This comprehensive free trade agreement (FTA) between Canada and Korea was announced today by the Prime Minister Stephen Harper, pushing further the Canadian Government’s ambitious trade agenda. The Department of Foreign Affairs, Trade and Development Canada (DFATD) has released a document summarizing the key points in the Canada–Korea FTA entitled Canada-Korea Free Trade Agreement (CKFTA): Technical Summary of Final Negotiatied Outcomes. The document summarizes the following negotiated outcomes of the Canada- Korea FTA, described in further detail below:
- Non-agricultural goods
- Agricultural and agri-food products
- Services and investment
- Government procurement
- Intellectual property
- Dispute settlement and institutional provisions
- Environment and labour
Key benefits stemming from the Canada-Korea FTA were summarized in the Prime Minister’s announcement of March 11, 2014 as follows:
- create thousands of new jobs in Canada covering various sectors of the economy.
- improved access to Korea’s government procurement market.
- benefit to Canadian consumers as a greater variety of goods from Korea will be available at lower prices.
- Canadian exports to Korea are expected to substantially increase by 32 percent with the Canadian economy thus increasing by $1.7 billion annually.
- considerable tariff and non-tariff measures reductions for Canadian companies
- improved access for professional, environmental and business services.
- preferential treatment for business visitors, traders, investors and professionals, such as architects and engineers, to facilitate their movement between Canada and Korea.
DFATD’s Technical Summary outlined the following important benefits for the non-agricultural goods sectors:
- Industrial goods sector : With the FTA between Canada and Korea, access to the Korean market will be significantly improved for Canada’s industrial sectors, accomplished by the mutual elimination of tariffs on all exports of industrial goods. Canadian exports will become more competitive not only with Korean domestic producers, but also with major competitors from United States and the European Union, who already enjoy Free Trade agreements with Korea. Manufacturing industry workers across Canada will be able to reap these benefits of the new access to the Korean market.
- Automotive Industry: The automotive provisions in the Canada-Korea FTA, will include tariff elimination, rules of origins, non-tariff issues, standards-related measures, specialized dispute settlement procedures, and unique safeguard provisions to protect against import surges.
- Wood and forestry products: The Canada-Korea FTA will gradually eliminate all Korean tariffs on forestry and wood products under the Canada-Korea FTA, with 57 percent of the tariff lines for wood and forest products eliminated as soon as the agreement comes into force. Provinces like British Columbia, Ontario, Quebec and Alberta will greatly benefit from the tariff elimination in the wood and forest products sector.
- Fish and seafood sector: Canada has a significant export capacity in the fish and seafood sector. Under the Canada-Korea FTA, all Korean tariffs on fish and seafood products will be gradually eliminated, with nearly 70 percent of fish and seafood tariff lines becoming duty-free within five years of the Agreement’s entry into force. It is expected that benefits from the Canada-Korea FTA will be of great advantage to workers in Newfoundland and Labrador, Prince Edward Island, Nova Scotia, New Brunswick, British Columbia and the Northwest Territories.
Agricultural and agri-food products
The key advantages for the agricultural sectors were also highlighted in both the Prime Minister’s announcement and DFATD’s Technical Summary:
- Eliminating the tariff lines for 86.8 percent of South Korean agricultural products will allow the expansion of agricultural related products to Korea, which will greatly benefit Canada’s agricultural sectors,
- Canadian tariff eliminations will include immediate duty-free access to 50.7 percent of agricultural tariff lines, with a further 36.3 percent of duties eliminated over five years.
- 13 percent of Canadian agricultural tariff lines will be excluded from tariff elimination and no additional market will be provided for Korea’s dairy, poultry and eggs.
The service industry is a vital sector of the Canadian economy, providing advanced professional services in areas such as engineering, architecture, information management, environmental protection and monitoring, mining and energy development. Canada’s services exports to Korea total over $750 million and there is great potential for growth and development.
The Canada-Korea FTA will establish:
- greater transparency and disciplines, resulting in better, more secure and predictable market access in areas of interest to Canada, such as professional services, environmental services and business services;
- temporary entry provisions will provide new, preferential access to the Korean market to business visitors, traders and investors, intra-company transferees and professionals, thus facilitating their movement between Canada and Korea.
- financial services provisions of the Canada-Korea Free Trade Agreement that will help protect existing investments and encourage further competition in the financial sector.
The investment chapter in the Canada-Korea FTA is not described in great detail in DFATD’s Technical Summary. However, it is noted that the provisions in the investment chapter of the Canada – Korea FTA will ensure that Canadian investors can benefit from:
- a more transparent and predictable environment, setting out the respective rights and obligations with respect to the treatment of Canadian investors in Korea and Korean investors in Canada.
- South Korea’s commitment to provide non-discriminatory treatment to Canadian investors, subject to South Korean laws.
- protection against discriminatory treatment, including at the pre-establishment stage of an investment,
- protection from expropriation without prompt and adequate compensation.
- investor-state disputes settlement provisions, which grant investors access to international arbitration to resolve disputes, thus ensuring greater protections for investors against discriminatory and arbitrary practices, as they have increased assurance that their investments will be treated fairly
The services and investment chapters also include a “negative list approach,” under which a market is fully open unless otherwise listed in a reservation. This approach will offer investors from each market more transparent and predictable domestic regulatory regimes.
Government procurement is a major source of economic activity in Korea and Canadian suppliers of products and services will enjoy preferential access to the procurement activities of the Korean government entities. The Agreement aims to put Canadian suppliers on equal footing with U.S. competitors and at advantage over competitors from other World Trade Organization Agreement on Government Procurement parties, such as Japan and the European Union, which face higher thresholds. In turn, Korean suppliers will gain access to Canadian central government procurement opportunities for contracts valued above $100,000.
The Agreement does not cover provincial, territorial or municipal government procurement, Canada and Korea will have commitments in relation to sub-national procurement once the revised WTO Government Procurement Agreement comes into force (expected in April 2014).
The Canada–Korea FTA will ensure that Canadian copyright, patent and trademark owners have their rights fully respected in the Korean marketplace. Moreover, robust enforcement provisions in the FTA provide further assurance and confidence for Canadian Intellectual Property rights-holders doing business in the Korean market. This Agreement also aims to increase opportunities for cooperation in the field of intellectual property.
Dispute settlement and Institutional provisions
This chapter aims to establish a dispute settlement process that is faster and more efficient than the dispute resolution process in the WTO and many other trade agreements, by providing for efficient, three-person dispute settlement panels, with panellists appointed through an ad-hoc appointment process.
The Agreement includes further provisions for:
- cultural cooperation to promote cultural exchanges and joint initiatives, such as audiovisual co-production;
- transparency provisions ensure that each party has access to information;
- provides for a joint commission that oversees and facilitates the implementation and application of the Agreement and supervises the work of the Agreement’s various committees;
- amendment provisions that allow parties to agree to revise and update the Agreement;
- termination and withdrawal provisions allow either party to terminate or withdraw from the Agreement with six months’ notice.
Environment and Labour
The environment provisions in the Canada-Korea FTA provide for a framework of cooperation in areas of mutual interest, as well as dispute resolution process to address any questions regarding compliance.
With respect to labour, the Canada-Korea FTA contains provisions that ensure Canada’s and South Korea’s adherence to national labour laws and policies in each country as well as respect of international labour standards, including in regard to the International Labour Organization’s 1998 Declaration on Fundamental Principles and Rights at Work. A non-derogation clause prevents either party from derogating from its labour laws in order to encourage trade or investment.