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Canada, South Korea Sign Landmark Free Trade Deal

by Mike Godfrey, Tax-News.com, Washington

24 September 2014


Nine years after negotiations began, Canada and South Korea have signed a free trade agreement (CKFTA) that will eliminate duties on nearly all tariff lines.

The deal was inked on September 22 by the Canadian Prime Minister, Stephen Harper, and the South Korean President, Park Geun-hye.

Upon the CKFTA's entry into force, South Korea will immediately remove duties on 81.9 percent of tariff lines. By the time the agreement has been fully implemented, South Korea will have eliminated duties on 100 percent of Canadian non-agricultural exports and 97 percent of agricultural exports. Canada will remove duties on approximately 99.9 percent of South Korea's exports to the country.

Average South Korean tariffs are three times higher than Canada's, at 13.3 percent compared with 4.3 percent. Tariffs are particularly high for Canadian beef exports (40 percent), and South Korean car exports (6.1 percent).

The CKFTA covers trade in goods and services, investment, government procurement, intellectual property, and environment and labor cooperation. It also contains provisions to reduce or end non-tariff barriers to market access for exporters and investors, and also contains dispute resolution clauses. The investment provisions are designed to create a more predictable, rules-based climate for trade and investment. New government procurement rules will place Canadian firms on an equal or better footing relative to competing nations, the Canadian Government said.

The Canadian Government said it expects a wide range of sectors to benefit from the CKFTA, including the industrial goods, agricultural and agri-food products, fish and seafood products, and forestry and value-added wood products sectors. The deal is projected to boost Canada's annual gross domestic product (GDP) by CAD1.7bn (USD1.5bn) and increase annual exports to South Korea by more than 30 percent.

Talks were put on hold in 2008 after South Korea maintained an import ban on Canadian beef, but the ban was lifted in January 2013. The terms of the CKFTA were eventually agreed in March of this year.

In a joint declaration published after their meeting, Harper and Park describe the CKFTA as "an historic initiative that will strengthen our trade and investment ties across the Pacific, increase the prosperity of both countries and result in job creation and enhanced opportunities for Korean and Canadian businesses, particularly small and medium enterprises, as well as investors, workers, and consumers."

The agreement must now be ratified by lawmakers in both countries.

TAGS: environment | tax | investment | business | marine | free trade agreement (FTA) | public sector | law | intellectual property | financial services | gross domestic product (GDP) | tariffs | World Trade Organisation (WTO) | trade treaty | food | agreements | manufacturing | tax rates | Canada | Korea, South | import duty | trade | services

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