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Don Cayo: Not yet clear how much B.C. will gain from Korean trade deal

2016-02-27 11:16:15

VANCOUVER — Benefits from Canada’s free-trade deal with South Korea, barely two weeks old, are expected to grow slowly over time — eventually goosing the national economy by as much as $2.1 billion. But it is anyone’s guess how much of this will wind up in the pockets and purses of British Columbians.

Judging from recent history, it should be a lot. B.C. dominates Canada’s $3.4-billion-a-year export trade to South Korea, with our $1.8-billion total adding up to more than the value shared by all other provinces combined.

But when you analyze where the biggest gains from the deal are likely to come, as Ottawa consultant Dan Ciuriak and two associates have done in a just-published paper from the C.D. Howe Institute, B.C.’s traditional areas of strength aren’t likely to be particular advantages.

The most important commodity on B.C.’s export list is coal and coal products, worth $984 million in 2013, or 54 per cent of the province’s total. But coal’s future is hard to predict — it is constantly assailed by critics, and vulnerable to being replaced, at least in part, by the LNG that B.C. might or might not eventually ship to energy-starved Asia.

As well, even without a free-trade agreement, export sales to South Korea have been growing briskly, not only for coal, but also for B.C.’s other major products.

The value of coal sent to South Korea has quadrupled from $230 million a decade ago to $934 million in 2013. Meanwhile, mineral exports (mainly copper) have risen from $253 million to $388 million, agriculture and seafood shipments from $33 million to $54 million, and machinery and equipment plus fabricated metals from $18 million to $69 million. Forest products are a mixed bag, with pulp and paper down from $227 million a decade ago to $101 million, but other wood products are up from $66 million to $200 million. Only chemical products are unqualified bad news, down from $68 million to $12 million. (Jingliang Xiao's estimation)

The trade deal took nine long years to negotiate, thanks mainly, Ciuriak says, to hang-ups over autos and beef. But with Eastern Canada’s auto sector having now rebounded “as far as probable” and with the South Korean ban on Canadian beef rescinded, the agreement was finally signed last fall.

Not surprisingly, he sees Korean automobile manufacturers as the principle beneficiaries of the deal, although mainly at the expense of manufacturers in other countries, not Canada. And in this country, it is meat producers — especially beef and pork — who will be the winners. So the biggest impacts nationwide won’t make many waves in B.C.

Smaller, but positive, impacts will be felt in B.C.’s fishery and forest industries, he said, as moderate to significant tariffs on our exports disappear. Our all-important mining exports, however, already have low or no tariffs.

Consumers across the country also stand to benefit, of course, as they do from any agreement to free up trade. For example, the 6.1-per-cent tariff on cars imported from South Korea will be phased out over three to five years. As well, costly rules of origin for many products are simplified, which will foster manufacturing efficiencies.

Ciuriak’s analysis notes that neither Canada nor South Korea have made impressive inroads in providing services to each other, although this will become easier now that the deal is in place. The degree to which this will foster opportunities in B.C. is an open question, as is the future of two-way trade in IT, creative industries, life sciences, marine industries and more.

But an equally important benefit of the deal, the first Canada has reached with an Asian economy, might be how it helps our exporters hold on to the markets they already have rather than gain new ones. Earlier deals between South Korea and the EU, the U.S. and Australia would have put Canada at a disadvantage if we didn’t have something similar.

“So, as much as anything, it’s a defensive deal to claw back our lost preferences,” Ciuriak told me.


(Source: The Vancouver Sun)

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