The Canada-Korea Free Trade Agreement: Benefits and Opportunities for the Canadian Agricultural and Agri-food Sector

The CKFTA is Canada’s first FTA in the Asia-Pacific region. It strengthens Canada’s presence in the important South Korean market and helps expand our economic footprint in this dynamic and vibrant part of the world. It also offers exporters, investors and service providers strategic access to regional and global value chains, and levels the playing field vis-à-vis their key competitors from the U.S., the EU, Australia and other countries that have concluded an FTA with South Korea. As such, the CKFTA provides a platform for Canadian companies to become increasingly competitive in the region. In terms of economic impact, the CKFTA is projected to boost Canada’s GDP by $1.7 billion and result in an increase in Canada’s exports to South Korea by over 30%.

Overview of Opportunities in South Korea

• South Korea is a major net importer of agricultural and agri-food products having imported nearly $26 billion worth of such products in 2013.
• The South Korean consumer market is highly developed, and Western-style foods are growing in popularity, as are Chinese and Japanese cuisine.
• In recent years, there has been a shift to integrate more grains and oilseeds and protein into the diet, and there is growing interest in healthy food and beverages, and more natural products. South Korean consumers also place a high premium on food safety.
• Good market opportunities exist for a broad range of Canadian agricultural and agri-food products, including:
  • grains and oilseeds (e.g. wheat, rye, oats, barley, barley malt, flaxseed, canola, and soybeans);
  • other crops (mustard seed, lentils);
  • processed food products (e.g. frozen French fries, canola oil, maple syrup, skim milk preparations, and mozzarella cheese);
  • meat and animal by-products (e.g. beef, pork, animal fat, hides and skin and tallow);
  • animal genetics (e.g. swine and dairy cattle);
  • alcoholic beverages (e.g. wine, icewine, spirits);
  • functional foods and natural health products;
  • pet foods; 
  • animal feed (e.g. canola meal, forage products including hay);
  • furskins; and
  • fish and seafood.
• Demand for Canadian maple syrup products has increased significantly in the South Korean market. Although maple syrup is already well known in the market, opportunities also exist to expand the presence of other types of maple products.

Improved Market Access

The CKFTA provides new opportunities for Canadian exporters of agricultural and agri-food products by eliminating tariffs and creating a level playing field vis-à-vis South Korea’s current free trade agreement partners, such as the United States and the European Union.

Once fully implemented, this Agreement will eliminate tariffs on over 97 percent of Canadian agricultural and agri-food exports to South Korea, including all Canada’s key export interests.  The CKFTA provides Canadian agricultural and agri-food products, including beef, pork, canola and grains, preferential access to the South Korean market. 

For example, with the CKFTA’s entry into force on January 1, 2015, tariffs were eliminated on the following agricultural and agri-food products:

• Wheat (duties of up to 3 percent);
• frozen French fries, (duties of up to 18 percent);
• maple syrup and maple sugar (duties of 8 percent);
• rye whisky (duties of 20 percent); and
  ice wine (duties of 15 percent).

Other key Canadian agricultural exports to South Korea will see their tariffs gradually eliminated over a number of years, including:

• fresh, chilled and frozen beef cuts and some processed beef, from a current rate of 40 to 72 percent (duties to be eliminated within 15 years);
• pork and most process pork products, from a current rate of up to 30 percent (duties to be eliminated within 5-13 years); and
• most food preparations, from a current rate of up to 30 percent (duties to be eliminated within 3 to 5 years).

With Canadian agricultural and agri-food exports to South Korea currently facing an average tariff rate of 52.7%, exporters stand to gain considerably from the CKFTA.

Simplified Origin Procedures and Trade Facilitation

The CKFTA makes it easier and less costly for Canadian agricultural and agri-food companies to do business in the South Korean market. For example, the Agreement simplifies the process of clearing goods through South Korean customs in view of:

• clear and transparent origin procedures to administer effectively the rules of origin without creating unnecessary obstacles to trade;
• access to advance rulings on the origin or tariff classification of products;
• the promotion of border procedures automated through the use of information technology in order to expedite procedures for the release of goods; and
• an impartial and transparent system for addressing any complaints about customs rulings and decisions.

Reduced Non-Tariff Barriers

Canada and South Korea recognize the importance of ensuring that improved market access in the agricultural and agri-food sector is supported by robust sanitary and phytosanitary (SPS) provisions.

Under the CKFTA, an SPS committee allows experts to collaborate and consult on SPS measures to enhance cooperation and facilitate trade by discussing issues before they become problems. This benefits Canadian agricultural and agri-food exporters by helping to ensure that market access gains are not undermined by unjustified SPS trade barriers.

The Agreement also contains strong disciplines on technical barriers to trade, which help Canadian businesses reap the benefits of the Agreement and prevent market access gains from being undermined by a lack of transparency or unjustified trade restrictions. These strong disciplines are backed up by comprehensive bilateral dispute settlement provisions. Specifically, the Agreement:

• promotes and requires (in the absence of good reason not to) the use of internationally accepted standards that minimize duplicative certification and testing of products;
• improves transparency with respect to standards and regulatory development by ensuring that companies have access to information, such as laws, regulations and administrative rulings, that can affect trade;
• encourages cooperation in bilateral, regional and multilateral forums on ways to promote increased transparency; and
• establishes a committee (and prospectively a working group) whereby any standards-related concerns can be addressed and dealt with on a timely basis.

Other Key CKFTA Benefits for the Agricultural and Agri-food Sector

Investment

Canadian companies investing in South Korea benefit from the Agreement’s investment chapter provisions. These provisions provide Canadian investors with a more transparent and predictable investment environment, and help mitigate any risks associated with investing in South Korea. Among other things, the investment chapter provides protection against discriminatory and arbitrary treatment, protection from expropriation without prompt and adequate compensation, and access to independent international investor-state dispute settlement.

Intellectual Property

The Intellectual Property chapter in the CKFTA provides clear and transparent intellectual property rules that help protect Canadians that own copyright, patent or trademark rights in South Korea.

The Agreement also commits South Korea to protect the terms “Canadian Whisky” and “Canadian Rye Whisky” as geographical indications, ensuring that these terms remain exclusive to Canadian producers. The Agreement’s robust provisions on the enforcement of intellectual property rights help ensure that Canadian intellectual property rights holders can do business with confidence in the South Korean market.

For more information on the CKFTA and prospective benefits from this Agreement, please visit Canada-Korea Free Trade Agreement, or contact the Trade Commissioner Service in South Korea (seoul-td@international.gc.ca).