Canada Country Brief - December 2008
Bilateral relations
The Australia-Canada relationship is mature, highly productive and broadly based. People to people contact between our parliaments, government officials, private sectors and academia is wide-ranging. We are both federal, geographically dispersed, continental-size countries, with Westminster systems of government and a similar standard of living. Trade relations began in 1895, when the Government of Canada sent John Larke to Sydney to establish a trade commission. Canada sent its first High Commissioner (Charles Burchell) to Australia in 1939, formalising diplomatic ties.
Bilateral links continued to strengthen in 2007. The Prime Minister of Canada, Mr Stephen Harper, visited Australia in September 2007 for the APEC Leaders’ meeting and also addressed a joint sitting of Parliament. Canada’s then Foreign Minister, Maxime Bernier and Minister for International Trade, David Emerson, also visited Australia in September 2007 for the APEC Summit.
Australian and Canadian military forces have fought side-by-side in both World Wars as well as in the Korean War and in the 1990-91 Gulf War. Australia and Canada were among the first countries to join the global coalition against terrorism, and both countries have committed military and other resources to stabilise and help rebuild Afghanistan. Both have made a major contribution to aid efforts towards the stabilisation and reconstruction of Iraq. Australia and Canada work closely to counter potential global terrorist threats through technical cooperation, information-sharing, exchanges of personnel and joint training.
Today, both countries face comparable public policy challenges in areas such as health, transport, indigenous issues and regional development. In 2002, the Foreign Ministers of Canada and Australia held the inaugural Canada-Australia Dialogue (CAD) in Ottawa on the subject of assisting countries emerging from conflict. This ministerial-level dialogue allows Canada and Australia to deepen our engagement on public policy issues of mutual interest. A successful Canada-Australia Dialogue was held in the portfolio of transport in March 2007. A CAD on health was held in August 2007, and was attended by Canadian Health Minister, Tony Clement. Climate change and energy has been flagged as the subject for a future CAD.
A comprehensive range of bilateral agreements cover trade, social security, air services, consular services abroad, mutual assistance in criminal matters and avoidance of double taxation. Consular cooperation is important; currently Canada provides services for Australia in 23 countries and Australia services Canadian consular interests in 16 countries. Tourism between our two countries is strong and growing, with almost 100,000 Canadians travelling to Australia each year and over 200,000 Australians travelling to Canada. A working holiday program allows young people to travel and work for set periods in each other's country. At present, around 15,000 young Australians and young Canadians take up this opportunity each year.
Political Overview
There are three branches of Government at the national level: legislative, executive and judiciary. The executive branch comprises the Prime Minister and the Cabinet. The Prime Minister is the leader of the party with the largest number of seats in the House of Commons.
The legislative branch consists of the House of Commons and the Senate. The House of Commons has 308 members. General elections must be held at least every five years, but have traditionally been held every four years. The Senate has 105 senators appointed on a regional basis. Its basic functions are to review proposed legislation and to operate as a forum for debating public issues. Senators are appointed by the Governor-General, on the advice of the Prime Minister, until the age of 75. However, there are legislative moves to limit new senators' terms to eight years and for Canadians to have a role in choosing the Senators who will represent them.
Historically, federal politics have been dominated by the Liberals and the Progressive Conservatives. Early in 2004, the Canadian Alliance and the Progressive Conservative parties reunited to form the Conservative Party of Canada. On 28 November 2005, the then Prime Minister Paul Martin and his minority Liberal Government lost a no-confidence motion in the House of Commons. This followed the earlier withdrawal of support for the Government by the New Democratic Party, which voted with the Conservative Party and the Bloc Québecois to pass the motion. The Canadian Governor-General, Michaёlle Jean, dissolved parliament on 29 November and Prime Minister Martin called a federal election. The Right Honourable Stephen Harper PC MP (b.1959) became the 22nd Prime Minister of Canada after a general election victory in January 2006. The Conservatives formed a minority government in the House of Commons. The Harper Government was re-elected on 14 October 2008, with a greater number of seats in the House of Commons, but continues to govern as a minority. Despite the difficulties of managing a minority government situation, the Harper Government has pressed ahead with its priorities, built around four pillars: accountability, security, environmental protection and strong economic management. On the domestic agenda in 2007, the Harper Government successfully passed its 2007 budget containing tax cuts, created Canada’s first ever greenhouse gas emissions regulatory plan and released new strategies on infrastructure development and science and technology development.
