March 12, 2014 - 2:24 PM
This week our Government announced that negotiations between Canada and South Korea on a free trade agreement have successfully concluded. As is often the case when trade deals are announced there are reactions from a variety of different groups, businesses, individuals, political interests and organizations that either oppose or support the agreement in question. Often these comments are based on speculation no differently than some in the BC Wine industry once feared that BC could not compete when the United States free trade agreement were concluded. Today we now know that BC wines can compete with the best in the world and there are many other local industries that depend upon open access to the United States marketplace.
One of the questions I am hearing from some citizens is why South Korea? In response to this question looking at the Canada-South Korea free trade agreement from a British Columbia perspective is useful to understand the economic importance of this announcement. Many are unaware that South Korea is now B.C.’s fourth largest trading partner– as an example between 2010-2012 the value of B.C. exports to South Korea was in the range of $2 billion in value. This success in trade occurred in spite of the fact that South Korea has tariffs on imported BC goods often between 8% and up to 15%. By comparison most goods from South Korea imported into Canada have tariffs in the 4-6% range, on average South Korea's tariffs on Canadians goods are three times higher over Canada's tariffs on South Korean imports. This trade imbalance will no longer exist as over 98% of tariffs will be eliminated with this free trade agreement. This in turn provides open access for Canadian business to access a market of 50 million people in a 1.1 trillion dollar South Korean economy.
Local reaction in Okanagan-Coquihalla so far has been positive. Premium BC wines & icewine that are popular in Asia currently face a 15% import tariff in South Korea and thus will be eliminated under the free trade agreement. Likewise BC Cherry & Blueberry producers often faced tariffs as high 30% even 45%; the removal of these restrictive cost increases will help these industries expand on the $ 210 million exported to South Korea in 2012. I have already heard from one Okanagan-Coquihalla based value added wood producer who is encouraged that his company's timber products will soon no longer be subject to an import tariff of 10% or higher. This is encouraging as BC value added wood exports to South Korea exceeded $300 million between 2010-2012. It is also worth pointing out that in many cases import tariffs can be subject to change depending upon tariff classification. I have heard from farmers who have experienced challenge and even hardship when facing significant increases in tariffs as a result of a change in import classification. These changes for a small producer can be financially devastating more so with a product that has a short shelf-life. Free-trade agreements with countries like South Korea provide certainty for BC producers and exporters and that helps to grow and increase business in new markets.
One other exciting aspect of the free trade agreement with South Korea is that it not only applies to goods; it also applies to services. BC, much like other parts of Canada, has become a leader in many industries such as mining, environmental services, oil and gas, clean energy and transportation are a few that many will be familiar with. Under this agreement these services can now be provided into South Korea by Canadian companies. In addition Canadian independent professionals (examples such as architects, engineers, management consultants and veterinarians) may enter South Korean with a pre-arranged contract. In order to explore new opportunities South Korea is creating new temporary-entry provisions for business visitors, investors, intra company service professionals and others to support new and existing business activities. Although this agreement is Canada’s first free trade agreement within the Asia-Pacific region, early forecasts estimate the potential to increase Canadian exports by 32% for a $1.7 billion increase in Canadian economic activity. The importance of opening up new markets for our local employers is a critical part to maintaining well paying jobs that support families and our communities. If you have comments or questions on this free trade agreement or any issue before the House of Commons please contact me at firstname.lastname@example.org or toll free at 1-800-665-8711.
News from © InfoTel News Ltd, 2014