OTTAWA — The Harper government is set to sign a long-sought trade deal with South Korea early next week, despite entrenched opposition by some in ontarios critically important auto sector, sources close to the talks say.
Preparations are underway for a signing ceremony in Seoul early next week, ending nearly 10 years of on-and-off talks that one of Canadas biggest industries has long prevented from reaching the finish line.
Cracks began to appear in the Canadian auto industrys united front last month when the association representing Japans automakers in Canada came out largely in favour of a deal, saying it would complement the agreement signed in the fall with the European unio and ease talks with Japan.
Another impetus was introduced when Korea was able to successfully complete deals with Canadas two largest trading partners, the United States and the European unio, leaving Canada out in the cold.
Government officials in Ottawa refused to confirm the agreement Thursday.
The deal, coming on the heels of an historic pact with the EU, will go a long way towards cementing the Harper governments expansionist trade agenda, and its stated goal that it wants to be a serious economic player in Asia.
Still, significant opposition remains. Ford of Canada chief executive Dianne Craig recently called the 2012 Korea-U.S. agreement a disaster for the sector _ even though Ford, along with the General Motors and Chrysler, initially supported the pact.
At issue for Canada is a 6.1 per cent tariff on car imports. Critics fear once its removed, it will further skew the automotive playing field between the two countries, with Korean-made brands Hyundai and Kia selling about 90,000 units in Canada annually in direct competition with Canadian-assembled vehicles. Korea also assembles autos in the U.S., which it exports into Canada duty free.
ontarios economic development minister, Eric Hoskins, said Korea out-exports Canada 50 to one in autos. Hoskins said nothing he has heard from Ottawa so far has eased his concern that Canadas automakers wont be even more outgunned once tariffs are removed.
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We want a free-trade agreement thats good for all sectors, but on autos particularly its disadvantageous, he said. I havent been given information to suggest that the improvements that weve asked for have been addressed.
In particular, ontario and the industry has asked for a slower phase-out of tariffs and a snap-back provision allowing Canada to re-impose tariffs if theres evidence Korea is not meeting its obligations.
With the deal, Canada hopes to arrest the deterioration in exports to Korea since the U.S. agreement went into effect, particularly in the agricultural sector.
But Jim Stanford, chief economist with the Unifor unio, which represents Canadian auto workers, says in effect Canada has traded off billions of dollars in the auto sector to win over tens of millions in more pork and beef exports.
Its a trade of cars for pigs and cows, he said. The government is willing to sacrifice autos, which is by far the largest trade item with Korea, in order to make some gains in agriculture and thats all about the governments political base in the West.
Rudy Husny, a spokesman for Trade Minister Ed Fast, said Canadian exports to South Korea had fallen by $1.5 billion — or about 30 per cent — since the U.S. agreement went into effect.
We will only sign an agreement thats in the best interest of hardworking Canadians including though the elimination of Korean tariffs and creation of effective tools to counter non-tariff barriers to trade, Husny said via email.
The data is not clear cut, however. According to U.S. trade numbers analyzed by Washington-based Public Citizens Global Trade Watch, the U.S. has also seen the monthly average of exports to Korea fall 10 per cent from prior to the deal. The U.S. Department of Commerce, however, has noted that Ford has increased its export of vehicles into Korea since the deal.
Aside from the auto sector, most business groups in Canada will welcome the breakthrough, particularly if it is the first step to greater economic penetration into the fast-growing economies of Asia.
Undoubtedly the Canadian-based auto assemblers are concerned, as they rightly should be, but you cant make trade policy based on only one sector, said John Manley, who is head of the Canadian Council of Chief Executives, the countrys most influential business lobby group.
Its important from an offensive point of view, but its also important defensively because, frankly, the United States got in first and they have been methodically taking market share from Canadian producers.
An agreement will be particularly welcomed by the Canadian agricultural sector, which has complained that Koreas agreements with other nations has put them at a competitive disadvantage.
Gary Stordy of the Canadian Pork Council said its been a straight line down for pork shipments since the Korea-U.S. deal of about two years ago, with exports falling to about $70 million in 2013 from $223 million in 2011.
South Korea is currently Canadas seventh largest merchandise trading partner and third largest in Asia after China and Japan. But the relationship has been decidedly one-sided, with Korea exports totalling $6.3 billion in 2012 while Canadian shipments totalled $3.7 billion.
