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Korea Now Has North American Free Trade Partners with Combined GDP of US$17 Trillion
Korea-Canada FTA
Korea Now Has North American Free Trade Partners with Combined GDP of US$17 Trillion
  • By matthew
  • September 23, 2014, 07:28
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Korea President Park Geun-hye and Canadian Prime Minister Stephen Harper shake hands after a joint press conference in the Federal Congress of Canada in the afternoon of Sept. 22 (local time).
Korea President Park Geun-hye and Canadian Prime Minister Stephen Harper shake hands after a joint press conference in the Federal Congress of Canada in the afternoon of Sept. 22 (local time).

 

The Korea-Canada FTA was signed on Sept. 22 (local time) during President Park Geun-hye’s state visit to Canada, making Korea the first Asian country concluding a free trade deal with Canada. This gives Korea the entire North American continent with a combined GDP of US$17 trillion as its free trade partners.

According to the agreement, Canada will eliminate tariffs on 93.2 percent of trade items and 95.9 percent of imports within the next three years and the percentages go up to 97.5 percent and 98.7 percent within the decade, respectively. Korea will reciprocate with 86.1 percent of trade items and 92.3 percent of imports within three years while raising the figures to 97.5 percent and 98.4 percent within 10 years.

One of the major beneficiaries of the FTA is the automobile industry. The current tariff rate of 6.1 percent is scheduled to go down to 0 percent two years after the agreement becomes effective. Korea exported 133,000 vehicles worth US$2.227 billion to Canada last year, and Korean carmakers’ local market share is estimated at 12 percent when the vehicles that the Hyundai Motor Group manufactures in the United States are also taken into account. The figures are likely to greatly increase once the agreement comes into effect, because Korean cars have a competitive edge in price against their Japanese and German rivals, and can compete on equal terms with the vehicles imported from the other NAFTA members of the U.S. and Mexico.

The prospect of the electronics industry and sectors associated with the auto industry is very bright, too. For example, the 6 percent tariff on auto parts and 7 percent on tires will be abolished immediately, or within five years, as with the 8 percent tariffs on washing machines, refrigerators, etc. Still, the primary industry is expected to take at least some hits. The Korean government is planning to invest 2.1 trillion won (US$2.0 billion) in it for export assistance.