Canada-Korea Free Trade Agreement (CKFTA)
How the Canada-Korea Free Trade Agreement Will Benefit Saskatchewan
Creating jobs and opportunities for Saskatchewanians
Saskatchewan stands to benefit significantly from preferred access to the South Korean market. South Korea is already Saskatchewan’s 17th-largest export destination, with exports from 2010 to 2012 worth an annual average of $210.2 million.
Upon entry into force, the Canada-Korea Free Trade Agreement will eliminate tariffs on almost all of Saskatchewan’s key exports and provide access to new opportunities in the South Korean market. Exporters in these sectors will also benefit from other Agreement provisions that will improve conditions for exports—provisions, for example, that ease regulatory barriers, reinforce intellectual property rights and ensure more transparent rules for market access. Overall, Saskatchewan has a lot to gain from the Canada-Korea Free Trade Agreement.
Top benefits for Saskatchewan:
- enhanced market access for many agricultural and agri-food products, including wheat, canola oil, rye, flaxseed, un-roasted barley malt and animal feed;
- duty-free access for industrial goods, including machinery, electrical equipment and sporting equipment;
- improved access for professional services;
- predictable, non-discriminatory rules for Canadian investors;
- improved access to South Korea’s government procurement market;
- strong provisions on non-tariff measures, backed up by fast and effective dispute settlement provisions.
Opening new markets in South Korea for Saskatchewan’s world-class products
Agricultural and agri-food products
Saskatchewan’s agricultural and agri-food products sector employed over 43,000 people in 2012, and is a significant driver of economic activity in the province.
Saskatchewan’s agricultural exports to South Korea were worth an annual average of $149.5 million from 2010 to 2012, led by wheat, canola oil, un-roasted barley malt, animal feed, rye and pork. Saskatchewan will benefit from expanded exports of these and a wide variety of other products, including peas and other pulses, flaxseed and mustard seed.
Canadian agricultural exports to South Korea currently face high tariff rates, which averaged 52.7 percent in 2012.
The Canada-Korea Free Trade Agreement will eliminate tariffs on 86.8 percent of agricultural tariff lines. This duty-free access will give Canadian agricultural products, including wheat, canola oil and animal feed, preferential access to the South Korean market and will create a level playing field with South Korea’s current free trade agreement partners.
For example, South Korean tariffs will be eliminated on:
- wheat, from a current rate of up to 3 percent;
- refined and crude canola oil, from a current rate of 5 percent;
- un-roasted barley malt, from a current rate of up to 269 percent;
- animal feed, from a current rate of up to 50.4 percent;
- rye, from a current rate of up to 108.7 percent;
- pork and most processed pork products, from a current rate of up to 30 percent;
- flaxseed, from a current rate of 3 percent;
- golden roasted flaxseed, from a current rate of 45 percent;
- mustard seed, from a current rate of 3 percent; and
- pulses, from a current rate of up to 607.5 percent.
Sanitary and phytosanitary (SPS) measures are applied by governments to protect human, animal or plant life or health. These measures can from time to time impact trade in agricultural and agri-food products. The Agreement includes a chapter on SPS issues in which Canada and South Korea agree to build on their shared commitments under the WTO on the application of SPS measures. Under the WTO SPS Agreement, parties recognize the rights of WTO members to take necessary measures for the protection of human, animal or plant life or health while ensuring these measures are based on science and do not unfairly restrict trade.
Under the Agreement, Canada and South Korea will establish a new bilateral SPS committee through which experts can collaborate and consult on SPS measures to enhance cooperation and facilitate trade by discussing issues before they become problems. This will benefit Canadian agricultural and agri-food exporters by helping to ensure that market access gains are not undermined by unjustified SPS trade barriers.
“South Korea is an important market for canola, with annual sales ranging from $60 million to $90 million in recent years. With a free trade agreement in place, we could significantly increase—even double—our canola exports to this market. Saskatchewan stands to benefit greatly: with almost half of all canola production coming from the province and substantial new processing capacity in place, Saskatchewan will reap the benefits of this FTA.”
Patti Miller, President, Canola Council of Canada
Reaping the benefits
South Korea is a net importer of agricultural and agri-food products, importing $20-billion worth of such products in 2012. Canada, a significant global supplier of high-quality agricultural products, is South Korea’s fifth-largest supplier of such products. The Agreement will further develop this relationship.
The Agreement will allow Saskatchewan products to compete on a level playing field with other agricultural exporting countries that have signed or implemented an FTA with South Korea, including the United States and the European Union.
Some 30,000 hard-working Saskatchewanians and their families depend on the industrial goods sector for their livelihood, with the sector accounting for approximately 24 percent of Saskatchewan’s GDP.
From 2010 to 2012, Saskatchewan’s exports of industrial goods to South Korea were worth an annual average of $53.7 million. The Canada-Korea Free Trade Agreement will significantly improve market access opportunities for Saskatchewan’s industrial goods sector by eliminating tariffs on all Canadian exports of industrial goods.
The Canadian market is already largely open to global imports, including those from South Korea. Mutual tariff elimination will help make Saskatchewan exports of industrial goods more price competitive with South Korean domestic production. The Agreement will also help Saskatchewan exporters maintain a competitive footing with major competitors who have already secured an FTA with South Korea.
When the Agreement enters into force, over 95 percent of South Korean tariff lines for industrial products will be subject to immediate duty-free access. Saskatchewan businesses stand to gain considerably when all South Korean tariffs on industrial goods are eliminated within 10 years. Without an Agreement, Canadian businesses would be at a disadvantage in the South Korean market against major competitors. The Agreement will create market access opportunities for Saskatchewan exporters across a number of industries.
