This has been a good week for Canada and Canada's most trade-friendly prime minister.
The state visit last week to Ottawa by South Korea's President Park Geun-hye marked a milestone in bilateral relations with the signing of the Canada-Korea Free Trade Agreement, Canada's first free trade agreement in Asia. This built on a flurry of recent activity, including the 50th anniversary of bilateral relations, the designation of the "Year of Korea in Canada", reciprocal visits by ministers, the first visit ever to Canada by a South Korean prime minister in 2012, and several visits by Prime Minister Harper to Seoul, including one where he became the first Canadian prime minister to address Korea's national assembly. Canadian commentary on the Korean peninsula also dramatically increased after 2009, with there being approximately 50 statements or references in speeches by the Canadian foreign minister. The trade negotiations, which began almost ten years ago, was finally concluded this year through the concerted political effort by both sides.
The trade relationship had favoured the Korean side ($6.3B vs $3.7B), whose average tariffs were three times higher than Canada's. When fully implemented, South Korea will eliminate duties on 98.2% of its tariff lines (Canada will remove 97.8%). This is good news for countless Canadian industry sectors, including agricultural, forestry, seafood, and industrial goods. For example, Korean tariffs on potatoes from PEI reached upwards of 304%; Canadian lobster and salmon faced tariffs of up to 20%; while Canadian agricultural exports faced rates which averaged 52.7%. Canadian beef and pork products will be able to compete again on a level playing field with products from the United States and the European Union, which had already concluded agreements with South Korea.
The overall benefit to Canada are such that even the New Democratic Party, which has historically been opposed to free trade agreements, has announced its support for this deal that is expected to increase Canadian exports by 32% and add $1.7B to our economy. Hopefully, this deal with South Korea will also encourage greater movement on Canada's trade negotiations with Japan (the world's 3rd largest economy at $5.1 trillion). Canada-Japan discussions were launched in 2012 and has gone through 6 rounds of negotiations.
There is even more potential with what occurred on Friday, when Prime Minister Harper hosted Herman Van Rompuy, President of the European Council, and José Manuel Barroso, President of the European Commission at the Canada-European Union Summit. The Canadian government characterizes the agreement reached with the EU (whose 28 member states have 500 million people and annual economic activity of close to $17 trillion) as "broader in scope and deeper in ambition than the historic North American Free Trade Agreement." It is estimated that this agreement, once ratified, could boost bilateral trade by 20% and result in a $12B annual increase to the Canadian economy. Admittedly, the road to ratification could be a long one.
Furthermore, with this agreement, Canada will be the only G7 country to have preferential access to the United States and the European Union, giving us access to over 800 million consumers. A good week for Canada at a time of unprecedented trade promotion.
To put it in perspective, under former Prime Minister Brian Mulroney, Canada completed the free trade agreement with the United States.
Under former Prime Minister Jean Chrétien, Canada's agreements with NAFTA (negotiated under Mulroney's term), Israel, Chile, and Costa Rica were brought into force.
Under Prime Minister Stephen Harper, Canada has concluded free trade agreements with 10 countries: Panama, Jordan, Colombia, Peru, and the European Free Trade Association (Iceland, Liechtenstein, Norway, and Switzerland); signed with Honduras and South Korea; and concluded negotiations with the EU. Canada continues to negotiate with some 30 other countries.
Once in force, the recent trade agreements are expected to add over $13.7B annually to the Canadian economy.
It was a good week indeed.
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