Understanding Canada’s trade and investment agreement types and statuses

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• Agreement types
• Status of trade and investment agreements

Agreement types

Canada signs a variety of international agreements to make trade easier, protect Canadian businesses and investors, and create stable rules for doing business around the world. These agreements help support jobs and economic growth at home while strengthening Canada’s ties with other countries:

• Free trade agreements
• Foreign investment promotion and protection agreements
• Mutual recognition agreements or arrangements
• World Trade Organization agreements
• Other types of legal instruments

Free trade agreements

Canadian free trade agreements (FTA) are treaties that open markets to Canadian businesses by reducing trade barriers, such as tariffs, quotas or non-tariff barriers. They create more predictable, fair and transparent conditions for businesses operating within foreign countries. Canada’s FTAs cover substantially all trade between parties to the agreement. Many of Canada’s FTAs also go beyond “traditional” trade issues to cover areas such as services, intellectual property and investment, as well as to extend market access and protection to under-served groups, such as SMEs, women-owned businesses, and Indigenous Peoples. Some countries use the term economic partnership agreement (EPA) instead of FTA. The two terms, EPA and FTA, are synonymous.

FTAs can be bilateral (between two countries), or plurilateral (between a limited number of countries).

Foreign investment promotion and protection agreements

A foreign investment promotion and protection agreement (FIPA) is a bilateral treaty designed to protect and promote foreign investment through legally-binding rights and obligations. With some exceptions to protect sensitive policy areas, FIPAs ensure foreign investors are treated just like domestic and other third-party foreign investors. FIPAs prevent governments from seizing investments without providing prompt and adequate compensation. They ensure investors are free to bring their capital and returns home if they wish to do so. At the same time, FIPAs reaffirm the right of governments to enact measures to achieve legitimate public policy objectives.

Mutual recognition agreements or arrangements

Governments use mutual recognition agreements or arrangements (MRA) to recognize each other's regulatory testing and certification as valid. Arrangements are not legally binding, unlike agreements.

MRAs simplify trade by allowing governments to accept the results of certifications by foreign regulators. Such certifications may be related to safety or other issues.

World Trade Organization agreements

The World Trade Organization (WTO) is an international forum that establishes the rules of international trade and allows members to deal with trade issues. WTO agreements are negotiated and accepted by WTO members to help producers of goods and services, exporters and importers operate effectively in the international trading system.

WTO agreements can be multilateral, applying to all WTO members once in force, or plurilateral, applying to a subset of WTO members which have accepted an agreement on a specific subject.

Other types of legal instruments

Canada uses a wide variety of tools, both legally binding and non-legally binding, to open foreign markets to Canadian businesses and create more predictable, fair and transparent conditions for Canadian businesses while operating within the foreign market. These agreements and arrangements include air transport agreements, frameworks for economic cooperation and trade, memorandums of understanding, trade and economic cooperation arrangements, and trade and investment cooperation arrangements.

Status of trade and investment agreements 

Canada’s trade and investment agreements can go through a range of statuses over time. These statuses indicate the stage of development or implementation of each agreement. While the process may vary depending on the type of agreement most fall into one of the following categories:

1. Exploratory discussions
2. Negotiations
3. Concluded negotiations
4. Signed
5. Ratification (or consent to be bound)
6. In force
7. Terminated
8. Inactive
9. Suspended
10. Provisional application

Below, is a description of what each status means and learn what the exceptions are.

1. Exploratory discussions

For free trade agreements (FTA) and foreign investment promotion and protection agreements (FIPA), exploratory discussions are often the first step countries take to figure out what could be included in an agreement. Using economic modelling tools such as feasibility or joint studies, they determine if there would be enough interest or economic benefit in entering into an FTA or FIPA. They are not negotiations, and do not guarantee that the parties will decide to launch negotiations.

2. Negotiations

Negotiations are launched once a negotiating mandate is approved. The negotiating teams are led by a chief negotiator and include experts covering all topics under negotiation. The pace and duration of negotiations varies according to each initiative.

Some agreements may directly begin with negotiations, without formal exploratory discussions. These include plurilateral agreements, World Trade Organization (WTO) agreements and mutual recognition agreements (MRA).

3. Concluded negotiations

Negotiations conclude once the parties arrive at consensus on all elements of an agreement. The draft text of the agreement must then be reviewed by lawyers, translated and go through the domestic approval process of each party.

4. Signed

In the case of bilateral and plurilateral agreements, signature is usually the first step after negotiation. By signing the treaty, the parties are finalizing the text for approval. The agreement is usually signed by all parties after the domestic authority is obtained. For Canada, an agreement can only be signed after getting policy approval from Cabinet and legal authority through an order in council for the Prime Minister, Minister of Foreign Affairs, or other designated persons to sign.

5. Ratification (or consent to be bound)

In Canada, the process to bring a treaty into force following signature begins with the agreement being tabled in the House of Commons for 21 sitting days. If implementing legislation is required, it will be reviewed and passed by Parliament in order to receive royal assent. While not every treaty requires implementing legislation, free trade agreements usually do. Once the Government of Canada satisfies its legislative requirements and regulatory changes have been made, steps can be taken to bring the agreement into force for Canada. The Government will need an order in council to provide authority to complete those steps. Usually, Canada will then notify the other party or parties when it has completed Canada’s domestic procedures for entry into force. If Canada provides its notification first, it will have ratified the agreement (or provided its consent to be bound), but the treaty will not come into force until others have notified that they have taken similar steps.

6. In force

Typically, an agreement will enter into force once parties to the agreement have completed their internal ratification processes and informed each other that they are ready for the agreement to enter into force. In force means that the legal obligations apply to the parties.

In the case of FTAs, the agreements can have provisions that are implemented in stages. For example, tariffs can be slowly phased out, quotas modified and regulations adjusted over time. “Full implementation” occurs when the longest tariff phase-outs or other transition measures in the agreement have been completed.

7. Terminated

An agreement is considered terminated when the parties have formally withdrawn from it and it is no longer in force. Termination can be initiated by any party, following the withdrawal procedures outlined in the agreement. Once terminated, the agreement no longer has legal effect. If a party withdraws from a plurilateral or multilateral agreement, the agreement will contain rules about the status of the treaty as it pertains to the other parties. For Canada to terminate a treaty, an order in council is required.

8. Inactive

A negotiation is considered inactive when no formal steps have been taken for a long period, and there is no clear indication negotiation will resume in the near term. This status does not mean the negotiations are terminated, but that progress is paused indefinitely.

9. Suspended

An agreement may be suspended when one or more parties decide to temporarily stop its implementation. This can happen due to political, economic, or other external factors. A suspended agreement can be reactivated if the situation changes.

10. Provisional application

Provisional application refers to the temporary application of an agreement or parts of an agreement before it formally enters into force. This typically occurs after signature but before the ratification process is complete. It allows certain provisions, often those related to market access or trade facilitation, to take effect early, while full domestic procedures are finalized. For example, the Comprehensive Economic and Trade Agreement (CETA) between Canada and the European Union has been provisionally applied since 2017, allowing most of the agreement to take effect while awaiting full ratification by all 27 EU member states.