South Korean trade deal sets up fight between auto, agriculture sectors

It’s no secret that when Prime Minister Stephen Harper meets with South Korean president Park Geun-hye on Tuesday it will be to sign a free trade deal.

It will be Canada’s first free trade deal in East Asia and one that could be a kind of template for deals with other Asian partners.

The Harper government wants to increase Canadian access to South Korean markets. A free trade deal would do that by eliminating tariffs and other differential treatment for Canadian goods.

“The whole world trades with Korea, and they're subject to certain duty rates, but when you get a preferential trade agreement, they're going to give you better rates, maybe zero duties, to get into that market, and of course we're going to do the same for the Koreans in certain selected products.”“It's going to mean access to a large and growing market in the Asia-Pacific region — preferential access,” says Canadian international trade lawyer Lawrence Herman.

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The Conservative government is aggressively pursuing trade arrangements around the globe, including that huge tentative deal recently with Europe.

An Asian deal has so far been elusive, however, and even a Korea deal seemed at times to be far out. In fact, the agreement took 10 years to achieve, and Canada was beaten to it by the United States.

Pork, beef producers could benefit

It’s in the U.S. that Canada will have competition — already has had competition, some say — in the key Canadian agricultural sector. Pork and beef producers could both benefit significantly from the deal, if they can displace American exports of the same products. Canadian agricultural exports to South Korea are said to have declined after the U.S.-South Korea agreement took effect.

Herman says there are other important sectors, like oil seeds, grains, processed foods and lumber. He expects growth in Canadian aerospace exports and also in the growing services sector.

“Services are more important in some respects than merchandise,” Herman says. “So we can export our services and get preferential access to, let's say, procurement projects in South Korea. We'll be able to offer consulting services, contracting services — a whole range of services.”

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But free trade goes both ways, and there are some concerns in the economically important automotive sector that removing a 6.1 per cent import tariff on Korean cars could have a negative impact on GM, Ford and Chrysler sales in the domestic market. Reduced domestic sales would in turn lead to layoffs among central Canadian manufacturers.

“I'm disappointed,” says Dino Chiodo, spokesman for the autoworker’s union Unifor. “I think this is going to be a losing deal for Canada, once again.”

Chiodo is the president of the union branch that serves Chrysler’s Windsor manufacturing facility.

“That 6.1 per cent tariff replacement is going to cost Ontarians and Canadians about 33,000 jobs,” he says. “We're talking about billions in giveaways with regards to auto and maybe millions in the other segments.”

That 6.1 per cent tariff replacement is going to cost Ontarians and Canadians about 33,000 jobs.- Dino Chiodo, Unifor spokesman 

Chiodo is skeptical of the government’s intentions. He agrees Canada can pick up fresh trade in agricultural sales, but Chiodo says picking up “a couple of pennies on pork and cattle” at the expense of high-paying manufacturing jobs doesn’t make sense — the costs are just too high.

“I would suggest that it would be more in line with the actual numbers if we're giving up a billion dollars in automotive, then we should be gaining a billion dollars some place else. That's what a free trade and fair trade deal should be looking at.

“It should be reciprocal. It shouldn't be selling our country.”

The government is sensitive to these claims and its alleged concern about the Canadian auto sector is what slowed negotiations with Korea.

A renewed focus

But the Conservative government’s renewed focus on trade might have been the catalyst to have negotiators get a deal done.

And now, it’s hoping to use the deal as a means of burnishing its economic credentials. On the way to South Korea Sunday, Harper’s air force plane stopped in Vancouver to pick up a group of business “stakeholders,” who will be offered up to journalists in a lock-up Tuesday morning.

Of course, the real catch in the Canadian deal with South Korea lays a short hop east across the Sea of Japan.  The Korea deal is a significant stepping-stone to the potentially more significant Japanese market.

It may also be useful for Canada in its participation in negotiations for a regional trade pact under the Trans-Pacific Partnership (TPP).  Even if that deal never materializes, Canada could then shop its South Korea deal around the table as an example to speed negotiations in easier-to-get bilateral deals with many of the TPP partners.

Herman says the South Korea deal will “reinforce our serious interest in the Asia-Pacific region.”

“It's very important for Canada in a strategic sense to be a player in the Asia-Pacific region. All of the statistics show that going forward that will be the region of the world where there will be most economic growth and for Canada. It's important to be there. This will be an indication that Canada is a serious player in the Asia-Pacific economy.”