South Korea Ruffles Canadian Feathers

It has not been long since the Korea-Australia Free Trade Agreement (KAFTA) was struck in December 2013, which is generally believe...

It has not been long since the Korea-Australia Free Trade Agreement (KAFTA) was struck in December 2013, which is generally believed to bring about the eventual demise of Australia’s auto manufacturing industry but boost its beef exports. Now, South Korea is about to enter another cars-for-produce deal again, this time with Canada.

Canada’s government is in deep discussions with various industries to understand the outcomes and impacts of such a deal, but it is believed that free trade with South Korea is inevitable. Already Canadian exporters have been losing market share to the US and European Union who entered into bilateral trade agreements with the fourth largest Asian market, 50 million populous country several years ago. Canada’s beef, pork and soybean producers are keen to seal the deal, but not so its automakers, as other agreements with South Korea had evidently been disastrous for its trade partners’ auto manufacturing industries.

Dianne Craig, President and Chief Executive of Ford Motor Co of Canada Ltd, is among the automakers trying to prevent the deal from being signed, or at least delay and restrict it. “… autos are the greatest driver of GDP and we think we need to have a pretty strong voice in this conversation. This is not good for autos, which means it’s not good for the economy, which means it’s not good for Canadians,” she said. While the government is still engaging in discussions with the automakers and are listening to their qualms, there are no delusions that an agreement is imminent.
Presently, South Korean cars imported into Canada are slapped with a 6.1% duty. Even with that, in 2012, 131 174 South Korean vehicles were imported while Canada exported less than 3000 the other way. If the duty was phased out with the free trade deal, the imports would escalate and exports would just about disappear. The government of Ontario, the country’s leading manufacturing province and where most automotive assembly plants are located, is pushing for better protection of the auto industry when imports rise as well as for a lengthy phase-out period of the import tariff.

Canadian’s pork producers, however, are eager that free trade with South Korea takes effect, the sooner the better, so that the 25% tariff imposed on their chilled products and 22.5% on frozen products can begin to be phased out. The pork industry is expected to gain initial annual exports worth as much as USD200 million annually, so it is likely that they will get their way this time.

South Korean automakers are on a roll, having sold an astounding 8.6 million vehicles in 2013 despite low domestic demands, which was fully compensated by robust overseas demand. Leading the pack was Hyundai, which experienced a 4% decrease in domestic sales that was more than made up for with a 9.3% boost to its overseas sales.



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