Canada, South Korea conclude long-delayed free trade deal

OTTAWA (REUTERS) - Canada and South Korea announced on Tuesday they had wrapped up talks on a long-delayed free trade deal which had stalled for years amid squabbles over exports of autos and beef.

The deal - outlined in a statement by Canadian Prime Minister Stephen Harper - is particularly important for Canada, which is trying to cut its reliance on the US market.

The agreement is the first Canada has concluded with a nation from Asia, a fast-growing part of the world that Ottawa is deliberately targeting.

Canada's Trade Ministry says exports to South Korea in 2012 were worth C$3.7 billion (S$4.23 billion) while imports from South Korea hit C$6.4 billion.

Canadian exports though have steadily dropped since a free trade deal between the United States and South Korea came into effect in March 2012.

The talks with South Korea began in 2005, but later stalled over disputes about auto exports and a delay by Seoul in scrapping its ban on Canadian beef. South Korea lifted its nine-year-old ban in 2012.

Canada says the deal will boost exports by 32 percent, equivalent to C$1.7 billion a year. South Korean exports should grow by 20 per cent a year, or around C$1.3 billion.

South Korea will remove duties on 98.2 per cent of its tariff lines, covering virtually all Canadian exports.

"Given that the average of Korea's tariffs are currently three times higher than Canada's (13.3 per cent versus 4.3 per cent), tariff elimination will be particularly advantageous for Canadian businesses," the government said in a statement.

The deal will hearten Canadian pork producers, who say their exports have plunged since the US deal with South Korea came into effect.

But some auto makers with Canadian operations, such as Ford Motor Co., will be less happy. The deal means Canada will remove its 6.1 per cent tariff on imports from firms such as Kia Motors Corp and Hyundai Corp.

This, some firms worry, will prompt a flood of South Korean imports. Ford notes that Canada imported around 131,000 South Korean vehicles in 2012 while exporting just 3,000.

The 6.1 per cent tariff will be eliminated over three years but this may not be enough to assuage Ford. International Trade Minister Ed Fast told CTV television on Sunday that the deal would reflect many of the auto industry concerns.

"My role isn't simply to promote the narrow interests of the auto sector itself. My role is to promote the national interests. Virtually every other sector of our economy has told us this trade agreement is absolutely critical," he said.

Japanese auto makers with Canadian operations initially opposed the deal but later changed their minds on the grounds that the Canadian deal with South Korea could pave the way for one with Japan.

Canadian officials downplay the potential damage to the auto industry, noting that 88 per cent of Canadian-made vehicles are already exported.

The agreement is relatively minor compared with a similar pact Canada agreed in principle last year with the European Union, one which the two sides say could boost bilateral trade in goods and services by a fifth to 25.7 billion euros (S$45.20 billion) a year.

Fast told CTV that Canada and South Korea hoped the deal would formally come into effect next year.

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