Negotiations are officially completed and terms finalized on a free trade agreement between Canada and South Korea, with a long line of enthusiastic Canadian farm export sectors in their wake.
A trade pact between the two countries has been in the works since they agreed to formal talks in 2005, but stalled for months at a time while other competing ag exporters, including the U.S. and more recently Australia, finalized deals with Korea. [Related story]
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Canada’s deal, which now goes back to Parliament for ratification, will not only be good for consumers but “is good news for farmers, the aerospace industry and the chemicals sector, to name a few,” Prime Minister Stephen Harper said in a release Tuesday from Seoul, where he announced the finalized deal with Korea’s President Park Geun-hye.
South Korea has had some motivation to wrap up talks quickly with Canada, since it’s been reportedly floating its interest in joining the Trans-Pacific Partnership (TPP), a group of nations in talks toward an Asia Pacific free trade zone. Joining the TPP talks would require approval from all existing TPP partners — including Canada, Australia and the U.S., among others.
When the Canada-Korea agreement is fully implemented, Korea will remove duties on 98.2 per cent of its tariff lines, covering “virtually all” of Canada’s imports, the government said.
“Given that the average of Korea’s tariffs are currently three times higher than Canada’s (13.3 per cent versus 4.3 per cent), tariff elimination will be particularly advantageous for Canadian businesses exporting to the Korean market.”
Canada’s agricultural exports to Korea were worth an average of $708 million from 2010 to 2012, led by wheat, pork and pork offal, hides, skins and furs, refined and crude canola oil, malt and prepared foods.
Korea’s tariff rates on Canada’s ag exports, however, averaged 52.7 per cent in 2012, and the agreement is to eliminate tariffs on 86.8 per cent of those agricultural tariff lines, the government said.
For Canada’s supply-managed sectors, the government noted, this free trade deal provides no additional market access — that is, no quota expansion, and no reduction or elimination of over-access tariffs — for Korean dairy, poultry or eggs.
“This duty-free access will give Canadian agricultural products, including beef, pork, canola and grains, preferential access to the Korean market and will put Canada on a level playing field with Korea’s current FTA partners,” the government said.
Meat access
A level playing field is a particular relief for Canadian ag groups, which for years have urged the Canadian government, to finalize a trade pact with Korea.
Canadian farmers, food processors and workers “have paid a heavy price for the delay in the conclusion of the negotiations with South Korea and the Canadian disadvantage will widen further every year that our country lags behind its competitors,” the Canadian Meat Council (CMC) said in a separate release Tuesday.
For countries without agreements, South Korean import tariffs are 40 per cent for chilled and frozen beef, 22.5 per cent for chilled pork and 25 per cent for frozen pork, while for countries with free trade agreements, tariffs are reduced progressively until they reach zero.
“After having reached $96 million of beef and $233 million of pork in 2011, the absence of competitive market access resulted in Canadian beef and pork exports falling to $10 million and $129 million in 2012 and to only $8 million and $76 million in 2013,” the council said.
The U.S., the European Union and Chile all have free trade deals in place already with Korea, the Canadian Pork Council (CPC) noted in a separate release Tuesday hailing the deal with the Canadian pork industry’s “third or fourth most important export market.”
Without a Korea-Canada pact, the CPC said, Canada’s pork trade with Korea — worth $223 million in 2011, $129 million in 2012 and an estimated $76 million in 2013 — would “largely disappear” when those other trade pacts are fully implemented.
Korea’s import tariffs, without a free trade deal in place, run at 25 per cent on frozen pork and 22.5 per cent on refrigerated pork products. Those duties are to be eliminated in “five to 13 years,” the government said.
Given its annual import demand of over $2 billion for beef and pork products, the South Korean market is “highly coveted by all of the globe’s major meat exporting nations,” CMC executive director Jim Laws said.
“By the time Canada’s meat processors and exporters regain competitive access, it is projected that annual beef and pork exports will rebound and reach $100 million and $300 million.”
