South Korea has finished its 12th free trade agreement (FTA) by concluding a deal with Canada, leading Korea’s free economic territory up to 61 percent from 58 percent, while marking Canada’s first free trade pact with an Asian nation.
The deal is particularly meaningful in that South Korea has a combined North America as Korea’s free trade zone, comprising the economies of the United States and Canada, which have a total combined gross national product (GDP) reaching US$17 trillion.
Creating the FTA with Canada has been a long and tough journey, as shown in the fact that it has been concluded after tense negotiations on the opening of each party’s core interest markets for nearly nine years. The deal centers on Canada phasing out tariffs on Korean auto imports in two years and Korea lifting tariffs on Canadian beef and pork imports in 15 years.
President Park Geun-hye had a summit meeting with Canada’s Prime Minister Stephen Harper at the Presidential Office in the afternoon of March 11, hailing the just-concluded FTA between the two countries as a “landmark achievement,” by saying the deal will bring about significant benefits for both economies.
The two leaders’ remarks came as the countries’ trade ministers announced they had worked out the deal. The Korean trade ministry said that Canada would lift its 93.2 percent tariff on imports from Korea within three years under the trade deal, while Korea would abolish its 86.1 percent tariff on imports from Canada during the agreed period.
President Park also expressed her interest in the Trans Pacific Partnership agreement (TPP), and sought Canada’s support of Korea’s participation in the US-led regional free trade deal that has been the subject of negotiations among a dozen Asia-Pacific nations.
Park said, “If we take part in the TPP, the Korea-Canada FTA and the TPP will produce synergy effects and provide each other with wider market access,” adding, “I hope the Canadian government will provide active support for Korea’s participation in the TPP.”
The joint statement after the summit said, “This historic initiative will further strengthen relations between Korea and Canada. We are committed to finalizing the legal review and required domestic procedures expeditiously with the mutual intention that the agreement will enter into force as soon as possible.”
If the deal takes effect, the 6.1 percent tariff on Korean cars exported to Canada will be eliminated 24 months after the FTA takes effect, which means the car industry would benefit most from the deal. Most of the six to seven percent tariffs on car parts, tires, and textiles are to be removed in three years, as well.
However, the deal will likely hit Korea’s beef and pork farmers hard, even if it will gradually remove tariffs on beef and pork imports from Canada over a span of 15 years and five to 13 years, respectively.
South Korea and Canada launched free trade talks in 2005, but made slow progress, mainly due to differences in the auto, agriculture, and livestock sectors, with South Korea seeking to remove Canada’s tariffs on car imports and Canada trying to eliminate South Korea’s tariffs on beef and pork imports.
Canada is the world’s 11th-largest economy, but the trade volume between the two countries has been relatively small, with Canada being only the 25th-largest trade partner for South Korea. Two-way trade amounted to US$10 billion in 2012.