Prime Minister Stephen Harper announced that Canada and the Republic of Korea have concluded negotiations for a bilateral free trade agreement that is expected to significantly boost trade and investment ties between the two countries. The Free Trade Agreement is expected to provide Canadian businesses and workers with a gateway to Asia, enhancing their global competitiveness. It will also level the playing field for Canadian companies competing with Korea’s other trading partners, including the United States and the European Union, which already have free trade agreements with Korea.

Canadian consumers 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 eliminates tariffs and reduces non-tariff measures that hinder market access for Canadian exporters and investors in Korea. Once the Agreement is fully implemented, Korea will remove or begin to remove duties on 98.2 per cent of its tariff lines, covering virtually all of Canada’s imports. South Korean tariffs currently average about three times Canada’s: 13.3 per cent as opposed to 4.3 per cent respectively.

Korea is already Canada’s seventh-largest merchandise trading partner and its third-largest in Asia (after China and Japan). Canadian imports from South Korea in 2012 added up to $6.4 billion (40 per cent of which was represented by automotive products), while Canadian exports to South Korea in that year totaled $3.7 billion.

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.

Korea’s economic growth in the last 30 years has been remarkable. Since 1980, Korea’s GDP has grown more than six-fold and experienced an average annual growth rate of 6.5 per cent. It is the world’s 15th-largest economy (GDP of $1.1 trillion), and the fourth-largest in Asia, with a population of 50 million people.

Officials say the pact is fully fleshed and not an agreement in principle, as was the case with the European Union deal, and could come into effect within a year. The agreement is also different is that it does not involve sub-national procurement, so Ottawa will not require provincial approval. Representatives of the aerospace, pork and beef industries, and forestry products industries were positive about what the elimination of South Korean tariff could mean for their industries.

As in every agreement, there will be winners and losers, and some observers believe the domestic auto will be among industries that will suffer as a result of implementation of this agreement. The auto industry will see a 6.1-per-cent duty on Korean exports of Hyundai and Kia vehicles eliminated over two years once implemented, making the brands even more competitive in the Canadian market. It should be noted, though that about half of Hyundai and Kia vehicles currently imported into Canada are manufactured in the U.S., and therefore not subject to duties under NAFTA rules. Unifor (formerly Canadian Auto Workers) President Jerry Dias, said that the agreement “poses a serious threat to Canada’s auto industry” and that Prime Minister Harper has failed to address a trade imbalance. Ontario Trade Minister Eric Hoskins also expressed concern over the impact the trade deal might have on Ontario’s automakers.

Supporters have stated that it was essential for Canada to conclude an agreement to respond to the competitive advantage enjoyed by the U.S., Europe and Australia from having implemented trade pacts with Korea. According to federal estimates, Canadian exports to South Korea have fallen by $1.5 billion, or 30 per cent, since the U.S. pact went into force in the spring of 2012. Jim Quick of the Aerospace Industries Association of Canada said his industry has seen shipments to Korea plunge from about $180 million to $34 million after the U.S., Europe and others signed their deals.