Canada-Korea Free Trade Agreement (CKFTA)

Myths and Realities

Myth: Free trade agreements (FTAs) threaten Canada’s public services.

Facts:

Canada’s FTAs exclude health care, public education and other social services maintained for a public purpose.

Canada’s FTAs do not force governments to privatize, contract out or deregulate public services.

Myth: Free trade agreements prevent governments from regulating environmental, labour, health care and safety standards.

Facts:

Canada’s FTAs do not prevent governments from regulating standards that protect the public, including in the areas of the environment, labour, health care and safety.

Nothing in any of Canada’s FTAs exempts foreign service providers and foreign investors from Canadian laws and regulations.

Myth: Free trade agreements harm Canadian environmental standards and regulations.

Facts:

Canada’s FTAs do not compromise the environmental protection measures that Canada has implemented.

Nothing in any of Canada’s FTAs exempts foreign service providers and foreign investors from Canadian laws and regulations.

Myth: The CKFTA will prevent the Government of Canada from protecting Canada’s cultural interests.

Facts:

Canada’s FTAs have not prevented Canada from protecting its cultural interests. The preservation and promotion of Canada’s cultural diversity is among the Government of Canada’s core objectives.

These same allegations were made during the NAFTA negotiations 25 years ago. Today, however, Canadian culture is thriving like never before. Canadian books, television, films, visual arts, music and other art forms are prominent on the world stage.

The CKFTA preserves policy space for cultural policies and programs at all levels of government, and will not impact Canada’s ability to continue to meet its cultural objectives.

Myth: Free trade agreements allow foreign investors and foreign companies to challenge Canadian laws and regulations.

Facts:

Canada’s FTAs do not allow foreign investors or companies to force a government to change its laws and regulations.

Including mechanisms for dispute resolution through international arbitration in FTAs does not restrict any level of government from legislating in the public interest.

Canadian and foreign investors alike are subject to all Canadian laws and regulations, including those pertaining to environmental, labour, health care, building and safety standards.

The CKFTA  provides for predictable and non-discriminatory  rules for investment and  provides both Canadian and foreign companies with a stable environment for investment.

Myth: As a result of the CKFTA, South Korean autos will flood the Canadian market and seriously harm the Canadian auto manufacturing industry.

Facts:

When it comes to the potential impact of this agreement on auto production in Ontario, every credible study that has been carried out makes clear that the impact on Canadian production and therefore auto manufacturing jobs in Canada would be minimal.

The protective effect of Canada’s 6.1% tariff on auto imports from South Korea is diminishing dramatically, as it is expected that soon 50% of South Korean-brand vehicles sold in Canada enter Canada tariff-free from the US under NAFTA.

It is untenable for Canadian exporters’ to continue to face an unlevel playing field tilted in favour of their US competitors as a result of KORUS.

A highly credible 2012 study by Dr. Van Biesebroeck (.pdf), formerly of the University of Toronto, concluded that the elimination of Canada’s 6.1 percent tariff on vehicles imported from South Korea will have a very limited impact on Canadian production and jobs - in the order of 0.2% of production, or fewer than 4,500 cars out of a base of around 2 million units.

Myth: Canadian auto manufacturers will continue to be shut out of the South Korean market because of the many barriers that prevent them from exporting to South Korea.

Facts:

That fact is that the most recent trade statistics, according to the Global Trade Atlas, made it very clear that the Free Trade Agreements signed by the US (KORUS, 2012) and the EU (KOREU, 2011) has been beneficial for the auto sectors in both the US and the EU, and put all Canadian exporters at a competitive disadvantage relative to their US and EU counterparts.

In the auto sector, since the implementation of KORUS, South Korean auto imports from the U.S. have more than doubled (from $340 million in 2011 to over $800 million in 2013). Meanwhile, South Korean auto imports from the EU have doubled (from $2 billion in 2010 to $4 billion in 2013) since KOREU.

Ford recently announced they set an annual sales record for South Korea in 2013 and closed the year as South Korea’s fastest-growing brand.

This follows Ford’s setting of an annual sales record in South Korea in 2012.

Myth: The Government of Canada negotiated the CKFTA agreement secretly.

Facts:

Throughout the CKFTA negotiations, the Government of Canada kept Canadians informed and consulted extensively to ensure that the Agreement would meet the needs of Canadians.

During negotiations, the Government of Canada received valuable input from companies and industry associations from across Canada. Also, Canadian government officials consulted actively with business and other interested Canadians.

Moreover, the CKFTA will be subject to full Parliamentary scrutiny and approval before it enters into force.

If you have questions or comments about the CKFTA, we would like to hear from you. Please contact Global Affairs Canada at the following address:

Trade Policy and Negotiations, Asia (TPA)
Global Affairs Canada
Lester B. Pearson Building
125 promenade Sussex Drive
Ottawa, Ontario, K1A 0G2
Fax: 613-944-5119
Email: consultations@international.gc.ca