Canada and South Korea concluded negotiations on a free-trade deal that will give more market access for Canadian beef producers and phase out tariffs on cars made by Korean companies such as Hyundai Motor Co.
The agreement will boost Canadian exports to South Korea by one-third, adding an annual C$1.7 billion ($1.5 billion) to Canada’s economic output once the deal is fully implemented, said a Canadian official familiar with the contents of the agreement who spoke to reporters in Seoul, asking not to be named as he’s not authorized to speak publicly. Korean carmakers will gain competitiveness in Canada over Japanese and European rivals, South Korea’s deputy trade minister Choi Kyong Lim said yesterday.
Canadian Prime Minister Stephen Harper, who met South Korean President Park Geun Hye in Seoul today, has stressed the need to diversify his country’s exports from the U.S., which bought 76 percent of Canada’s foreign shipments last year. Companies including Ford Motor Co. of Canada Ltd. oppose the deal on the grounds that it unfairly protects South Korea’s automakers.
“What we’re doing here is allowing other Canadian companies and other Canadian sectors to have the same access that Ford already has,” Harper told reporters in Seoul. “Ford supported the Korea-US free trade agreement, thereby Ford has access through the U.S. to the Korean market.”
Negotiations between Canada and South Korea started in 2005 and reached an impasse in 2008. In 2011, the European Union implemented its deal with South Korea, while the U.S. brought its own version into force in 2012.
The agreement will eventually phase out 98.2 percent of South Korean tariffs and 97.8 percent of Canadian duties, the Canadian government said in documents released to reporters. South Korean duties now average about 13.3 percent, while Canadian tariffs average 4.3 percent, according to the documents. It will come into force as quickly as possible once it goes through legal review and both countries ratify it, the official said.
Disagreement over access for Canadian beef and pork, as well as South Korean cars, represented the biggest stumbling blocks to the deal, the Canadian official said.
Under the agreement, Canada will phase out over three years its 6.1 percent tariff on imports of vehicles produced by automakers such as Hyundai and Kia Motors Corp. Those provisions were criticized by Canadian labor leaders.
“We cannot stand by a deal that secures a one-way flow of Korean auto imports into the Canadian market, undermining the jobs and industry on which so many Canadians depend, while precious little is done to strengthen our imports to Korea,” said Unifor national President Jerry Dias, in an e-mailed statement. Unifor represents workers at the largest automakers in Canada.
Dias and Ontario economic development minister Eric Hoskins both said the agreement should have included the same “snap-back” provision included in the U.S.-Korea pact, which allows the U.S. to re-establish tariffs if South Korea introduces non-tariff barriers on Canadian imports.
While Hoskins said in a statement he welcomes moves to open markets for Canadian farmers, Ontario “remains very concerned regarding the potential for serious negative impacts this agreement could have on Ontario’s auto sector.”
Agricultural groups, including the Canadian Canola Growers Association and organizations representing meat and specialty crop producers, issued statements celebrating the agreement.
“This deal is especially important to Canada, with South Korea having already concluded Free Trade Agreements with the EU, Chile, Australia and the U.S.,” said Rick White, chief executive officer of the canola growers group, in an e-mailed statement. “Until today we’ve been at a competitive disadvantage versus other oilseeds.”
South Korea will eliminate its duties on Canadian fresh, chilled or frozen beef over 15 years, and pork in the same categories over as many as 13 years. Canadian agriculture industries such as dairy, which are controlled through a policy known as supply management, are exempted from the deal, according to the official.
“I can understand how there might be voices of concern regarding potential injury caused to the agricultural and livestock industries,” South Korean President Park told reporters in Seoul. “We have done our best to fully reflect the sensitivities of our position in those regards and have put in certain measures to cushion the blow.”
Park asked for Harper’s support for Korea to join the Trans-Pacific Partnership trade talks, which encompass 12 nations from Singapore to Chile. TPP would boost the effectiveness of South Korea and Canada’s bilateral pact, Park said, according to a pool report of a meeting with Harper distributed by her office today.
The South Korean deal is the first Canada has reached in Asia, and will let it compete fairly with the U.S. and European Union, which have already signed pacts with Korea, according to the Canadian official.
Canadian exports to South Korea declined 32 percent over two years to C$3.44 billion last year, according to Canadian government data. Over the same period, Canada’s trade deficit with that country more than doubled to C$3.9 billion.
“This is a deal that Canada needed,” Joy Nott, president of the Canadian Association of Importers and Exporters, told reporters in Seoul. “This puts us back on level footing with the Americans and the EU.”
Ford Motor Co. of Canada President Dianne Craig said in a interview with the Globe and Mail newspaper in January that a pact wouldn’t benefit Canada because South Korea isn’t a “good fair-trade partner.”
“We believe that South Korea will remain one of the most closed automotive markets in the world under the deal negotiated by the Canadian government,” the company said in a statement today.
South Korea already has free trade agreements with countries including the U.S., European Union, India and Chile and is currently in talks with China and Japan.