Canada and Costa Rica Strengthen Relations

Strengthening Canada’s engagement with Costa Rica

San José, Costa Rica

Prime Minister Stephen Harper announced the launch of negotiations to modernize the existing free trade agreement between Canada and Costa Rica, as well as the signing of an air transportation agreement and a tax information exchange agreement between the two countries.

Canada-Costa Rica Free Trade Agreement

Costa Rica is Canada’s largest trading partner in Central America, accounting for 31 percent of its two-way merchandise trade with the region in 2010. Unlike Canada’s current approach to free trade agreements, the existing Canada-Costa Rica Free Trade Agreement – which came into effect on November 1, 2002 – does not include substantive provisions in areas such as services, investment and government procurement.

Canada and Costa Rica look forward to modernizing their existing free trade agreement, which will aim to lower tariffs on goods, expand market access for cross-border trade in services, investments, electronic commerce and telecommunications, as well as secure access to the government procurement market.

As a result of the modernization, new opportunities could be created in Costa Rica for Canadian businesses in construction, manufacturing and agriculture. This will serve to increase economic prosperity in Canada and Costa Rica by creating new opportunities and jobs – a key objective of Canada’s engagement in the Americas.

Officials will meet in the coming weeks to begin the negotiation process. Both Canada and Costa Rica are committed to updating their existing free trade agreement as soon as possible.

Air Transportation Agreement with Costa Rica

On August 11, 2011, Prime Minister Stephen Harper and Costa Rican President, Laura Chinchilla, witnessed the signing of an air transportation agreement, which will benefit businesses and travelers by facilitating more flight options and routings, and strengthen ties between Canada and Costa Rica.

The new agreement – which provides airlines and passengers with significantly more flexibility in terms of routes, frequency of service and pricing – aims to expand commercial opportunities for airlines and businesses, which will in turn promote tourism and greater economic activity in the two countries. It also enables Canadian and Costa Rican airlines to offer air services using flights from countries other than their own and contains a number of provisions dealing with aviation safety and security.

The Air Transport Agreement is consistent with the Government of Canada’s Engagement in the Americas strategy, which aims to promote prosperity by further engaging with countries in the Western hemisphere. It is also a key component in the implementation of Canada’s Blue Sky Policy, whose objective is to enhance the prosperity of our country by creating opportunities and jobs in various sectors of the economy, including trade and tourism.

The Air Transport Agreement must be ratified by both Canada and Costa Rica before the provisions contained within it can be implemented. Until that time, the 1996 air transport agreement remains in effect.

Tax Information Exchange Agreement

Tax information exchange agreements (TIEA) are bilateral agreements under which two countries undertake to exchange tax information that is relevant to the administration and enforcement of domestic tax laws. In particular, a TIEA sets out to combat tax evasion and tax havens.

As a member of the Organization for Economic Co-operation and Development (OECD), Canada believes that the ability for countries to exchange standardized tax information is of the utmost importance and supports the OECD in its encouragement of member countries to enter into TIEAs. This is why the Government of Canada announced in 2007 that it would adopt a policy in support of negotiating TIEAs with jurisdictions with which it does not have a comprehensive tax treaty.

As with all TIEAs, the agreement signed on August 11, 2011 between Canada and Costa Rica will help fight international tax evasion and protect the integrity of Canada’s tax system.

Currently, Canada has TIEAs in force with Bermuda and the Cayman Islands, as well as the jurisdictions formerly known as the Netherlands Antilles. Canada has also signed TIEAs with Anguilla, Bahamas, Dominica, Guernsey, the Isle of Man, Jersey, Saint Lucia, San Marino, St. Kitts and Nevis, St. Vincent and the Grenadines, and the Turks and Caicos Islands.

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