Canada’s response to the recently concluded free-trade agreement (FTA) with South Korea will say much about the kind of nation we are.
Yes, open markets bring challenges, but the benefits of trade liberalization invariably outweigh the costs. I and many others are confident of Canada’s ability to compete and win in global markets.
No one can claim that the process of reducing trade barriers is painless. Trade agreements by their nature open the door to more competition and cause disruptions in some sectors. Assuming the deal is ratified, this will be true not only in Canada but also in South Korea, where the agreement will create significant opportunities for Canadian exporters.
Those who lose ground due to trade liberalization typically capture the lion’s share of the headlines. Little attention is paid to the much greater number of businesses, workers and consumers that not only survive but thrive and benefit from improved market access and lower costs of imported goods.
The steady lowering of international trade barriers over the past half century has been a driving force behind job creation and poverty reduction in countries around the world.
The Organization for Economic Co-operation and Development (OECD) estimates that per capita income grows by an average of 4 per cent for every 10-per-cent increase in foreign trade. The OECD further suggests that a halving of trade barriers across the G20 would result in a 0.3- to 3.3-per-cent boost in jobs for low-skilled workers (the impact varies by country) and a 0.9- to 3.9-per-cent expansion in higher-skilled employment opportunities.
A reduction of barriers to trade with South Korea will give Canadian companies preferential access to one of the world’s fastest-growing advanced economies – a top 10 exporter and importer and a centre for innovation. Canadian companies would enjoy enhanced opportunities to sell products and services to South Korean consumers and participate in South Korean-based supply chains.
The federal government projects that the removal of trade barriers will increase Canadian exports to South Korea by 32 per cent and boost Canada’s gross domestic product by $1.7-billion.
But the implications of the Canada-South Korea FTA go considerably further than that. The agreement represents a turning point in Canada’s long-standing efforts to build closer economic ties with Asia-Pacific markets. It demonstrates to other important economies in the region that Canada is a reliable and serious partner. And it offers a base from which Canadian companies can reach out to other fast-growing markets.
The United States, the European Union and Australia have already concluded trade agreements with South Korea. These agreements have put Canadian companies at a competitive disadvantage. Canadian exports to South Korea have dropped by nearly one-third since the implementation of the U.S. deal. The Canada-South Korea FTA will give our exporters a fighting chance to regain lost market share and, in so doing, protect jobs in Canada.
Preferential access to the South Korean market alone does not guarantee success for Canadian companies. Ensuring the agreement lives up to its potential will require resources both to aggressively promote Canadian businesses and to enforce the agreement.
As with NAFTA and the nine other bilateral trade agreements that Canada has already ratified, we can expect the trade deal with South Korea to spur innovation and productivity, giving Canadian companies a stronger position in export markets while providing Canadian consumers with access to a wider variety of goods and services at more competitive prices.
By ratifying the Canada-South Korea FTA, we will demonstrate our confidence in the ability of Canadian businesses and workers to compete with the best in the world.
John Manley is president and CEO of the Canadian Council of Chief Executives