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Canada and Korea Reach FTA Deal

Thursday, March 13, 2014
Sandler, Travis & Rosenberg Trade Report

Canadian Prime Minister Stephen Harper and Korean President Park Geun-hye announced March 11 that Canada and South Korea have successfully concluded negotiations on a bilateral free trade agreement. A joint declaration indicates that Canada and South Korea are committed to finalizing the legal review and required domestic procedures expeditiously in order to implement the deal as soon as possible.

A fact sheet issued by the Canadian Department of Foreign Affairs, Trade and Development indicates that the FTA with South Korea, Canada’s first with an Asian country, is expected to increase Canadian exports by 32% and boost the domestic economy by $1.7 billion. The agreement will also level the playing field for Canadian businesses competing with companies operating in other jurisdictions that already have FTAs in place with South Korea, including most notably the U.S. and the EU.

The fact sheet indicates that South Korea will provide immediate duty-free treatment to 81.9% of Canadian tariff lines, including 90.2% of non-agricultural tariff lines, while Canada will provide immediate duty-free treatment to 81.5% of Korean non-agricultural tariff lines. Once the agreement is fully implemented, South Korea will remove its duties on 98.2% of Canadian tariff lines (with all non-agricultural tariff lines benefiting from duty-free treatment within 12 years) and Canada will do the same with respect to 97.8% of Korean tariff lines.

Among other benefits, South Korea will provide immediate duty-free treatment to 98.7% of Canadian tariff lines in the metals and minerals sector (duties on all remaining tariff lines will be eliminated within five years), 94% of tariff lines covering chemicals (duties on all remaining tariff lines will be eliminated within five years), 63% of tariff lines covering pharmaceutical products (duties on all remaining tariff lines will be removed within five years), 88% of tariff lines covering medical devices, 99.8% of tariff lines covering textile and apparel products, and 100% of tariff lines covering aerospace products. Products of interest to Canada that will benefit from duty-free treatment immediately upon entry into force of the agreement include, among others, turbo propellers, turbo-jet parts, ground-flying training equipment, leather clothing, tanned or dressed fur skins, certain cameras, transmission apparatus parts, electric conductors, certain ferro-alloys, alloy powders, unwrought nickel and nickel powders.

Canada, for its part, will provide immediate duty-free treatment to 65.2% of Korean tariff lines covering appliances, 87.6% of tariff lines covering consumer electronics, 30.8% of tariff lines covering ships, 99.5% of tariff lines covering chemicals, 78.2% of tariff lines covering aluminum, 5.7% of tariff lines covering apparel (duties on the remaining tariff lines will be phased out within three years, however) and 34.8% of tariff lines covering footwear (duties on the remaining tariff lines will be phased out within five or eleven years).

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