The FTA negotiations between South Korea and Canada have finally concluded after nearly nine years of negotiation between the two parties. The two countries’ presidents announced the conclusion of the FTA negotiations following a summit held last month in Korea and further exchanged opinions over issues worthy of cooperation between the two nations, as well as the Northeast Asian regional situation.

A spokesperson of the Ministry of Trade Industry and Energy (MOTIE) said Canada will have to remove tariffs on 93.2% of imported Korean-made products within three years while Korea also must eliminate tariff for 86.1% of imported Canadian-made items in the same period according to the agreement.

For the FTA, in Korea, the automotive sector is expected to see the greatest benefit as export tariffs (6.1%) to Canada will be wholly removed after 24 months from the effectuation of the FTA. The current 6~7% level of tariffs in the areas of automotive components, tires, textiles, etc. would mostly be removed within three years.

However, Korean beef and pork farmers are expected to face more competition as tariff removals of Canadian beef and pork will have to be carried out in 15 years and 13 years, respectively. Korea’s president made her expectation over the FTA by saying, “We expect stronger economic cooperation between the two nations through the South Korea-Canada FTA. Now we officially ask for the sincere support from the Canadian government in the our nation’s participation of the Trans-Pacific Partnership (TPP) based on the fact that Korea’sparticipation in the pact is forecast to facilitate greater trade and investment between Korea and Canada.”
 
 
Significance and Results of the Korea-U.S. FTA

In the past two years since the implementation of the Korea-U.S. (Korus) FTA, exports to the United States and U.S. investment in South Korea have increased, stimulating the Korean economy.

Korea’s exports to the United States have surged and U.S. investment into Korea has been stimulated since the Korea-U.S. FTA took effect two years ago. The United States accounts for 22.5% ($16.2 trillion in 2013) of the global GDP (IMF). It is the world’s largest market, and Korea’s third-largest trading partner.
Since the FTA took office, both exports and imports of products that benefited under the pact have increased and U.S. investment in Korea have surged, stimulating Korea’s economy.

Korea-U.S. trade volume rose by 4.1% ($197.4B- >$205.4B) following the implementation of the KORUS FTA. In the second year of the FTA, the trade volume of the products that benefited under the pact rose by 13.0% ($41.7B->$47.1B), but the trade volume of the products that were excluded from the agreement was down by 8.6%.

Since the FTA took effect, Korea’s exports to the United States have grown faster than total exports, which have meant that the agreement has served as a sustaining pillar for exporters here. Exports of products included in the FTA grew for two consecutive years (1st year 1.6%->2nd year 5.4%), with continuous growth in automobile parts (11.5- >8.3%) and petroleum products (36.1->5.9%).

However, the growth rate in those sectors dropped sharply due to falling export prices and the extension of overseas oil refinery facilities. Exports of excluded items decreased (-3.5%) during the first year of the FTA, but went up in the second year (5.7%). Exports of wireless communication devices plunged during the first year of the FTA (-34.1%) only to go up again during the second year (31.3%), thanks largely to a boom in the LTE market.

Exports of automobiles rose (16.5->14.7%) over the two years, due to improved quality and brand awareness.

Over the two years since the FTA went into effect, imports of U.S. goods increased(10.1%), mostly in products included in the pact, which partially offset the decrease in the import of products excluded from the pact (-23.8%). Imports of items included in the pact such as prime mover and pumps (-4.4->9.7%) and agricultural chemicals and medicine & medical supplies (15.9->13.4%) were steadily increased (5.3- >4.5%), while imports of excluded items fell (-20.7->-3.7%) for two straight years due to weak imports in the semiconductor (-1.3-.-6.1%) and aircraft & parts (-16.3->-12.9%) sectors. The use ratio of the Korus FTA in exports during the second year stood at 75.7%, up from the first year.

 
 
 
 
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