The Canada-Korea Free Trade Agreement: Benefits and Opportunities for the Canadian Services 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
- Canada’s services exports to South Korea - which include transportation, financial, and travel services, and commercial services such as financial, management, engineering and other professional services - are worth more than $750 million a year, and there is much potential for growth.
- The South Korean market offers areas of opportunities for Canadian exporters, including in professional services (e.g. foreign legal consultancy, commercial education and training, and research and development), financial services, and services incidental to air transportation and the sustainable technologies and information and communication technology (ICT) sectors.
Improved Market Access for Canadian Service Providers
With the CKFTA, Canadian service providers benefit from increased and more transparent and predictable access to the South Korean service market. The Agreement provides a level playing field for Canadian service suppliers against key competitors from the U.S. and the EU. For example, Canadian companies benefit from preferential market access in key areas of export interest, including professional services (e.g. foreign legal consultancy services, commercial education and training, and research and development); environmental services; business services; services incidental to manufacturing and mining, and wholesale trade.
This means that, under the CKFTA, Canadian service providers face reduced barriers and are better able to take advantage of key market opportunities in South Korea. For example, depending on the sector, some of the benefits Canadian service providers can enjoy include the removal of commercial presence requirements, limits placed on the number of suppliers, and requirements to enter into joint ventures.
Under the CKFTA, South Korea is legally bound to maintain the negotiated level of liberalization for the sectors and activities covered in the Agreement and cannot reduce that level by introducing new barriers in the future. The Agreement also ensures that if South Korea were to further liberalize its market for foreign service providers or investors in the future, this would be applicable to and locked in for Canadian companies as well.
Specific Services Outcomes under the CKFTA
Legal services
The CKFTA will establish enhanced market access for Canadian firms providing foreign legal consultancy services. Having achieved parity with the Korea-U.S. FTA (KORUS), Canadian law firms offering foreign legal consultancy services will enjoy the same level of access to the South Korean market as their U.S. competitors. Under the CKFTA, Canadian law firms will automatically benefit from any further liberalization of South Korea’s regime in the area of foreign legal consultancy.
With the CKFTA’s entry into force on January 1, 2015, South Korea now allows Canadian firms to establish representative offices (Foreign Legal Consultant (FLC) offices) in South Korea. Canadian attorneys can also provide legal advisory services regarding laws of the jurisdiction in which they are licensed and public international law as an FLC in South Korea.
On January 1, 2017, South Korea will allow FLC offices to enter into specific cooperative agreements with South Korean law firms in order to be able to jointly deal with cases where domestic and foreign legal issues are mixed, and to share profits derived from such cases.
On January 1, 2020, South Korea will allow Canadian law firms to establish joint venture firms with South Korean law firms. This is subject to certain requirements such as restrictions on the proportion of voting shares or equity interests of the joint venture firms.
Financial services
The CKFTA’s financial services provisions help protect existing investments and encourage further competition in the financial sector. Canadian financial service providers that have investments in South Korea benefit from enhanced investment protection and access in the South Korean market on par with the best treatment provided to any other foreign companies. The Agreement also includes new commitments to facilitate cross-border trade, including in the areas of portfolio management services, data processing operations and transfers of information that facilitate efficient capital allocation by Canadian financial institutions in the region. Additionally, the CKFTA includes special dispute settlement rules for financial services and prudential carve out that safeguards the right of governments to take prudential measures aimed at protecting the stability and integrity of the financial system. The Agreement also encourages financial sector officials in Canada and South Korea to communicate with one another in order to prevent or resolve unnecessary barriers to entry into the financial services sector.
Commercial education services
Under the CKFTA, Canadian education service providers benefit from enhanced market access to South Korea’s commercial education and training market. This includes private teaching institutes for adults related to lifelong and vocational education, lifelong adult education facilities, including education facilities annexed to workplaces, non-governmental organizations, schools, and media organizations, educational facilities related to the development of knowledge and human resources and, online lifelong education facilities.
Engineering services
The CKFTA provides a framework to facilitate the negotiation of Mutual Recognition Agreements (MRAs), which enhance professional recognition of Canadian professionals in South Korea and facilitate closer collaboration from both countries in international markets. Within this framework, engineering services have been identified as a key priority for the development of an MRA in the future.
Environmental services
The South Korean market offers opportunities for Canadian companies in the areas of carbon capture and storage, waste to energy and waste management, water treatment, hydrogen and fuel cell electricity generation, energy storage, and smart grid technologies. By improving legal certainty and transparency, the CKFTA supports Canadian environmental services providers in taking advantage of these opportunities.
