The following is from the 23 January 2013 edition of Embassy Magazine.
Hee-yong Cho says Korea trade talks need ‘flexibility.’
South Korean Ambassador Hee-yong Cho says he wants no tariffs on imports of Korean cars to Canada, while urging his Korean colleagues and his Canadian counterparts to show a little “flexibility” in the seven-year-old trade talks.
“Basically less tariff will be better,” Mr. Cho told Embassy during an interview on Jan. 11. Canada has a 6.1 per cent tariff on Korean cars.
Canada and Korea launched free trade talks in 2005 under the previous Liberal government. After 13 rounds, the talks hit an impasse in 2008. At that time, Korea’s market was closed to Canadian beef after a ban due to the outbreak of mad cow disease in Canada.
When Korea reopened its market to Canadian beef and cattle in January 2012, the Harper government welcomed the move, and the government hinted that talks would soon be wrapped up: The decision “removes the most significant bilateral trade irritant and creates positive momentum in our relationship,” Caitlin Workman, spokesperson for the Department of Foreign Affairs and International Trade, told Embassy soon after.
But it has been a year since that “positive momentum,” and some in the business community along with Canadian beef and pork exporters want a deal to be signed. Exporters are worried about losing market share to competitors in the United States after the US-Korea free trade deal went into force last year.
As well, the upcoming change of leadership in Korea, with a new president set to take office in February, is a wild card. Korea held its presidential elections in December: Park Geun-hye won the election and is set to take office on Feb. 25.
Analysts are split about what a new leadership could mean for a potential deal. John Weekes, who was Canada’s chief negotiator for NAFTA, said the presidential elections complicates the situation in Korea, but that both sides likely see the next month as a window of time during which “there’s a serious effort being made to see what could be done.”
If they can’t reach a deal by the end of February, “it might take some considerable number of months before they were effectively able to negotiate again.”
But others say the Koreans are running out the post-election clock, much like a lame duck session of the US Congress—meaning that not much will happen during the next four or five weeks.
Meanwhile, Mr. Cho arrived in Canada to start his posting in July last year and said that since his arrival, one of his priorities has been to “push both sides to show more flexibility and…to make it closer and closer.”
“I’m cautiously optimistic,” Mr. Cho said, adding that the earlier the two sides wrap up a deal, the better.
The tariff question
While Korea is looking for reduced or no tariffs for vehicles exported to Canada, some in the Canadian auto industry have concerns about a deal.
“We would be one of the sectors of the economy that would be incredibly negatively impacted,” said Ken Lewenza, national president of the Canadian Auto Workers union.
Even with tariffs, he said, Korean automakers are growing quickly in the Canadian market.
“When you reduce the tariffs and then you don’t have access to their market, then you can only expect the Canadian market to be flooded with Korean built vehicles,” he said.
“We sell very little in their market.”
He said there are many non-tariff barriers, like a protective climate, for vehicles being shipped into Korea from other countries.
Mark Nantais, president of the Canadian Vehicle Manufacturers’ Association, said last year that Korea was still one of the most closed markets in the world. He said less than 5 per cent of the vehicles sold there are imported.
Meanwhile, those in the business community are awaiting a finished deal.
“We fully support a [free trade] agreement and we’re sorely disappointed that even after all these years of negotiations we are still without one,” wrote Mike Weisbart, a director at the Canadian Chamber of Commerce in Korea, in an email to Embassy.
“Both countries are trading nations at heart and the benefits to both sides are clear,” Mr. Weisbart said.
Kathleen Sullivan, executive director of the Canadian Agri-Food Trade Alliance, said Korea is a big market for her members. The group includes the Canadian Cattlemen’s Association and the Canadian Pork Council.
But the deal between the US and Korea is worrisome, she said.
“Canada’s in a pretty precarious situation where we’re definitely losing market opportunities in Korea,” Ms. Sullivan said. “Once those are gone it will be very difficult to get them back.”
She said they would be looking for more market access, meaning reduced tariffs over time or increased tariff-rate quotas.
Given that Korea recently signed deals with the US and the European Union, their need to negotiate a deal with Canada has probably lessened, Ms. Sullivan said.
Mr. Cho said officials from the two countries have “accelerated the talking and discussions,” especially after Korea resumed beef imports from Canada. Leaders have talked trade on different occasions and at international meetings including the Nuclear Security Summit that was held in Seoul in March 2012, he said.
Reached again this week, Ms. Workman said that Canada wants the best deal, and it had “encouraged Korea to bring an ambitious approach to these discussions.” The government, she added, is also talking with stakeholders to get their views.
Mr. Weekes said that it seems like the two sides have effectively relaunched the trade talks and that they would announce a result if they are successful in putting together a deal.
Korean Prime Minister Kim Hwang-sik visited Ottawa in December to celebrate the 50th anniversary of diplomatic ties between the two countries.
“Both the Korean prime minister and [Prime Minister Stephen Harper]…talked in their remarks about the importance of concluding a free trade agreement at an early date,” Mr. Weekes said.
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