Industry welcomes Canada-South Korea Free Trade Agreement

Ottawa – Canada and South Korea have concluded negotiations for a bilateral free trade agreement.

This is Canada’s first with an Asian market and the federal government says it will create thousands of new jobs in Canada.

It will also provide Canadian businesses and workers with a gateway to Asia, and level the playing field for Canadian companies competing with Korea’s other trading partners, including the U.S. and the E.U. (both already have free trade agreements with Korea).

Korea is a key market for Canada, it’s the world’s 15^th-largest economy (at $1.1 trillion) and the fourth-largest in Asia, with a population of 50 million.

Consumers in Canada will benefit from a greater variety of goods at lower prices, as the Free Trade Agreement will cover virtually all aspects of Canadian-Korean trade: goods and services, investment, government procurement, environment and labour cooperation, and other areas of economic activity.

The agreement will eliminate tariffs and reduce non-tariff measures that hinder market access for Canadian exporters and investors in Korea.

Once the agreement is fully implemented, Korea will remove duties on 98.2 per cent of its tariff lines, covering virtually all of Canada’s imports.

The Canada-Korea Free Trade Agreement will benefit a wide range of sectors, including:

• industrial goods (e.g. chemicals and plastics, information and communications technology, aerospace, metals and minerals, etc.);
• agricultural and agri-food products;
• wine and spirits;
• fish and seafood; and
• wood and forestry products.

The agreement will also benefit Canada’s services sector and strengthen opportunities and protection for two-way investment.

In the agricultural sector, South Korea will gradually eliminate tariffs on nearly 87 per cent of products coming from Canada, reports the CBC.ca.

For instance, tariffs on Canadian beef and pork would be gradually eliminated over a period of five to 15 years depending on the product. The agreement will not affect Canada’s supply management.

During the negotiations, many of Canada’s industries called on the federal government to conclude a deal with Korea.

In an open letter to Prime Minister Stephen Harper, groups and companies such as the Winery & Grower Alliance of Ontario, Maple Leaf Foods Inc., the Alliance of Ontario Food Processors, Beef Farmers of Ontario, Pulse Canada, Canadian Agri-Food Trade Alliance, Malting Industry Association of Canada, the Canadian Meat Council, Sunworld Farms Ltd., Cargill Beef Canada, Ontario Bean Growers, Canadan Pork International, Quality Meat Packers Ltd., Ontario Pork, Pet Food Association of Canada, Canola Council of Canada, Grain Growers of Canada, Canadian Canola Growers Association, Andrew Peller Limited and Spirits Canada appealed for a level playing field to “protect and create jobs for workers” in Canada.

Pork industry

The Canadian Pork Council (CPC) says it welcomes the news of the agreement. The council has been a strong advocate for free trade with Korea because it will allow the pork industry to be on an equal footing with its competitors – the U.S., the E.U. and Chile – in what has at times been the industries third or fourth most important export market.

Without an FTA with Korea, Canada’s $223 million of pork trade with Korea in 2011 and $129 million of pork trade in 2012 would largely disappear when the FTAs Korea has signed with three other countries are fully implemented. Canada exported approximately $76 million of pork to Korea in 2013.

The CPC says South Korea has always been a top five market and the high value of the items sold there, such as chilled (shoulder) butts and bellies, is significant enough to have a major impact on Canadian hog prices and jobs in both the farming and processing sectors should Canada lose access to the market.

An American study evaluated the benefits for the U.S. pork sector of the FTA between U.S. and Korea at US $10 per hog. The benefits for the Canadian pork industry of a Canadian FTA with South Korea should be similar as those in the U.S.

“The completion of a Canada-South Korean Free Trade Agreement was of critical importance for the Canadian pork sector.  Korean people recognise the quality of Canadian pork due and we look forward to rebuilding market share lost in South Korea,” says CPC’s Chair Jean-Guy Vincent.

“The absence of an FTA with Korea was causing substantial and growing prejudice to the Canadian pork industry due to the tariff rates since all of our key competitors in Korea have FTAs in place.”

Cattle industry

The Canadian Cattlemen’s Association (CCA) was also pleased with the news.

Under the terms of the agreement, the 40 per cent Korean tariff on fresh and frozen beef will be fully eliminated in 15 equal annual steps and the 18 per cent tariff on offals will be fully eliminated in 11 equal annual steps.

The CCA says the tariff has been the main impediment to accessing the Korean market since Korea lifted its BSE prohibition on Canada in early 2012, explains Dave Solverson. CCA president.

“For the past few years, Canada’s key beef competitor, the U.S., has enjoyed an increasing tariff advantage flowing from its FTA with South Korea. Today’s announcement means Canadian beef will be able to once again compete for meaningful access in the Korean market,” Solverson said from Seoul, where he was with Prime Minister Harper for the announcement.

The impact of the tariff disadvantage is clear. In 2002, Korea was a $40 million market for Canadian beef and its fourth largest export destination.

In 2013, with a growing tariff disadvantage relative to U.S. beef, Canada exported $7.8 million. The Canada-Korea FTA will signal to Korean buyers that they can resume their relationship with Canadian beef and maintain a long-term competitive position.

“This is excellent news for Canadian beef producers,” says Dan Darling, CCA Vice President and Foreign Trade Chair. “The ability to get every piece of the animal to the highest value market is what maximizes prices at the farm gate. I particularly like that we will be getting an aggressive phase-out on offals that get more value in Korea than they do here in North America.”

Photo: Prime Minister Stephen Harper and South Korean President Park Geun-hye