Canada is preparing to revive long-stalled free trade talks with South Korea as the federal government shifts its negotiating focus from Europe to fast-growing Asia.
A Canadian team is in Tokyo this week for the opening round of free trade negotiations with Japan and, according to government and industry sources, will also meet with South Korean officials in a bid to formally restart talks on a separate deal with the world 15th-largest economy.
The meetings come as International Trade Minister Ed Fast works toward a year-end deadline to wrap up a massive free trade deal with the European Union.
Reaching a final agreement with South Korea pits the interests of auto makers, who have long fought duty-free entry of Hyundai and Kia vehicles in their home turf, against Canada’s agri-food exporters, who are losing market share to rivals in the U.S. and Europe which already have free trade there. A deal with South Korea also highlights the complex links between the various trade deals now in play.
“The government is definitely looking for an opportunities to re-engage [with the South Koreans],” said Barry Sutton, vice-president of international sales for Maple Leaf Foods. Ottawa knows it has to “pick up its game” in South Korea, Mr. Sutton said.
Peter Clark, an Ottawa trade consultant who has worked with Canada’s agri-food industry, said the federal government wants to finish what it started seven years ago. “There wasn’t that much left to do,” Mr. Clark explained.
The treatment of autos has been a sticking point in both the South Korea and EU talks. The five auto makers that manufacture vehicles in Canada are opposed to treaties that would eliminate Canada’s 6.1-per-cent tariff on vehicles imported to Canada from South Korea and the EU.
That tariff applies to vehicles made in the EU, South Korea and Japan, but if Ottawa agrees to wipe it out in the EU and South Korea agreements, Japan-based manufacturers will be less competitive.
“The issue is: Don’t disadvantage us in the marketplace,” said David Worts, executive director of the Japan Automobile Manufacturers Association of Canada.
“We have reached a position where we are more or less equal,” Mr. Worts said. “This would disadvantage us in the marketplace.”
It would also send the wrong signal to Japanese auto makers about further investment in Canada, he noted.
The Canadian Vehicle Manufacturers Association (CVMA), which represents the Canadian units of the Detroit-based auto makers, shares the Japan-based companies’ concerns about the EU and South Korean deals, but extends that worry to a Canada-Japan free trade agreement.
CVMA president Mark Nantais said any deal must “completely open up the other market and systematically reduce all non-tariff barriers.”
And so far, there are no indications that’s happened yet in South Korea even though the country already has deals with the U.S. and EU.
Adam Taylor, a spokesman for Mr. Fast, would confirm only that “discussions are continuing” with South Korea on reopening talks, suspended in 2008 after Canadian beef was banned following the mad cow scare. “Our government will continue to consult with stakeholders and promote the interests of Canadians and all sectors of the Canadian economy as we assess next steps,” Mr. Taylor said.
Complicating the federal government’s efforts to finalize a deal is South Korea’s looming presidential election, which takes place Dec. 19.
“It would be good if we got to the point where we could complete the negotiations before these elections,” said Gary Cordy, of the Canadian Pork Council.
Canadian pork producers worry that rival countries that already have free trade deal with South Korea are quickly gaining a competitive edge in a market worth about $300-million a year to Canada.
The United States, the EU and Brazil all have deals with South Korea.
Under the U.S.-South Korea free-trade agreement, for example, tariffs on imported pork drops from as high as 25 per cent to zero by 2016.
Canada had large merchandise trade deficits with both South Korea and Japan in 2011.