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| President Park Geun-hye shakes hands with Canadian Prime Minister Stephen Harper during a news conference at Cheong Wa Dae, Tuesday, after signing a free trade agreement. / Yonhap |
By Kim Tae-gyu and Choi Kyong-ae
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Korean beef suppliers now have less room to grow as Canada has just joined the U.S., Australia and New Zealand as countries able to sell their meat products at lower prices here, they said.
The FTA was inked nine years after negotiations began in July, 2005, and Korea became the first Asian country to sign such a pact with Canada, the Ministry of Trade, Industry and Energy said in a statement.
Under the deal, Korea will gradually cut the 40 percent tariff on Canadian beef over a period of 15 years after the deal takes effect. In return, Canada is to lift the 6.1 percent tariff on Korean-made vehicles in two years and 6 percent tariff on some car parts immediately, it said.
"Though the addition of Canadian beef to the Korean market won't edge out most local livestock farmers, some of them may suffer to compete with the growing volume of imported beef," Baek Heung-gi, a researcher at Hyundai Research Institute, said by telephone.
An official from the agriculture ministry said if imported beef dealers compete to lower prices to woo customers, domestic suppliers may have to follow suit and see their margins squeezed further. She declined to be named due to the sensitivity of the matter.
The bilateral agreement is a "big win" for Canada as the local market was closed to all Canadian beef products for nine years through 2011 after mad cow disease was reported in Alberta in 2003, she said.
To cope with the sharp increase in agricultural imports, the two countries have agreed to adopt a safeguard clause, the statement said.
In a joint press conference held at Chong Wa Dae, President Park Geun-hye and her Canadian counterpart Stephen Harper welcomed the deal, pledging stronger cooperation at the multilateral level.
"Following the FTA, we have another tool to further boost investment and trade of the two countries, namely the TPP … I hope hat Canada will support us if we take part," Park said.
TPP stands for the Trans-Pacific Partnership aimed at tackling tariff and non-tariff barriers to boost trade in more than 10 countries including Australia, Japan and Mexico. Korea is also mulling joining the U.S.-led trade deal which covers about 40 percent of global trade.
Prime Minister Harper said that the FTA between Korea and Canada will unlock the full potential of their economic ties and lay the foundation for a new era of mutually beneficial bilateral relations.
Meanwhile, Korea stands to gain from the deal as lower tariffs will allow Korean-made vehicles to be more price-competitive in Canada.
"As Korean carmakers are expected to ship vehicles to Canada without tariffs in about two years (after the FTA comes into effect), they are better positioned to compete with their rivals from Japan and the E.U.," Baek said. Japan and the E.U. are still in talks with Canada to reach a free-trade agreement, he added.
Canada is a market which locally sells 1.7 million vehicles a year, bigger than the 1.4 million in Korea.
"As the U.S. Big 3, Toyota Motor and Honda Motor sell locally-produced vehicles without tariffs, it was really hard to beat them in terms of price," Kim Tae-nyen, executive director of the Korea Automobile Manufacturers Association, said by phone. The Big 3 are General Motors, Ford Motor and Chrysler.
Automobiles and auto parts make up 48 percent of Korea's total exports to Canada last year worth $5.2 billion. Imports from Canada were $4.7 billion, resulting in a trade surplus of $488 million for Korea, the statement said.
The tariff on Korean vehicles exported to Canada is currently 6.1 percent. Korea charges a higher 8 percent tariff on vehicles imported from countries, including Australia, with which Korea has not signed FTAs.
Korea took a 12-percent share in the Canadian automobile market last year, following the U.S. with 45 percent and Japan with 34 percent. Canada was one of the five biggest buyers of Korean vehicles along with the U.S., Saudi Arabia, Russia and Australia last year, the ministry said.
"Korean carmakers sell some of their vehicles built in the U.S. but with lower tariffs they can ship cars from Korea," Kim said.
Under the agreement, the two countries will separately see tariffs on 98 percent of trade items and more than 98 percent of trade value fully lifted in the 10 years from the time the deal becomes effective.
However, tariffs on 19 percent of agricultural products will remain intact, or go through a gradual abolition over a period of more than 10 years, to protect local industries. Products such as rice, baby formula, cheese and ginseng are excluded from the FTA.
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