Contact: Henry J. Chang; Blaney McMurty Ontario (Canada)
Introduction
On March 11, 2014, Prime Minister Stephen Harper and President Park Geun Hye of the Republic of Korea (South Korea) announced that Canada and South Korea had concluded negotiations on a new free trade agreement. The Canada-Korea Free Trade Agreement (the “CKFTA”) will cover virtually all aspects of Canada-South Korean trade, including trade in goods and services, investment, government procurement, non-tariff barriers, environment and labour cooperation, and other areas of economic activity.
The final text of the CKFTA is still being drafted so it has not been made public yet. However, the Government of Canada has published a Final Agreement Summary1, which provides some insight into what will appear in the CKFTA.
Trade in Goods
The CKFTA will eliminate duties on non-agricultural and agricultural goods. A brief summary of these provisions appears below.
South Korean Tariff Elimination
The following will occur once the CKFTA comes into force:
- Duties on 90.2% of non-agricultural tariff lines will be immediately eliminated. There will also be transition periods of 5, 7, 10, 11, and 12 years for the remaining tariff lines.
- Duties on 70% of fish and seafood tariff lines will be eliminated within the first 5 years. 100% of tariff lines will be duty free within 12 years.
- Duties on 85% of forestry and value-added wood products tariff lines will be eliminated within the first 5 years. 100% of tariff lines will be duty free within 10 years.
- There will be a progressive elimination of duties on 86.8% of agricultural tariff lines, although some of these duties will take many years to be phased out. In addition, South Korea has excluded selected agricultural products from duty elimination, including most dairy products, poultry and poultry products, ginseng and its products, rice and rice products, refined sugar and most tobacco products.
Canadian Tariff Elimination
The following will occur once the CKFTA comes into force:
- Duties on 81.5% of all non-agricultural product lines will be immediately eliminated. There will also be transition periods of 3, 5, 10, and 11 years on the remaining tariff lines.
- Duties on 77.2% of fish and seafood tariff lines will be eliminated within the first 5 years. 100% of tariff lines will be duty free within 3 years.
- Duties on all wood and forestry tariff lines will be eliminated immediately.
- Duties on 50.7% of agricultural tariff lines will be eliminated immediately. A further 36.3% of duties on agricultural tariff lines will be eliminated over five years. However, Canada will exclude certain agricultural products from duty elimination, including all those that apply to over-quota supply-managed products (i.e. dairy, poultry and eggs). In addition, tariff rate quotas for supply-managed goods will not be increased.
One of the most controversial issues has been the proposed elimination of the duties currently applied to South Korean automobiles. It has prompted strong objections from Ontario’s automobile industry, which claims that the elimination of this duty will result in an even greater trade imbalance with South Korea. Although these objections are certainly understandable, the implementation of the CKFTA may not be as significant, since many of the South Korean cars sold in Canada this year are already expected to enter the country duty free from the United States pursuant to the North American Free Trade Agreement (the “NAFTA”).