Specifically, under the new free trade pact, Korea’s 40 per cent tariff on fresh and frozen beef will be “fully eliminated in 15 equal annual steps and the 18 per cent tariff on offals will be fully eliminated in 11 equal annual steps,” the Canadian Cattlemen’s Association said in a separate release.
The tariff has been the “main impediment” against Korean market access since Korea lifted its BSE-related ban on Canadian beef in early 2012, the CCA’s new president Dave Solverson said Tuesday from Seoul.
In 2002, the year before the BSE ban, Korea was a $40 million market for Canadian beef and its fourth largest export destination, the CCA noted. In 2013, with “a growing tariff disadvantage relative to U.S. beef,” Canada exported $7.8 million.
The new trade pact, the CCA said, “will signal to Korean buyers that they can resume their relationship with Canadian beef and maintain a long-term competitive position.”
Crop access
Among Canadian crop exports, South Korea in recent years has imported Canadian canola products worth between $60 million and $90 million per year, and Canola Council of Canada president Patti Miller said those imports “could double” under the new trade agreement.
Canola seed and oil have faced “unstable and discriminatory” tariffs in Korea, hampering exports in the past, the council said, but with a trade pact in place, canola seed will have tariff-free access when the agreement comes into force and canola oil tariffs “will be phased out quickly.”
Korea also imports about 55,000 tonnes of pulses per year, and Canada’s share of the pulse and special crop market is valued at about $5 million per year, Pulse Canada said Tuesday.
Canada between 2010 and 2013 averaged exports of about 4,400 tonnes of beans (worth $2.17 million to $2.92 million) and 400 tonnes of peas. In dollar value, Canada’s pea exports have dropped from about $427,000 in 2010 to just over $100,000 in 2013.
“Canadian pulses of all types, but especially beans, can now successfully compete in the Korean market,” Pulse Canada chairman Nick Sekulic said in a release. “Over the next few years, we expect to see an opportunity for more Canadian pulse exports to Korea, now that we can enter the market on similar footing with our competitors.”
The deal “will also give Korean importers access to Canadian pulses and special crops that will compete on the basis of price and quality, not market-distorting tariffs,” Murad Al-Katib, president of the Canadian Special Crops Association, said in the same release.
Canadian mustard already represents about 97 per cent of Korea’s mustard imports, averaging 1,600 tonnes per year between 2010 and 2013, worth between $1.2 million and $1.6 million, Pulse Canada said.
Henry Van Ankum, chairman of Grain Farmers of Ontario, noted the deal “specifically opens new market opportunities for our identity-preserved soybeans, and removes trade barriers currently limiting our corn, soybean and wheat exports.”
Canada, the GFO said, exported over 17,000 tonnes to Korea in 2013, “but as this only accounted for four per cent of (Korea’s) total imports, there is the potential for significant market share increase.”
The Canadian Vintners Association noted Korea is already Canada’s fifth-largest wine export market by value, buying about 37,000 litres worth $2.2 million in 2013. Canadian wine is subject to a 15 per cent Korean tariff.
Of that $2.2 million, about 96 per cent is in Canadian icewine, on which all import tariffs would be eliminated “immediately,” the association said. Import tariffs on other wines would end over a three-year period.
Korea’s 20 per cent import duty on Canadian rye whisky would also end immediately on ratification, the government noted Tuesday.
The Malting Industry Association of Canada also hailed the deal, which would eliminate tariffs on 13,000 tonnes of malt upon ratification. Tariff-free access would rise to 25,000 tonnes by year 11, followed by “complete tariff-free access” in year 12. Korea is Canada’s third-largest offshore malt export market, taking about 25,000 tonnes.
“This agreement once ratified should provide for additional domestic sales opportunities for malting barley producers, due to the anticipated increased market opportunities for value-added malt during the course of the implementation period and certainly beyond,” the association said. — AGCanada.com Network
