the LCA, which includes an open and robust process to resolve complaints and disputes. Failure to respect ILO principles and to enforce domestic laws is subject to penalties, which could include payment of up to $15 million in any twelve-month period into a cooperation fund. These funds will be applied to the dispute resolution process.

For more information on the ILO’s Declaration on Fundamental Principles and Rights at Work, please consult Programme for the Promotion of the Declaration.

Canada is offering its resources and its expertise to help Peru fully implement this agreement and to that end will sponsor a $1-million labour program to promote technical cooperation.

Canada-Peru Agreement on the Environment

The Canada-Peru Agreement on the Environment commits both countries to achieving higher levels of environmental protection by developing and improving their respective environmental laws and policies. The agreement also includes key obligations that require the two countries to comply with, and effectively enforce, these laws and to refrain from diminishing them or reducing their enforceability to encourage trade or investment.

The agreement reaffirms commitments by both countries under the UN Convention on Biological Diversity to protect biological diversity to a higher degree and to respect, preserve and maintain traditional knowledge, innovations and practices of indigenous and local communities. Canada is committed to working with Peru to protect and conserve the latter’s biological resources-among the most diverse in the world-in a manner that respects the interests of indigenous peoples and local communities.

Both parties have committed to addressing any potential issues arising under the agreement in a cooperative manner, through consultation and the exchange of information. The parties may request consultations at the ministerial level to help resolve outstanding issues.

For more detailed information on the Convention on Biological Diversity, please consult Convention on Biological Diversity.

For more detailed information, and for the complete text of the agreements between Canada and Peru, please visit Canada-Andean Countries Free Trade Discussions.