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Canada seeks free trade with S.Korea

11/26/2012 @ 7:55am

Canada is preparing to revive long-stalled free trade talks with South Korea as the federal government shifts its negotiating focus from Europe to fast-growing Asia.

A Canadian team is in Tokyo this week for the opening round of free trade negotiations with Japan and, according to government and industry sources, will also meet with South Korean officials in a bid to formally restart talks on a separate deal with the world 15th-largest economy.

The meetings come as International Trade Minister Ed Fast works toward a year-end deadline to wrap up a massive free trade deal with the European Union.

Reaching a final agreement with South Korea pits the interests of auto makers, who have long fought duty-free entry of Hyundai and Kia vehicles in their home turf, against Canada's agri-food exporters, who are losing market share to rivals in the U.S. and Europe, which already have free trade there. A deal with South Korea also highlights the complex links between the various trade deals now in play.

"The government is definitely looking for an opportunities to re-engage [with the South Koreans]," said Barry Sutton, vice-president of international sales for Maple Leaf Foods (MLFNF, MFI.T). Ottawa knows it has to "pick up its game" in South Korea, Mr. Sutton said.

Peter Clark, an Ottawa trade consultant who has worked with Canada's agri-food industry, said the federal government wants to finish what it started seven years ago. "There wasn't that much left to do," Mr. Clark explained.

The treatment of autos has been a sticking point in both the South Korea and EU talks. The five auto makers that manufacture vehicles in Canada are opposed to treaties that would eliminate Canada's 6.1% tariff on vehicles imported to Canada from South Korea and the EU.

That tariff applies to vehicles made in the EU, South Korea and Japan, but if Ottawa agrees to wipe it out in the EU and South Korea agreements, Japan-based manufacturers will be less competitive.

"The issue is: Don't disadvantage us in the marketplace," said David Worts, executive director of the Japan Automobile Manufacturers Association of Canada.

"We have reached a position where we are more or less equal," Mr. Worts said. "This would disadvantage us in the marketplace."

It would also send the wrong signal to Japanese auto makers about further investment in Canada, he noted.

The Canadian Vehicle Manufacturers Association, which represents the Canadian units of the Detroit-based auto makers, shares the Japan-based companies' concerns about the EU and South Korean deals, but extends that worry to a Canada-Japan free trade agreement.

CVMA president Mark Nantais said any deal must "completely open up the other market and systematically reduce all non-tariff barriers."

And so far, there are no indications that's happened yet in South Korea even though the country already has deals with the U.S. and EU.

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