Foreign Policy
One of Canada's highest priorities is its bilateral relationship (political, cultural and commercial) with the United States. With more than C$1.75 billion in goods and more than 133,000 people moving across the Canada-US border each day, both countries have a critical stake in each other's economic security. Another key foreign policy priority for Canada is Afghanistan. As a NATO member, Canada is a significant contributor to allied efforts to improve the security situation, as well as in the reconstruction and development of Afghanistan. During 2007, Canada complemented its existing military, diplomatic and development presence in Afghanistan with further commitments of development aid and the increase of its diplomatic representation.
In multilateral forums Canada and Australia, along with New Zealand, work closely in the UN on issues ranging from security issues, human rights to cooperation on the environment. Often the three countries work together informally (known as the CANZ grouping), sometimes with other likeminded nations. This close cooperation in the UN is an important part of Australia’s relationship with Canada.
As export-oriented economies with strong interests in agriculture and mining, Australia and Canada have a common interest in a fair, open and non-discriminatory world trade system. Both countries were prominent players in the creation of the General Agreement on Tariffs and Trade (GATT) in 1947, and today both are active and influential members of its successor, the World Trade Organization (WTO), which was established in 1994. In 1986, Australia invited Canada to participate in the Cairns Group of agricultural fair trade nations, a diverse coalition bringing together developed and developing countries from Latin America, Africa and the Asia-Pacific region. The Cairns Group comprises 19 countries and remains an influential voice in the agricultural reform debate.
Australia and Canada work closely together to promote a coherent and robust system of global trade and economic cooperation in key international organisations such as the Organization for Economic Cooperation and Development (OECD), the Asia-Pacific Economic Cooperation (APEC) forum and in many United Nations agencies. Canada joined APEC in its inaugural year (1989) and Vancouver hosted APEC in 1997. Canada continues to take an active role in economic and technical cooperation, health, security and trade/investment liberalisation across the Asia-Pacific region.
One of the Harper Government's first decisions was the reintegration of the Foreign Affairs and International Trade departments, a decision taken to ensure a coherent approach to foreign and trade policy in the international context. The Canadian International Development Agency (CIDA) is included in the portfolio also and administers Canada's Official Development Assistance (ODA). Following the election in Canada on 14 October 2008, Prime Minister Harper announced new Foreign and Trade Ministers. The Honourable Lawrence Cannon MP was named Minister of Foreign affairs and The Honourable Stockwell Day was appointed Minister of International Trade.
Economic Overview
Like Australia, Canada has a low population density and a vast wealth of natural resources. Its economy ranks eighth in the world in current price GDP terms and is well diversified, with the services sector accounting for about 70 per cent of GDP and employing about 75 per cent of the labour force. The country’s economic well-being is attributable to such factors as the wealth of natural resources, the strength of its manufacturing and construction industries, the skilled labour force, and the health of the financial and services sectors. Canada’s close trade relationship with the United States is also an important contributor to Canada’s economic growth (the US absorbed around 79 per cent of Canada’s exports and was the source of around 65 per cent of Canada’s imports in 2006).
Canada’s medium-term economic fundamentals remain strong, and real GDP growth should average 2.8 per cent during 2007-11. Economic growth is set to ease slightly in 2007 as the rise in consumer spending slows, and export growth is restrained by the strong currency and weaker external demand. Although commodity prices are expected to fall significantly from 2009, the Canadian dollar is expected to gain ground against its US counterpart as growth picks up domestically and investors focus on the large US external deficit. The Canadian Government expects inflation to remain around the 2.2 per cent target over the next two years, despite concerns about higher fuel and energy costs. Unemployment was 5.9 per cent in the first quarter of 2008, a 32-year low.
Bilateral economic and trade relationship
Canada is Australia's 22nd-largest merchandise trading partner (A$3.81 billion). In 2007-08, Australia's merchandise trade with Canada consisted of A$2.2 billion in imports and A$1.6 billion in exports. Around 2000 Australian businesses either export to or operate in Canada every year, with top performing exports in 2007-08 including wine (A$264m), medicaments (including veterinary; A$68m) and passenger motor vehicles (73m). Companies exporting to Canada include food processors (Capilano Honey and Burns Philp); food retailers (Bakers Delight); consumer products retailers; packaging (Amcor); software (Mincom, Adacel and Keycorp); tourism (Wotif.com and Flight Centre); financial services and processing (Macquarie Infrastructure and Computershare); and mining (Ashton Mining and BHP Billiton). The top three merchandise imports from Canada last financial year were aircraft, spacecraft and parts (A$174m), telecommunications equipment (A$114m) and pork (A$156m). Total services trade was valued at around A$1.4 billion in 2007, with Australia exporting A$739m worth of services to Canada in the last year.
