Free-trade negotiations between Canada and South Korea, which began in 2005, have at last borne fruit. The federal government, reportedly hesitating, should proceed with the tentative agreement that’s been achieved – as Australia did last month.
Canada now imposes a 6.1-per-cent tariff on South Korean automobiles. Vehicles from our NAFTA partners, the United States and Mexico, come into this country already duty-free. Next year, South Korean vehicles – Hyundais and Kias – will enter the U.S. free of tariffs. Both the U.S. and the European Union have trade agreements with South Korea. And Canada’s free-trade agreement with the EU will phase out tariffs on automobiles, too. It would make sense to start recognizing this whole vast area as one auto market.
We should not want to isolate ourselves from South Korea, the world’s 15th-largest economy. The South Koreans have recently decided to apply to enter the Trans-Pacific Partnership trade negotiations, in which Canada is already taking part. That may help explain South Korea’s revived interest in Canada.
While the negotiations with South Korea languished, Canada’s trade deficit with the country rose. Trade deficits aren’t inherently bad things, but in this case there’s reason to believe that Canadian exporters – most notably of pork and beef – have suffered from the slow progress of the talks.
In the past, the South Korean economy was dominated by chaebols, literally “money clans,” which were not receptive to imports. But small and middle-sized enterprises are now emerging. If the non-tariff-barrier provisions of the Canada-South Korea agreement are satisfactory, the federal government should move ahead.