Korea’s U.S. Trade Treaty Could Pave Way for Canadian Pact
Embassy, Canada
Korea’s U.S. Trade Treaty Could Pave Way for Canadian Pact
Canada stands to learn from the new South Korea-U.S. free trade deal, not only about what it entails, but also what the reaction will be from ’sensitive’ sectors like the automotive industry.
By Lee Berthiaume
6 June 2007
Canadian trade officials will be carefully examining the free trade agreement recently inked by South Korea and the United States and applying any lessons learned to their own ongoing negotiations with the Asian country.
"The government is reviewing the details of the U.S.-Korea FTA deal so that we can appropriately assess implications for our own FTA negotiations with Korea," International Trade spokesman Brooke Grantham said last week.
Canada began free trade negotiations with South Korea in July 2005, and so far there have been 10 rounds of talks, the most recent being from April 23-26 in Seoul.
However, a number of sensitive areas have emerged, including market access for agricultural products, shipbuilding and automobile manufacturing. Those sensitive areas have essentially stalled the negotiation process.
The U.S., in contrast, began negotiations with South Korea in February 2006, and concluded the talks at the beginning of April. The KORUS agreement’s text was made public on May 24, and has been met with mixed reviews in both countries.
Many of Canada’s sensitive areas when trading with South Korea are shared by the U.S., and it’s believed the KORUS agreement could pave the way for moving ahead with a Canada-Korea deal.
Under the KORUS agreement, nearly 95 per cent of consumer and industrial products traded between the two countries will become duty-free within three years. Most of the remaining tariffs will be dropped within 10 years.
Of those products, about half of American farm exports to South Korea will be duty-free immediately, while other products will see tariffs phased out. Beef tariffs will be phased out over 15 years and pork over 10.
The South Koreans also agreed to eliminate an eight per cent tariff on American-made vehicles and overhaul its system for taxing vehicles based on their engine sizes. The U.S. will drop its 2.5 per cent duty on small-engine South Korean vehicles, and over 10 years will phase out a 25 per cent duty on imported trucks.
The agreement also includes an expedited dispute resolution mechanism dealing specifically with auto-related disputes.
International Trade Minister David Emerson told reporters on Monday that Canada still has some "heavy lifting to do" to complete the agreement.
"We expect to have another round sometime in the next few weeks and we’ll know better after that whether we’re close or not close," he added.
When asked if there was a feeling at the International Trade department that the KORUS deal could spur a breakthrough on the Canada-Korea negotiations, Mr. Grantham noted that the U.S. has inked agreements with other Canadian trading partners, such as El Salvador, Honduras, Nicaragua, Guatemala and the Dominican Republic, that Canada is still working on.
With completion of the KORUS, Korea has commenced free trade negotiations with the European Union, another huge market for the Asian country, which some fear could draw its attention away from Canada.
’Good Milestone for Canada’
Hwang Soon-Taik, minister-counsellor at the South Korean Embassy in Ottawa, said his government was hoping to have finished negotiations with Canada last year, but has set a new goal for the end of this year.
When asked whether negotiations with Canada or Europe will receive priority from his government, Mr. Hwang said because the two are not starting at the same time and running in parallel, it’s unlikely one will supercede the other in importance.
But Mr. Hwang could not say whether finalization of the KORUS agreement will help complete a Canada-South Korea deal.
"We think this will be a good milestone for Canada and Korea," he said. "But the positions between the two countries [Canada and the U.S.] are slightly different. We don’t have the same specifications."
American automobile companies and politicians from car-producing states have expressed concern over the pact, saying it will not help domestic producers as it doesn’t include guarantees that vehicles will be sold in South Korea.
In addition, there are concerns that the Asian country-the world’s 17th largest economy-will simply build new non-tariff barriers.
Canadian Auto Workers union president Buzz Hargrove last week described the agreement as "poor" and said he was worried the Canadian government will follow the U.S. lead on negotiating auto rules.
"That’s an absolute fear that that’s the way we’re going to do it," he said. "That coupled with [International Trade Minister David] Emerson’s desire to leave a legacy as a Tory, he’s rushing to try to get a free trade agreement signed."
