Prime Minister Stephen Harper has hit back at auto industry stakeholders that are criticizing Canada’s new free trade deal with South Korea, saying that Ford Motor Company, in particular, should not expect preferential treatment.
Canada finalized a long-awaited free trade agreement with South Korea Tuesday, and while the agriculture sector hailed the deal for opening new markets for Canadian beef, pork, seafood and other goods, auto industry stakeholders warned the deal will cost jobs and solidifies a trade imbalance with Asian manufacturers.
Harper signed the deal alongside South Korean President Park Geun-hye in Seoul. The agreement ends 10 years of off-and-on negotiations, and marks Canada’s first bilateral free trade deal with an Asian country.
The deal “will create thousands of new jobs in Canada” and open a key Asian market for Canadian goods and services, the Harper government said in a statement. The deal is projected to increase Canadian exports to South Korea by 32 per cent.
The agreement eliminates nearly all South Korean tariffs on Canadian industrial goods, fish and seafood products, and agricultural and Agri-Food products. Canada’s agriculture sector will now have far better access to the country’s 50 million consumers.
However, some auto industry stakeholders decried the deal over Canada’s pledge to eliminate its 6.1 per cent duty on Korean cars -- Hyundais and Kias -- over two years.
Before details of the agreement were even released to the public, Ford Canada issued a statement saying it “opposes” the new deal.
“As a global company committed to free trade, Ford supports well-negotiated agreements that open new markets for vehicles produced in Canada. For this reason, we cannot support the Canada-South Korea free trade agreement,” Ford Canada president and CEO Dianne Craig said in the statement.
“We believe that South Korea will remain one of the most closed automotive markets in the world under the deal negotiated by the Canadian government.”
When asked by reporters about the deal’s critics, Harper opted to address Ford specifically.
“Ford supported the Korea-U.S free trade agreement, thereby Ford got access to the United States and has access through the United States to the Korean market,” Harper said Tuesday.
“What we are doing here is allowing other Canadian companies and other Canadian sectors to have the same access that Ford already has. So it is, I don’t think, realistic for a company to think it will have one set of rules for it and another set of rules for the entire rest of the Canadian economy.”
Unifor, which represents autoworkers, said the free trade deal poses “an unneeded challenge for Canada's autosector” as it tries to get back on solid economic footing.
"We cannot stand by a deal that allows Korean carmakers to flood Canada, while doing little or nothing to get our cars into Korea," Unifor National President Jerry Dias said in a statement before details of the deal were released.
"If Korean companies want to sell more in Canada, they should be required to make those cars here."
The union said the federal government should take action to remedy a trade imbalance in the auto industry, including tying tariff reductions to achieving measurable targets and requiring South Korean firms to invest in Canada and create jobs as a condition for tariff reductions.
"The survival of our middle class depends on stable jobs, not exporting our riches to be manufactured in another country," Dias said.
Although South Korea is Canada’s seventh-largest trading partner, and third-largest in Asia after China and Japan, a massive trade imbalance exists between the two countries, with South Korean exports to Canada totalling just over $6 billion in 2012, compared to $3.7 billion going the other way.
Auto industry analyst Charlotte Yates said Ford and other automakers were hoping to see a so-called “snap-back” provision in the deal, which would allow tariffs to be returned to pre-agreement levels if it turned out that South Korea’s non-tariff barriers, such as licensing requirements and customs fees, were affecting Canadian exports.
The provision was negotiated in the U.S.-South Korea trade deal.
Unifor’s national secretary treasurer, Peter Kennedy, told BNN on Tuesday that Canada’s deal is “inferior” to the South Korea-U.S. agreement because it does nothing to address non-tariff barriers.
South Korea is a closed market for Canadian-made vehicles, he said, and this deal “does nothing to change that.”
He also said such deals must be part of a broader industrial strategy, “which doesn’t exist in this country.”
“For those sectors that are advantaged by the trade deal, that’s fine, we support that,” Kennedy said. “But you don’t throw other sectors under the bus with the hope that somebody else might be a winner.”
Ontario’s Economic Development and Trade Minister Eric Hoskins said Tuesday the deal has “the potential for serious negative impacts” for the auto sector, saying two years is not enough time for automakers to adjust to the elimination of the tariff on South Korean vehicles.
Ontario had asked for the longest-possible phase-out period for the tariff, as long as seven years.
Hoskins is calling for a task force comprised of the federal and Ontario governments, as well as automakers, to compile monthly reports on Korean auto imports.
The federal NDP issued a statement Tuesday afternoon saying it supports "growing trade opportunities with South Korea" and the Asia-Pacific, but the party accused the federal government of "cherry-picking details of this deal for release."
“The Canadian auto industry and manufacturing sector have been kept in the dark throughout the negotiations,” said Guy Caron, deputy international trade critic. “We are particularly concerned about the auto sector and its 115,000 quality middle-class Canadian jobs.”
The federal Liberals said they are "broadly supportive" of the agreement for the growth opportunities it offers Canadian businesses.
International trade critic Chrystia Freeland said in a statement that the party will review the deal's contents, but said that "an increased emphasis on trade produces the growth that will deliver a real and fair chance for middle-class families."
Deal ‘tipped to the West’
Meanwhile, the agriculture and energy sectors are pleased with the deal.
"There's a new balance of forces in the country and I wouldn't overstate that it's tipped to the West," Paul Evans, director of the Institute of Asian Research at the University of British Columbia, told the Canadian Press.
Cal Dallas, Alberta’s minister of international and intergovernmental relations, said the deal will be a boon to his province.
"A lot of the work that we've been able to do on the trade side has been in the agricultural sector but it's very clear now there's huge opportunities for energy," Dallas said.
That means "attracting inbound investments" and determining ways to "move energy into the South Korean market,” he said.
