This is the 17th in a series of articles on suggestions to President-elect Lee Myung-bak. ― ED.
By Terry Tuharsky
Vice President of GBD Canada
Congratulations President-elect Lee Myung-bak! Having worked so closely with Canadians on the Foreign Investment Advisory Council, we were delighted to hear of your election victory. Canada is a good friend of Korea and we have a history of excellent relations. But with Korea now working on 11 free trade agreements, Canada's situation with Korea looks very worrisome. A situation where Korea manufactures the PDA's Blackjack and Strawberry, while denying access to the world's No. 1 PDA, Canadian made Blackberry, has worldwide implications especially with FTA(s). In addition, Canada has concerns about the banning of Canadian beef and the Korean auto sector. These issues have caused serious obstacles for our politicians to conclude an FTA and Korea's relationship with Canada is weakening.
Right now Korea is forcing CEOs, bankers and resident foreign investors to purchase their Blackberries in Hong Kong and roam here in Korea, causing them to spend thousands of extra dollars. This situation may be the ``straw'' that breaks many FTAs and seems unwise because Canada and Korea have several advantages: We have the most open access for Koreans, of any Asian nation (no visa, stay for six months). We are major trading partners with each other, and we both want our Korea-Canada FTA to be successful. In addition, Canada has 200,000 Korean immigrants, and we even have a Parliamentarian who was a former Korean English teacher. So there are many positives. However, Korea does have to compete for Canada's attention in the Asia Pacific arena.
Canada has 1 million people of Chinese descent and China has a $1 trillion economy. Canada also has 700,000 people of India descent and India provides three times as many immigrants annually as Korea does. Japan also grabs more attention because of their population and economic size. So in dealing with Canada, it is important not to create a situation where Canada can ``go elsewhere.'' A case in point is the Korea-Canada FTA, which is ``not about to happen'' because of a lack of access to the Korean auto market, says the Canadian finance minister (Nov. 23 2007, Bloomberg). And also reported in Bloomberg, ``Canadian Trade Minister David Emerson last month said his government will need `breakthroughs' in order to conclude a deal this year, citing the auto industry as the biggest hurdle.'' With powerful ministers sounding doubtful about free trade would it not be prudent to solve some Canadian trade issues now?
With the ban on Canadian beef lasting over four years, the indications are similar. In May 2007, Canada's former Foreign Minister MacKay said with respect to beef, ``I believe this is an irritant, but one that is going to be resolved in the very near future.'' But now in 2008, Ted Haney, president of the Canadian Beef Export Federation, with the beef issue still unresolved, said, ``Market access has been politicized around the world.'' With over 100 countries including Taiwan accepting Canada's beef, this would be an excellent time for the new administration to signal that Korea can help Canada.
With Blackberry, the Korean government has refused to approve the rate plans for the Blackberry on major Korean networks, because it does not use the WIPI software standard. This is the only country in the world where this is happening. If Korea advocates deregulation in the financial sector and wants to create a financial hub, it is difficult to see how banning the Blackberry helps. Estimates of WIPI costs are an extra $30 per mobile phone, possibly a maximum Korean consumer loss of $480 million yearly. Over 10 years that's billions of dollars. If Blackberry sold 16,000 units out of 16 million units sold annually (2006 data), that would be one-tenth of 1 percent market share. Korean manufacturers account for 80 percent or more of the mobile phone market in Korea
The Ministry of Information and Communication (MIC) who is responsible for this action, seems to be forcing Canada to consider a ``Retaliatory Position.'' The Wall Street Journal covered this story because Blackberry is a worldwide issue. The Invest Korea Ombudsman thinks Blackberry should be exempt from the WIPI standard, stating the rejection is ``discriminatory,'' ``may violate WTO,'' ``the Blackberry handheld fully complies with MIC's policy,'' and ``It is puzzling that MIC would continue to signal that the Blackberry must be WIPI compliant when it clearly fits the exemption.'' Because the Blackberry/WIPI problem is symbolic of the over-regulation that the business community complains about ― it's the 800-pound gorilla in the room. I would ask academics, IT technologists, and libertarians etc. to look at the facts on the Internet and form your own opinion.
I think MIC has created a kind of ``Perfect Storm.'' On one hand, if Korea chooses to drop WIPI, manufacturers will be angry, but if the ban on Blackberry continues, Korea's reputation suffers immeasurably and claiming Korea is a financial hub while forcing CEOs, bankers and resident foreign investors to acquire their Blackberries in Hong Kong has been called ``embarrassing.'' This is the only place in the world where this is happening, but you may not see things this way. I would ask academics and interested parties to do their own research, and write your chamber of commerce or interested communities. If Invest Korea's Ombudsman states with respect to Blackberry: ``A discriminatory regulation like this undermines consistency of the government policy,'' it's fairly evident that Korea needs to focus on the government policies it can change. Blackberry and beef could change easily and show excellent progress on deregulation. Korea has issues that warrant study. Canada and Korea deserve an FTA but these issues ― Blackberry, beef and autos ― are more than just an irritant.
The writer served as chairman of the Canadian Chamber of Commerce in Korea.