Canada and South Korea finalized years of negotiations on their bilateral free trade agreement (FTA) on March 11 after summit talks between Stephen Harper and his South Korean counterpart President Park Geun-hye.
The protracted FTA negotiations started in 2005, but later ground to a halt over disputes about import ban on Canadian beef. The new FTA, signed Tuesday by trade ministers of the two countries, is expected to take effect in 2015 after domestic procedures for the ratification.
“This agreement is a great deal for both of the countries,” said Harper. “It will create jobs and opportunities for Canadians today and, just as importantly, more generations to follow.” Harper added the agreement is “good news” for Canadian beef and pork producers, and for the wine, fish, seafood, medical and chemical sectors.
According to the Harper government, the deal is expected to increase Canadian exports to South Korea by 32 per cent and expand the economy by $1.7 billion. Speaking in Seoul, Harper also noted that the FTA will “level the playing field for Canadian companies competing with South Korea's other trading partners, including the United States and the European Union, who already have free trade agreements with South Korea.”
Although trade between the two countries stood at just over $10 billion as of 2013, it is considered significant for being the first free trade pact Canada has signed with an Asian country. Neither Japan nor China has a trade agreement yet with the North American country, and Canada hopes Korea will be a gateway to the Asia-Pacific region in the future.
Under the deal, tariffs on 97.5 percent of goods will be removed both in South Korea and Canada within 10 years after the FTA takes effect.
Once in force, the deal will eliminate virtually all tariffs between the countries, with Korea cutting 81.9 per cent of duties upon the first day of the FTA coming into force, and Canada removing 76.4 per cent of levies. Some tariffs will take much longer to be fully phased out, however. South Korea will remove a 40 percent import duty on Canadian beef within 15 years, while eliminating a tariff of 22.5-25 percent on pork imported from Canada over the next 13 years.
Canada will cut the 6.1 percent tariff on South Korean vehicles in two years after the FTA implementation, a move that many believe will enable South Korean automakers such as Hyundai and Kia to gain ground in the Canadian market. Automobiles currently account for 43 percent of Korea’s exports to Canada.
A study cited by the federal government estimated that damage to the Ontario auto sector would be limited to about 0.2 per cent of production or 45,000 vehicles annually, noting that 88 per cent of cars produced in Canada are for export.
Click here to download a summary of the Canada-Korea Free Trade Agreement (CKFTA).