For example, South Korean tariffs will be eliminated on:
- weighing machinery and scales, from a current rate of 8 percent;
- electrical transformers, from a current rate of 8 percent;
- filtering or purifying machinery for liquids, from a current rate of up to 8 percent; and
- sporting equipment, from a current rate of 8 percent.
Canada and South Korea recognize the importance of fostering cooperation and transparency in standards-related measures and have committed to encourage the use of internationally recognized standards and membership in multilateral arrangements to minimize duplicative certification and testing of products, including those related to medical devices.
The Agreement will also include a mechanism that will allow either party to raise concerns with the other party’s standards-related measures, with the goal of minimizing or eliminating the measures’ impact on trade. Canada and South Korea have negotiated provisions that will allow citizens of the other party to participate in the development of technical regulations and conformity assessment procedures on terms no less favourable than those that apply to their own citizens. This will help minimize or eliminate barriers before they come into place.
Minimizing the impact of technical barriers will help maximize market access for Saskatchewan’s exports.
Reaping the benefits
Canada has obtained a tariff outcome—the elimination of all tariffs on industrial goods—that will level the playing field with key competitors such as the United States and the European Union, and provide enhanced market access opportunities in some specific areas of interest to Saskatchewan. As a result, Saskatchewan businesses stand to gain considerably from the Canada-Korea Free Trade Agreement.
Opening new markets in South Korea for the Saskatchewan’s world-class services
The service sector is a key driver of Saskatchewan’s economy, accounting for 55.7 percent of the province’s total GDP and employing over 395,000 people in Saskatchewan in 2012.
Canada’s service exports to South Korea are worth more than $750 million a year. Saskatchewan’s key export interests in this vibrant sector include research and development, construction services, information and communications technology, tourism and transportation services. Jobs in this sector are traditionally highly skilled and well-paying, creating important opportunities for Canadian expertise.
Improved access to markets
The Canada-Korea Free Trade Agreement will provide Canadian service suppliers with greater and more predictable access to the dynamic South Korean market. Once in force, the agreement will create a level playing field for Canadian service suppliers against key competitors from the United States and the European Union, which have implemented free trade agreements with South Korea.
- The Agreement includes significant improvements and new sectoral market access, which go well beyond South Korea’s obligations under the WTO’s General Agreement on Trade in Services (GATS) in many sectors of export interest to Canada. The Agreement will establish enhanced market access in areas such as professional services (e.g. foreign legal consultancy services, private and adult education, research and development), environmental services, and business services. This outcome is commensurate with South Korea’s free trade agreement commitments with the United States and the European Union.
- The Agreement uses a “negative list” approach for listing reservations to the obligation of the cross-border trade in services chapter, which means that everything is open unless otherwise listed in a reservation.
- The Agreement also ensures that any future changes that aim to make it easier for Canada’s service providers to access the South Korean market (or for Canadian investors to obtain better treatment) will be locked in every time they bring improvements in access. This is referred to as the “ratchet mechanism.” This mechanism means that if South Korea liberalizes a law, policy or regulation that makes it easier for Canadians to conduct their services or investment activities in South Korea, the liberalization becomes South Korea’s new obligation under the Agreement.
Temporary entry for business persons
South Korea’s temporary-entry commitments under the Agreement are more ambitious than any of South Korea’s other FTAs. The Agreement’s temporary-entry provisions will provide new, preferential access to the South Korean market, facilitating movement between Canada and South Korea for business visitors, traders and investors, intra-company transferees, professionals (i.e. contract service suppliers and independent professionals) and their spouses.
Under the Agreement, Canadian firms can send their employees to South Korea to fulfill service contracts, for instance, in science, engineering and IT fields. Canadian independent professionals (i.e. self-employed professionals contracted directly by a South Korean or South Korean company) such as architects, engineers, management consultants and veterinarians, may enter the South Korean market with a pre-arranged contract.
In addition, the Agreement will benefit the e-commerce and telecommunications sectors.
The telecommunications sector is important for the economies of Canada and South Korea. Not only is telecommunications a constantly growing service sector, it is one of the most important enablers in the modern economy, providing the means of delivering other services that Canadians depend on.
The Agreement will ensure that all players in the telecommunications market have fair access to networks and services in each other’s market, and that regulators act impartially, objectively and in a transparent manner. Service providers and investors will benefit from increased transparency and predictability of the regulatory environment and secure, competitive marketplaces.
Electronic commerce was in its infancy 20 years ago. Today, e-commerce is part of our daily lives. Canadians shop and plan holidays online, and buy and download software and entertainment content, including movies, television programs and music. Advertisers are making increased use of “smart advertising” on the Web to track our shopping habits and promote specific deals likely to interest us.
Canada and South Korea recognize the growing economic importance and changing nature of this technologically advanced sector. To facilitate trade in the digital economy, the Agreement includes a commitment whereby both parties will not levy customs duties, fees or other charges on digital products that are transmitted electronically. As well, Canada has agreed to important measures under the Agreement aimed at building trust and confidence in the digital environment, such as those having to do with the online protection of e-commerce users’ personal information.
Reaping the benefits
The Agreement provides Canadian service providers with improved protection, predictability and transparency for conducting business, as well as greater access to South Korea’s sophisticated services market.
Canadian gains under the Canada-Korea Free Trade Agreement will enable Canadian companies to compete on a level playing field with their major competitors in the South Korean market, giving them an advantage over competitors from other countries. Ultimately, this advantage will benefit the entire Canadian economy and lead to new jobs, growth and prosperity in a sector that exemplifies Canadian expertise.
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