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Canada signs trade deal with South Korea, gains foothold in Asian marketTuesday, September 23, 2014 > 09:46:11
(The Globe & Mail)
Canada is catching up with the United States in signing a long-discussed free-trade deal with South Korea, but lessons from the two-and-a-half-year head start south of the border point to potential hurdles ahead.
In the first state visit of a Korean president since 1999, Park Geun-hye was welcomed on Parliament Hill on Monday by Prime Minister Stephen Harper to mark the ceremonial completion of the trade deal, which was announced in March when Mr. Harper visited Seoul.
It is the first of two major trade deals Mr. Harper will finalize this week, with top European Union officials scheduled to arrive on Friday for the conclusion of the Canada-EU trade agreement.
Mr. Harper said Canada and South Korea have a lot in common in that both are neighbours to major world powers. The Prime Minister said the deal gives Canada a foothold in the Asian market.
“There’s just no better and no more ideal partner than the Republic of Korea,” Mr. Harper said at an event with Ms. Park.
Many Canadian business groups welcome the trade deal with Korea given recent concern that they have faced a competitive disadvantage since the United States implemented a free-trade pact with South Korea in 2012. As with the negotiations involving the United States, the main concern for the Canadians was the trade in automobiles, which has been fairly one-sided in terms of imports from South Korean manufacturers such as Hyundai and Kia. Lower prices for consumers and business opportunities in agriculture and the services sector are seen as the main wins for Canada.
Perrin Beatty, the president of the Canadian Chamber of Commerce, said it is now up to Canadian businesses to seize the opportunity by expanding into South Korea.
“The free-trade agreement in essence opens the doors,” he said. “But the question is how we go in once the door’s been opened. How do we encourage the Canadian business community to do so?”
A report this month by the Congressional Research Office in Washington examined the early impact of the trade deal between South Korea and the United States, providing a hint of what Canada might expect.
Between 2011 and 2013, U.S. goods exports to South Korea decreased by five per cent to $39.2-billion, while imports from South Korea rose 11 per cent to $62.1-billion. The U.S. goods trade deficit with South Korea worsened during the period, growing from $14.7-billion to $23-billion.
The trade balance in services between the two countries improved for the United States during the same period, rising from $6.9-billion to $10.1-billion.
The report stressed that it is difficult to draw conclusions at this stage because further tariff reductions are scheduled. It also cautioned that it is hard to sort out how much of the recent change in the trade balance is directly tied to the agreement versus broader economic fluctuations.
Nonetheless, the report notes concern that the overall trade figures suggest the deal has been better for South Korea.
“The increase in the U.S. goods trade deficit with South Korea since the implementation of the [free trade agreement] has caused concern among some U.S. policy makers,” the report states.
The U.S. experience should also concern Canadians, said Jim Stanford, an economist with the labour organization Unifor, which has warned the deal will ultimately hurt Canada’s auto-manufacturing sector.
“The auto provisions of our deal are inferior to those of the U.S. deal, and the U.S. deal has hurt the U.S. auto industry, clearly,” Mr. Stanford said. “For a country in the modern world, trading off high-tech manufacturing for agricultural production and resource exports is an increasingly questionable trade-off in my view.”