The Globe and Mail | Jan. 14 2014
Canada-South Korea free trade pact moving closer
OTTAWA — Canada and South Korea are moving closer to a long-delayed free trade deal amid stiff resistance from Canadian-based auto makers.
Negotiators have made significant progress towards a final agreement, particularly in agriculture, according to industry and government sources.
The federal government is now in discussion with various industry sectors as it carefully analyzes the economics and politics of going ahead with a deal, including balancing what the auto industry might lose in Ontario against the potential export gains for producers of pork, beef and soybean and other products.
The Detroit Three auto makers have long warned of a flood of South Korean-made Hyundai and Kia cars if Canada’s 6.1-per-cent tariff is phased out.
The Ontario government is pushing Ottawa to secure better protection for Canadian auto plants, including emergency protections if imports surge as well as a lengthy phase out of the tariff.
“There is a window of opportunity to finish the deal,” explained Martin Rice, executive director of the Canadian Pork Council. “It’s up to Canada to move ahead.”
Canadian pork producers, who are among the most vocal supporters of a deal, said they have already agreed to their part of a tentative deal, including the removal of a 25-per-cent tariff on frozen pork gone over five years and a 12-year phase out of a 22.5-per-cent tariff on chilled meat.
Mr. Rice said his industry stands to gain annual exports initially worth as much as $200-million a year and doesn’t want to lose further ground to the U.S., which already has free trade with South Korea.
Beef producers also stand to gain greater access under proposed terms, outlined to various industry sectors in recent weeks.
“Canada has been working closely with Korea towards a high-quality bilateral free trade agreement for several years,” said Adam Taylor, a spokesman for Trade Minister Ed Fast. “That work continues . . . As always, Canada will only sign agreements that reflect Canadians’ best interests.”
The free trade deal is already more than eight years in the making. Talks stalled in 2008, and have been on-again, off-again ever since.
Two key factors got negotiations back on track in recent months. Hyundai Motor Group and its affiliate Kia Motors now have assembly plants in Georgia and Alabama. Many vehicles, including the best-selling Hyundai Elantra, can enter Canada duty-free from the U.S.
And secondly, Canada holds a key to South Korea’s entry into the much broader Trans-Pacific Partnership trade deal. South Korea can’t join without the approval of all existing TPP countries, including Canada, and that has spurred the country to make more concessions in bilateral talks.
The cost of not doing a deal is already inflicting a heavy toll. Canadian merchandise exports to South Korea have fallen sharply in the past couple of years as countries that already have bilateral free trade deals, including the U.S. and the European Union, steal market share.
“It’s been a long time coming,” said Ottawa trade consultant Peter Clark. “We lost three-plus years and now we’re behind the eight ball with the U.S.”
Toronto trade lawyer Lawrence Herman said the two sides appear to have moved on some critical issues, and shouldn’t let a deal slip away now. “It was most unfortunate that Canada could not close an agreement [before] the U.S.,” he said.