03/11/2014 01:30 EDT | Updated 05/10/2014 05:59 EDT

Canada-South Korea trade deal to phase out import tariffs on cars

Prime Minister Stephen Harper announced on Tuesday that Canada has concluded negotiations with South Korea on a free trade agreement that would phase out Canadian tariffs on imports of South Korean cars over three years.

Under the agreement, Canada's 6.1 per cent tariff on imports of South Korean passenger cars would be phased out in three annual cuts — with the first cut coming as soon as the agreement comes into force.

Ontario, whose automotive sector is a key driver of the Canadian economy, would have liked a longer phase-out period, a source close to the negotiations told CBC News on Monday.

Going the other way, South Korea's eight per cent tariff on imports of cars coming from Canada would be eliminated as soon as the agreement was implemented, as well as South Korea's three to eight per cent tariff on imports of automotive parts.

The agreement is being touted as one that would give Canadians "unprecedented access" to Korea's $1.1-trillion economy and at the same time create "thousands of new jobs" in Canada.

"Canadian businesses, investors and consumers in every province stand to benefit significantly from the increased market access that the agreement will provide," Harper said in a written statement.

In the agricultural sector, South Korea would gradually eliminate tariffs on nearly 87 per cent of products coming from Canada. For instance, tariffs on Canadian beef and pork would be gradually eliminated over a period of five to 15 years depending on the product.

Canada would give South Korea immediate duty-free access on nearly 51 per cent of agricultural products, with more tariffs to be eliminated over five years.

The free trade agreement with South Korea would not affect Canada's supply management, which the government says would remain "as robust as ever."

Ford Canada skeptical of deal's benefits

The government hopes to see the agreement implemented "as soon as possible."

But not everyone is buying into the touted benefits of the new deal.

Ontario's Premier Kathleen Wynne said on Monday that she was of mixed emotions on the agreement.

"In terms of the agri-food sector, we are very optimistic about the opportunities that a Canada-Korea deal might provide," said Wynne, who was aware of the agreement's details. "We do have reservations about the auto sector."

Ontario had requested Ottawa at least match a U.S. negotiated deal with South Korea. Such a deal would include a so-called snap-back provision by which tariff reductions could be rolled back if it was shown that Seoul was using non tariff barriers to thwart Canadian exports of autos and parts into South Korea. The negotiated deal did not achieve this.

Ford Canada can’t support the new agreement, Dianne Craig, the Ford Motor Company of Canada’s president and CEO said in a statement.

The company claims South Korea “will remain one of the most closed automotive markets in the world” under the new deal. It cites recent agreements between South Korea and both the U.S. and the European Union, which have “failed to reverse this one-sided automotive trade flow.”

Craig says the South Korean government has continued to protect its home market and subsidized its exports through non-tariff barriers and active intervention in its currency.

“No Canadian manufacturer can compete with a market controlled by non-tariff barriers and currency manipulation,” she writes, adding the new agreement does not address these key issues.

Unifor, Canada’s largest union in the private sector, also expressed concern over the U.S.-South Korea free trade deal and feared Canada entering a free trade agreement with the South.

“We cannot stand by a deal that allows Korean car makers to flood Canada, while doing little or nothing to get our cars into Korea,” Jerry Dias, the union’s national president, said in a statement shortly before details of the agreement were released. “If Korean companies want to sell more in Canada, they should be required to make those cars here.”