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Economy Lab

Canada must act on trade deal with Seoul Add to ...

John Weekes, a senior business adviser at Bennett Jones LLP, was Canada’s ambassador to the WTO and chief negotiator for the NAFTA



Of all the trade files sitting in the inbox of the Harper government, none is more crucial than completing free-trade negotiations with South Korea. The Obama administration intends to send a free-trade deal to the U.S. Congress in a few weeks and the South Korea-EU FTA comes into force in July.



In a matter of months, Canadian producers will be at huge competitive disadvantage in the South Korean market - Canada’s six-largest export market for merchandise in 2009.



A FTA with South Korea should be a ‘no-brainer,’ given that barriers to the South Korean market are generally higher than those in Canada. In fact, Canadian and South Korean negotiators have basically completed a deal. So, what’s holding it up? Beef and automobiles - the same two sectors which impeded completion of the U.S.-South Korean FTA.

Canadian beef exporters are still reeling from the continuing prohibition on Canadian beef following the occurrence of bovine spongiform encephalopathy, or mad-cow disease, in 2003. It appears Canada and South Korea may be close to an agreement on lifting the ban. However, once Canadian producers do get access they will still be excluded - a 40 per cent tariff compared to duty free entry for U.S. producers once the U.S.-South Korea FTA comes into effect. Canada should learn to walk and chew gum at the same time by addressing both issues at the same time.

On autos, the U.S. has reached an agreement with Seoul: We need to do the same, for the U.S.-South Korea deal will effectively set the conditions for North America as whole whether we like it or not. The risk we face now is that the North American automobile producers will not make any new investments in Canada for any vehicle that might be exported to South Korea until we get South Korean barriers down to the same level that U.S. producers will face. Even the United Auto Workers have decided to support the agreement with South Korea now that the Obama administration has succeeded in improving the original deal. Whether or not Canada gets exactly the same treatment as the U.S. doesn't matter in the real world, only in the vanity department.

Nor is this just about beef and autos: High Korean tariffs mean many exporters will suffer. For instance Canadian pork producers have complained vociferously about being caught in the crossfire between competitive EU producers and American suppliers.

There is one final reason why the Harper government should move now: Opponents of the U.S.-South Korea deal in the U.S. Congress will take some solace from the fact that Canada has not yet made a deal with South Korea and the Koreans know that. We should use that bit of leverage now with Seoul to help secure the best deal possible. Once the U.S. Congress approves the agreement, it will be on offer to Canada on a strictly take it or leave it basis.

 

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