A free-trade agreement between Canada and South Korea does not include many of the safeguards for the auto industry that Ontario was pushing for in the pact, The Globe and Mail has learned.
Two Ontario government sources with knowledge of the deal – whose contents will be made public tomorrow – said it "comes up short" in protecting Canadian auto makers. The agreement does, however, open up major business opportunities for this country's agriculture sector, the sources said, and Ontario supports most provisions of the pact.
Ontario Premier Kathleen Wynne would not divulge any details of the agreement Monday, but said she has "reservations" about its implications for auto makers.
"We are of two minds: we are optimistic and at the same time we are cautious on the auto sector," she said at an unrelated announcement in St. Albert, Ontario. "We will be looking for the appropriate protections and framework around the auto sector, and we're very optimistic in terms of the agrifood sector, we know that there is huge opportunity."
A spokesman for federal International Trade Minister Ed Fast declined to comment in any detail Monday, as the terms of the agreement had not yet been released. In an e-mail, Rudy Husny wrote that "the outcomes and tools are as good and in some cases better than those achieved by the U.S. and EU and our other key competitors, in all areas including autos." He would not say what those tools are.
The sources said the 6.1-per-cent protective tariff on South Korean autos will be phased out in less than five years. Ontario had asked for the phase-out period to be extended to the longest possible time frame.
The deal also does not contain a so-called "snap-back" provision to discourage South Korea from imposing new "non-tariff" barriers to Canadian-made vehicles, the sources said. Ontario is concerned the South Korean government might use various techniques – such as imposing higher taxes on Canadian vehicles – to encourage its citizens to buy Korean vehicles instead. Queen's Park had asked Ottawa to guard against this with a clause that would re-impose the tariff on South Korean vehicles if the South Koreans were found to be employing any of these techniques. But the agreement does not contain this provision.
"The feds have come up far short," one source said. "The deal could potentially damage our auto sector."
The pact does, however, contain a provision to discourage large amounts of South Korean vehicles from flooding the Canadian market. Under this clause, the sources said, Canada can impose a tariff if the number of South Korean vehicles gets too high.
Ontario Economic Development Minister Eric Hoskins declined to comment on the deal Monday, but is expected to make a public statement Tuesday, once the contents are released.
Mr. Hoskins is also expected to demand the federal government set up a task force to report monthly on South Korean imports so that, if a surge happens, the tariffs can be quickly activated.
Ontario will also be asking Ottawa to work with the province, industry and labour to report quarterly on whether South Korea is implementing any non-tariff barriers.
Auto giant Ford has frequently warned that the deal could pose a threat to the industry, accusing the South Korean government of imposing non-tariff barriers to foreign-made vehicles.
In one case, for instance, the South Korean offices of BMW, Toyota, Audi, Volkswagen and Mercedes-Benz were raided by Korean officials earlier this year. There have also been reports of South Korean citizens who buy foreign vehicles being suddenly subjected to tax audits.