The centerpiece of the agreement is dramatic duty and tariff elimination. From the get-go, South Korea will provide duty free access to 81.9% of Canadian tariff lines, covering 90.2% of non-agricultural lines. In turn, Canada will offer the same duty free access to 81.5% of South Korea’s non-agricultural lines. Eventually, Canada will graduate that duty free access to 97.8% of South Korean tariff lines, while South Korea will extend its preferential treatment to a total of 98.2% of Canada’s tariff lines.
The provisions of the deal relevant to apparel and textile products are significant. South Korea committed to eliminating tariffs on 99.8% of apparel and textile products from Canada. Canada will, in turn, eliminate 5.7% of all tariff lines covering the same products and 34.8% on those tariff lines that cover footwear. With respect to apparel, Canada is bound to discontinue the remaining tariff lines in a gradual phase out over the next three years. Regarding footwear, depending on the specific product in question, the remaining tariffs will be phased out over the next five to eleven years.
Canada has been aggressively courting new free trade agreements over the last several years. Last October, it concluded a major agreement with the E.U., the first ever bilateral trade agreement between the E.U. and a G8 country. The E.U. and Canada have long been close trading partners; in 2011, the E.U. was Canada’s most important trading partner after the U.S., accounting for 10.4% of the nation’s overall trade portfolio. In total, the E.U. and Canada trade more than $82 billion in goods each year; as a consequence of the recently settled Comprehensive Economic and Trade Agreement (CETA), that number should increase by 23 percent to $117 billion.
This is a time of great transition for Canada in terms of trade, undergoing massive revisions of its trade relations with numerous countries. In addition to CETA, Canada is eliminating trade preferences for 72 countries, beginning in 2015. These special designations are maintained under its General Preferential Tariff system. Russia, Turkey, Thailand, Singapore and South Africa are among the nations that will be impacted.
Many are viewing the two announcements in tandem as evidence of a historic pivot for Canada toward Europe economically. Canadian economists predict that the E.U.’s $17 trillion economy is a veritable gold mine of opportunity, potentially generating as much as 80,000 new jobs, adding $12 billion to its GDP.
Whether Canada is focused on the E.U., though, there can be no doubt that the deal just finalized with South Korea will have considerable benefits. According to the Canadian Department of Foreign Affairs, Trade and Development, Canada is expected to increase its exports 32 percent and boost its domestic economy by $1.7 billion. This is Canada’s first bilateral free trade agreement with an Asian nation.