Harper rebukes Ford Canada’s stand on free-trade deal

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Prime Minister Stephen Harper has issued a sharp rebuke to the Ford Motor Co. of Canada Ltd., accusing the company of duplicity in its attacks on the new Canadian free-trade agreement with South Korea.

Speaking in the grandeur of the Blue House, the South Korean president's home and office on a promontory overlooking Seoul, Mr. Harper heralded the conclusion of the deal "a historic milestone for Canada." It is Canada's first with an Asian nation and will, he said, hand companies access to Korea as a gateway for trade in the fast-growing region. But the deal's unveiling, after more than nine years of closed-door negotiations, immediately gave rise to worries on both sides of the Pacific that knocking down duties will also knock down critical jobs for Korean farmers and Canadian auto workers.

In Canada, Ford's local president Dianne Craig has been among the most vocal critics of the deal, which she said gives the industry insufficient protection from Korean car makers. Concluded in Seoul on Tuesday, the Canada-Korea free-trade agreement promises to sweep away 98 per cent of the duties on goods that flow between the two countries, including cars.

But far more South Korean cars come to Canada than the other way around, and Ms. Craig, in a statement Monday, said the deal did not do enough to undo South Korean "non-tariff" barriers that include the use of currency markets to subsidize exports.

"We believe that South Korea will remain one of the most closed automotive markets in the world under the deal negotiated by the Canadian government," she said in a statement. According to the Yonhap news agency, South Korea last year delivered more than 130,000 cars to Canada, worth $2.23-billion (U.S.), far outweighing the roughly $92-million in imports of Canadian cars and parts.

On Tuesday, the Unifor labour union and Eric Hoskins, Ontario's minister of economic development, trade and employment, both criticized Ottawa for landing a deal that doesn't achieve some of the auto protections the U.S. achieved in its Korean free-trade deal.

Unifor national president Jerry Dias said the deal undermines the "jobs and industry on which so many Canadians depend."

Mr. Hoskins said he was "disappointed" and called for a task force to look for anti-Canadian discrimination by South Korea, and monitor Korean car sales into Canada.

In Seoul, Mr. Harper sought to turn the tables on his critics, specifically calling out Ford, which did support the Korean-U.S. free-trade agreement enacted almost exactly two years ago. In backing that deal, Ford "secured access through the United States to the South Korean market. What we are doing here is allowing other Canadian companies and other Canadian sectors to have the same access that Ford already has," Mr. Harper said.

"So it is I don't think realistic for a company to think it will have one set of rules for it, and another set of rules for the entire rest of the Canadian economy."

Canada currently imposes a 6.1 per cent duty on imported Korean cars. That duty will gradually be eliminated after two years under the free-trade agreement, far faster than companies like Ford had hoped for.

A senior government official acknowledged that some pain is likely to Canadian car makers, with Ottawa estimating an "impact on production" of fewer than 4,500 cars, or about 0.2 per cent of current output. (Nearly half the Korean cars purchased in Canada today are actually built in the U.S.) Ottawa believes, however, that the terms it negotiated – including a permanent 177-day dispute mechanism – are, in sum, equivalent to the U.S. deal. Canada also stands to benefit from one element missing in its deal, the ability by the U.S. to force a snap resumption of tariffs if South Korea is found to violate the terms of the agreement. Since the North American auto industry is so deeply-interlinked, such a move would likely work to Canada's advantage as well, the official said.

In Seoul, meanwhile, President Park Geun-hye found herself defending the potential pain the deal will inflict on her country's agricultural producers, a question of great sensitivity in Korea, where farming remains a key source of rural work and income.

"There can rightly be" worries about "the potential injury caused to agricultural and livestock industries," Ms. Park said. The Korean government will launch economic impact assessments if needed to study the potential damage, and may even hand out money to those hurt if needed. Ms. Park said one option is "providing direct income support to redress injuries."

But she expressed confidence in the deal's "measures to cushion the blow." The agreement offers no duty cuts on rice imports – hardly a major concern for Canada – but does impose lengthy timelines of up to 15 years to slowly pare back duties on products like beef. Duties on pork, meanwhile, will slowly fall over 13 years. Duties on grains like oats (which currently faces a 554.8 per cent duty), wheat and rye will be immediately cancelled when the deal enters into force. The Korean government boasted to domestic media that it secured better terms with Canada than the U.S. or the European Union, with a deal that exempted, or delayed duty cuts to, 18.8 per cent of Canadian farm products – more than 12.3 per cent with the U.S. and 14.7 per cent with the EU.

South Korea's biggest hopes for the deal, meanwhile, suggest that Ford may not be wrong to worry. Ms. Park said it will "unleash the full potential of our relationship." That means selling a lot more Korean cars in Canada. "We can expect to see a surge of expanded export opportunities, primarily for our key export items," Ms. Park said, saying later the two primary industries are automotive and textiles.

- With a file from Adrian Morrow