Canada-South Korea trade deal appears close after decade of talks

The Harper government is set to sign a long-sought trade deal with South Korea early next week, despite entrenched opposition by some in Ontario's critically important auto sector, sources close to the talks say.

Preparations are underway for a signing ceremony in Seoul early next week, ending nearly 10 years of on-and-off talks that one of Canada's biggest industries has long prevented from reaching the finish line.

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Cracks began to appear in the Canadian auto industry's united front last month when the association representing Japan's automakers in Canada came out largely in favour of a deal, saying it would complement the agreement signed in the fall with the European Union and ease talks with Japan.

Another impetus was introduced when Korea was able to successfully complete deals with Canada's two largest trading partners, the United States and the European Union, leaving Canada out in the cold.

Government officials in Ottawa refused to confirm the agreement Thursday.

Opposition remains

The deal, coming on the heels of an historic pact with the EU, will go a long way towards cementing the Harper government's expansionist trade agenda, and its stated goal that it wants to be a serious economic player in Asia.

Still, significant opposition remains. Ford of Canada chief executive Dianne Craig recently called the 2012 Korea-U.S. agreement a "disaster" for the sector even though Ford, along with the General Motors and Chrysler, initially supported the pact.

At issue for Canada is a 6.1 per cent tariff on car imports. Critics fear once it's removed, it will further skew the automotive playing field between the two countries, with Korean-made brands Hyundai and Kia selling about 90,000 units in Canada annually in direct competition with Canadian-assembled vehicles. Korea also assembles autos in the U.S., which it exports into Canada duty free.

Ontario's economic development minister, Eric Hoskins, said Korea out-exports Canada 50 to one in autos. Hoskins said nothing he has heard from Ottawa so far has eased his concern that Canada's automakers won't be even more outgunned once tariffs are removed.

"We want a free-trade agreement that's good for all sectors, but on autos particularly it's disadvantageous," he said. "I haven't been given information to suggest that the improvements that we've asked for have been addressed."

In particular, Ontario and the industry has asked for a slower phase-out of tariffs and a "snap-back" provision allowing Canada to re-impose tariffs if there's evidence Korea is not meeting its obligations.

With the deal, Canada hopes to arrest the deterioration in exports to Korea since the U.S. agreement went into effect, particularly in the agricultural sector.

An agreement will be particularly welcomed by the Canadian agricultural sector, which has complained that Korea's agreements with other nations has put them at a competitive disadvantage.

South Korea is currently Canada's seventh largest merchandise trading partner and third largest in Asia after China and Japan. But the relationship has been decidedly one-sided, with Korea exports totalling $6.3 billion in 2012 while Canadian shipments totalled $3.7 billion.