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Removal of Federal Exceptions in the Canadian Free Trade Agreement

The Government of Canada successfully reviewed all of its exceptions in the Canadian Free Trade Agreement (CFTA) with the intent to remove as many as possible. As part of this comprehensive review, the federal government consulted all provinces and territories to ensure no stone was left unturned.

This review has resulted in the removal or narrowing of 17 exceptions, representing one third of the Government of Canada’s exceptions since the CFTA was launched in 2017.

Many of the exceptions removed relate to procurement, providing Canadian businesses more opportunities to compete to deliver government goods and services.

As part of its review, the Government of Canada ensured, to the fullest extent possible, that remaining federal exceptions under the CFTA are essential for supporting Canadian interests and do not create meaningful barriers for internal trade in Canada. Specifically, they are required to uphold Canadian interests, such as national security, national economic and social policy, international trade obligations and/or the Government of Canada’s responsibility to support regional interests. Remaining federal exceptions under the CFTA may support one or more of these Canadian interests.

Why Federal Exceptions Remain in the Canadian Free Trade Agreement

1Rationale Federal Exception in the CFTA
National Security: Ensure the Government of Canada can uphold public safety and national security, which goes beyond the scope of the CFTA.

Annex I of Part VII – Exceptions for Existing Measures

Ensures the Federal Government can Regulate Foreign Investment and Foreign Ownership in Federally Incorporated Corporations and other entities:

  1. Canada Business Corporations Act, Canada Cooperatives Act;
  2. Investment Canada Act;
  1. Telecommunications Act, Radiocommunications Act;

Annex 519.1 – Procurement Exceptions

  1. Excluded Entities
    1. Canadian Security Intelligence Service;
    2. Communications Security Establishment;
    3. Financial Transactions and Reports Analysis Centre of Canada;
  2. Exceptions and Notes
    1. c) any corporation of the Royal Canadian Mounted Police;
      d) any corporation incorporated or acquired by or on behalf of any service established by an Act of Parliament to collect information and intelligence respecting the security of Canada;
      j) Canadian Air Transport Security Authority for security screening, including services and goods that are related or incidental to security;
      k) space projects for the Canadian Space Agency;

 
National Economic and Social Policy: Ensure the Government of Canada can fulfill its responsibility to advance national economic and social policy.

Annex I of Part VII – Exceptions for Existing Measures

Maintains Exclusivity of National Postal Services:

  1. Canada Post Corporation Act, Letter Definition Regulations

Annex II of Part VII – Exceptions for Future Measures

  1. Ensures federal infrastructure investments can be directed based on national and regional needs;
  2. Ensures the federal government can regulate fish licensing or related activities, including entry of foreign vessels;
  3. Ensures the federal government can issue approvals for transportation and transmission on pipelines and power lines;
  4. Ensures the federal government can regulate marine transportation services in Canadian waters;
  1. Ensures the federal government can appoint, create, expand or regulate exclusive service suppliers in the transportation sector;
  2. Ensures the federal government can regulate aviation, air transportation, and related services; and
  1. Ensures the federal government can regulate foreign nationals’ ability to work in Canada on a temporary basis, including under the Temporary Foreign Workers Program and International Mobility Program.

Annex 519.1 – Procurement Exceptions

  1. Excluded Entities
    1. Bank of Canada;
    2. Canada Pension Plan Investment Board and its subsidiaries; and
    3. Public Sector Pension Investment Board and its subsidiaries.
  2. Exceptions and Notes
    1. a) any entity not wholly-owned by the Government of Canada;
      b) commissions under the Inquiries Act;
      e) intervention activities of the Canada Deposit Insurance Corporation or its subsidiaries, or procurement by any subsidiary created in respect of such intervention activities;
      f) Canada Lands Company Limited or its subsidiaries;
      g) shipbuilding and repair, including related to architectural and engineering services, by any Crown corporation for which the Minister of Transport is specified;
      i) transportation services, leasing, and rental of transportation equipment, or transportation services incidental to a procurement contract by Marine Atlantic Inc., Canada Post Corporation or pilotage authorities established pursuant to the Pilotage Act;
      l) public relations services; and
      m) international assistance, including development aid.
    2. a) Industrial and Technological Benefits Policy; and
      b) Industrial and Regional Benefits Policy.
International Trade Obligations: Ensure the Government of Canada can fulfill commitments to other countries through international trade agreements. 

Annex 519.1 – Procurement Exceptions

  1. Exceptions and Notes
    1. h) relation to an international crossing between Canada and another country, including the design, construction, operation or maintenance of the crossing, as well as any related infrastructure;
Supporting Regional Interests: Ensure the Government of Canada can fulfill existing agreements and accords with provincial and territorial governments, as well as allow the federal government to effectively respond to evolving regional needs.

Annex I of Part VII – Exceptions for Existing Measures

Ensure the province or territory is the primary beneficiary of its offshore oil and gas exploration and development:

  1. Canada Oil and Gas Operations Act, Canada-Nova Scotia Offshore Petroleum Resources Accord Implementation Act, Canada-Newfoundland and Labrador Atlantic Accord Implementation Act, Canada-Yukon Oil and Gas Accord Implementation Act, Yukon’s Oil and Gas Act, measures implementing the Northwest Territories Oil and Gas Accord, including implementing measures that apply to or are adopted by Nunavut, and measures implementing the Accord between Canada-Quebec for the joint management of petroleum resources in the Gulf of the St. Lawrence, or any other similar federal-provincial accords related to the joint management of petroleum resources.
  2. Hibernia Development Project Act, Canada-Newfoundland and Labrador Atlantic Accord Implementation Act.

Maintains requirement for oil and gas production holders to be incorporated in Canada:

  1. Canada-Newfoundland and Labrador Atlantic Accord Implementation Act, Canada-Nova Scotia Offshore Petroleum Resources Accord Implementation Act, Canada Petroleum Resources Act, Territorial Lands Act, and Federal Real Property and Federal Immovables Act

Ensures Canada’s marine pilotage authorities can respond to the safety and environmental risks of the region:

  1. Pilotage Act

Annex II of Part VII – Exceptions for Future Measures

  1. Ensures Canada’s passenger rail transportation services can reflect regional needs, including service to remote communities, and Canada’s freight rail transportation system is integrated and competitive;
  1. Ensures the federal government can advance a general framework of regional economic development.
Other: Maintained by the Government of Canada on advice of other Parties of the CFTA.

Annex I of Part VII – Exceptions for Existing Measures

  1. Cameco Limited (formerly Eldorado Nuclear Limited Reorganization and Divestiture Act);

What is a Federal Exception under the Canadian Free Trade Agreement?

An exception under the CFTA is a carve out taken by a signing government, which includes the federal government and all provincial and territorial governments, to indicate where the agreement does not apply. For example, a signing government could choose to take an exception to exclude a specific industry. This would mean that the rules of CFTA would not apply to the industry listed in the exception.

The Government of Canada has taken exceptions to ensure it can uphold national security, national economic and social policy, international trade obligations, and its responsibility to support regional interests.

Under the CFTA, the Government of Canada has taken:

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