The Canada-Korea Free Trade Agreement: Benefits and Opportunities for the Canadian Sustainable Technologies 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 help 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 US, 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 one of the world’s top importers of energy, relying on imports to meet 97% of its requirements. To reduce the country’s dependency on energy imports, the South Korean government has taken measures to promote energy efficiency and develop new and renewable energy sources.
• With the introduction of the Renewable Portfolio Standard, the Renewable Fuel Standard, and the Renewable Heat Obligation, the South Korean government aims to have renewable energy make up 11% of the country’s total primary energy consumption by 2035, up from 3% in 2012.
• The South Korea market offers opportunities for Canadian exporters 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.

Improved Market Access

With the entry into force of the CKFTA on January 1, 2015, South Korea eliminated tariffs on over 95 percent of industrial goods. All other tariffs, including on clean technology products (e.g. pumps, mixers, water filtration equipment, wind and solar generating sets, panels for solar water heaters, etc.), will be eliminated within 5 years. Clean technology products currently face duties of up to 8%, and tariff elimination will provide Canadian sustainable technology providers with preferential access to the South Korean market.

Simplified Origin Procedures and Trade Facilitation

The CKFTA makes it easier and less costly for Canadian sustainable technology 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.

Increased Access for Services and Improved Temporary Entry

Canadian sustainable technology service providers benefit from increased and more transparent and predictable access to the South Korean service market. For example, Canadian companies benefit from preferential market access in several sectors of export interest to Canada, including professional and environmental services.

The CKFTA also removes barriers to temporary entry for various professionals related to the sustainable technology industry, including engineers and physical scientists, who are fulfilling contracts in the South Korean market. 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.

These temporary entry provisions are the most ambitious that South Korea has ever negotiated, which will gives an advantage to Canadian companies over their U.S. and EU competitors.

Reduced Non-Tariff Barriers

The Agreement contains strong disciplines on non-tariff measures, which will 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 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 whereby any standards-related concerns can be addressed and dealt with on a timely basis.

Other Key CKFTA Benefits for the Sustainable Technology 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’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.

Government Procurement

The CKFTA 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 sustainable technologies exporters 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).