Other professional services
South Korea offers preferential access in other areas, including research and development services, as well as services incidental to air transportation, oil & gas, mining, manufacturing, and the maintenance and repair of equipment. The CKFTA also provides preferential access to key areas of Canadian ICT export interest such as services incidental to the gaming and IT solution development industry.
Mutual Recognition of Professional Qualifications Facilitated
The CKFTA facilitates the creation of Mutual Recognition Agreements (MRAs) between the relevant bodies of each Party. More specifically, Canada and South Korea have agreed to endeavour to ensure that the relevant bodies in their respective territories meet within 12 months of the entry into force of the CKFTA to develop MRAs in the following key sectors: engineering services, architectural services, and veterinary services. MRAs in other professional sectors may be developed, as appropriate, and as determined by our respective relevant bodies.
Improved Temporary Entry
With respect to labour mobility, the CKFTA’s contains the most ambitious temporary entry provisions that South Korea has ever agreed to in any of its FTAs, thereby giving an advantage to Canadian companies over their competitors.
The Agreement facilitates the movement of business persons by removing barriers to entry, such as economic needs tests, and ensuring new barriers are not introduced in the future, such as quotas and proportionality tests. The Agreement also provides preferential access for Canadian independent professionals, such as architects, engineers and management consultants, as well as broader coverage for Canadian firms sending professionals to South Korea to fulfill service contracts, for instance in the science, engineering or information technology fields.
The CKFTA provides access for the following category of persons: Business Visitors; Intra-Corporate Transferees; Traders and Investors; Professionals; and Spouses.
The CKFTA does not define the duration of stay for each category. The Agreement defers to the respective Parties’ domestic regimes, and therefore, the duration of stay is subject to change. Currently, the allowed duration of stay for each category is outlined in the table below:
| Category | Canada | South Korea |
|---|---|---|
| Business Visitors | Up to 6 months | Up to 90 days |
| Intra-Corporate Transferees | Up to 7 years for Executives and Managers; Up to 5 years for Specialized Knowledge Workers; Up to 3 years for Management Trainees. | Up to 2 years |
| Traders & Investors | Duration of one year for initial work permit; renewable in 2-year incremental extensions. | Up to 5 years, depending on the investment activity. |
| Professionals | Generally one year (renewable) | Up to 5 years for various professionals including professors, consultants and researchers. |
| Spouses | Open work permit that corresponds to the duration of the spouse's work permit for each category listed above except for the Business Visitors category. | Open work permit that corresponds to the duration of the spouse's work permit for each category listed above except for the Business Visitors category. |
For more information on temporary entry for business persons under the CKFTA, including explanations for each category and work permit durations, please visit:
For more information on temporary entry for business persons in South Korea, please visit:
Beyond Border Measures
Transparent and objective treatment by regulatory authorities is essential to the success of both Canadian and South Korean service providers. The CKFTA contains provisions on domestic regulation that will facilitate trade in services by ensuring that services providers applying for authorization to provide services be informed of the decision concerning their application within a reasonable amount of time. The applicant is also entitled to receive information concerning the status of the application, without undue delay. More broadly, Canada and South Korea have affirmed their commitment to ensuring that domestic regulatory measures related to licensing and qualification requirements and procedures are clear, publicly available, objective and impartial.
Other Key CKFTA Benefits for the Services Sector
Telecommunications
The CKFTA ensures that all players in the telecommunications market have fair access to networks and services, and ensures that regulators act impartially, objectively and in a transparent manner. The Agreement’s telecommunications chapter contains regulatory disciplines to ensure that the regulatory frameworks in Canada and South Korea support the competitive delivery of telecommunications services and do not otherwise detract from the market access commitments taken under the chapters on investment and cross-border trade in services.
E-Commerce
The Electronic Commerce chapter in the CKFTA seeks to facilitate electronic trade between Canada and South Korea. In particular, both countries are obliged to refrain from applying customs duties, fees or other charges to digital products transmitted electronically. As well, the chapter seeks to facilitate electronic trade by seeking to address concerns that users of electronic commerce have when participating in online transactions. For example, provisions on the protection of personal information and on consumer protection intend to build trust and confidence for users to engage in electronic commerce.
Government Procurement
The Agreement provides Canadian suppliers of products and services preferential access to procurement opportunities of South Korean central government entities. Through the Agreement, Canadian suppliers of products and services benefit from secure and predictable access to covered procurement by South Korean central government agencies for contracts valued above 100 million South Korean Won (roughly $100,000). South Korea’s overall government procurement market is estimated to be worth $105 billion annually.
Canadian service providers thus stand to benefit considerably from the CKFTA.
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).
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