Though Canada's trade regime is generally liberal and transparent, tariff peaks and other distorting trade mechanisms do apply to domestically sensitive agricultural sectors such as dairy and poultry. Tariff rates can be found on the APEC Tariff Database.
Investment ties between Australia and Canada are substantial and Canada offers a stable investment environment for Australian business. Australian investment stock in Canada was valued at A$4.2bn in 2005 and Canada was our 6th largest investment destination. Australian investment in Canada is becoming increasingly diversified, ranging from mining and finance through to software and food manufacturing. Australian companies with investments in Canada include Worley Parsons, Plenary Group, and Macquarie Infrastructure Group.
Canada is the 8th largest foreign direct investor in Australia, with over $5.8 billion in stock as at the end of 2005. Canada has substantial investment in Australia, principally in mining and energy, engineering, food processing, computer software and media and communications. Large Canadian investors in Australia include Placer Dome, Alcan, Nortel and McCain Foods.
Australian Trade and Investment Strategies
Australia and Canada grant each other preferential tariff rates on a limited range of products agreed under the Canada-Australia Trade Agreement (CANATA), established in 1960 and amended in 1973. As CANATA pre-dates the multilateral trading system, most of its provisions have been superseded by tariff reductions achieved by negotiation in the WTO.
Canada is a fellow member of the Cairns Group, sharing a commitment to achieving fundamental and substantial reform of world agricultural and agrifood markets. Canada supports substantial trade liberalisation through the current Doha round of WTO trade negotiations.
Austrade has offices in Toronto, Vancouver and Montreal to pursue Australia's trade and investment priorities.
Export Opportunities
Canada is an important market for services, with total exports amounting to over A$739 million in 2007. Tourism and transport-related services account for around 90 per cent of services exports to Canada, with continued growth forecast, particularly in tourism. Changes in the Canadian education sector are opening opportunities for universities to attract students to Australia. Further services sector opportunities exist in the creative, visual and performing arts, film/television and literature.
Future services trade opportunities expected to be developed over the coming 1-3 years include agribusiness technologies, transport and transport security-related services and education-related products and services.
In addition, Australia’s expertise in delivering infrastructure outcomes from public private partnership models has been acknowledged by Canadians, both in business and in government. As Canada continues to revitalise infrastructure in and around its major hubs, Australian companies will be well-placed to provide financing, debt structuring, project management, engineering and design services.
A number of processed primary products, including wine and cereal preparations, have performed well in the Canadian market. Foods (especially gourmet, organic, retail and private label) are experiencing strong demand. In the consumer goods area, opportunities exist in home products, giftware and natural/organic bodycare. Australia is successfully exporting agricultural equipment and products to Canada by undertaking direct outreach programs to customers, including major farming stores, distributors and wholesalers.
Changes in Trade and Investment Conditions
Pharmaceuticals
Trade in prescription and non-prescription pharmaceuticals between Canada and Australia has been enhanced through a Mutual Recognition Agreement signed in Canberra on 16 March 2005. This Agreement allows manufacturers' batch certifications to be recognised by one without reanalysis by the other. This applies to both prescription and non-prescription pharmaceuticals. In addition, the Agreement reduces compliance costs and speeds up the process of getting pharmaceutical products into markets in both countries.
Quality Management System Certification for Medical Devices
Australia and Canada signed a Memorandum of Understanding (MOU) on 1 June 2007 recognising each other’s assessments of new medical devices. This MOU will streamline approval processes for new medical devices, enabling the mutual recognition of Quality Management System certifications issued by each country’s respective health authorities.
Chamber of Commerce
The Canadian Australian Chamber of Commerce (CACC) was launched on 20 October 2005. The Chamber is an independent, non-profit organisation that aims to contribute to increasing the level of trade and investment between Australia and Canada. Membership is free of charge to interested parties.