Officials dispute Flaherty's optimism for South Korea free-trade deal

March 26, 2013

Canadian and South Korean officials are playing down Finance Minister Jim Flaherty's assertion that a free-trade deal between the countries is imminent.

Mr. Flaherty, who is on a four-day trip to drum up business in Asia, said Monday after a speech in Hong Kong that Canada is "very close" to wrapping up an agreement with South Korea.

It now appears that Mr. Flaherty was either mistaken or overly optimistic about the outcome of the talks, which have dragged on for nearly eight years as South Korea completed free-trade agreements with numerous other countries, including the United States and the European Union.

Canadian and South Korean officials insisted Tuesday that a deal is, at best, months away, with progress stalled by the change of government in Seoul and the unresolved issue of Canada's 6.1-per-cent duty on Hyundai and Kia cars.

"Until that new government is in power, not a lot is going to happen," a Canadian official close to the talks said bluntly. "To say we're very close isn't quite true. We're trying to lock in [an agreement] in the coming months. It's not days or weeks."

Newly elected President Park Geun-hye was only inaugurated Feb. 25. Since then, she's faced a battle with parliament over her plans to restructure the government, a political showdown that kept her from naming her full cabinet until last week. As part of the restructuring, responsibility for trade negotiations was passed from the former Ministry of Foreign Affairs and Trade to the newly created Ministry of Trade, Industry and Energy.

South Korean media spent Tuesday swatting down as inaccurate Mr. Flaherty's upbeat description of the state of negotiations. An unnamed official in South Korea's trade ministry was quoted by the state-run Yonhap news agency as saying Mr. Flaherty's assessment was "a far cry" from the truth.

"Currently, there is no formal discussion," the official said, adding that formal negotiations, which began in 2005, had not been held since 2008.

"There are currently a number of live issues, and both sides have their own circumstances to address before opening the negotiation," Yonhap quoted the official as saying. "The issues have not been narrowed, and there is no schedule set for discussion."

A spokesperson for Mr. Flaherty declined to clear up the contradiction, referring all questions about what the Finance Minister said earlier in the week to Trade Minister Ed Fast. The Prime Minister's Office also referred questions to Mr. Fast's office.

Adam Taylor, Mr. Fast's communications director, acknowledged that "some important work remains to be done" on the free-trade deal. "Once the transition is complete, we look forward to working with Korea's new government in order to continue to grow this important trade and investment relationship," Mr. Taylor said.

By all accounts, the same stumbling blocks that have existed since 2005 remain today. Canadian auto makers have resisted the idea of duty-free access for South Korean-made Hyundai and Kia cars, while South Korea has been reluctant to drop tariffs on Canadian pork and beef.

The U.S. and Japanese auto makers with plants in Canada have pressured Ottawa to reject any deal that doesn't tackle the non-tariff barriers in Korea, complaining about recent government investigations into alleged price collusion by foreign auto makers.

Canadian pork producers have watched in frustration as U.S. rivals, armed with lower tariffs, have pushed them out of the once-lucrative market. Canada faces tariffs of up to 25 per cent on pork exported to South Korea. By 2016, most U.S. pork will enter that country duty-free.

Canadians in South Korea shared the assessment that it's unlikely there has been substantive progress in recent months.

"There's a disconnect between Seoul and Ottawa," said Mike Weisbart, vice-chairman of the Canadian Chamber of Commerce in Korea.

In the wake of President Park's battle to restructure the government, "it's hard to see her relishing the idea of pushing a trade deal through the National Assembly," Mr. Weisbart added. He said the Canadian business community badly wants Mr. Flaherty's remarks to prove correct, since the U.S.-South Korea free-trade deal that came into effect last year has left Canadian firms at a crippling competitive disadvantage.

"An FTA is pretty sensitive in Korea. Especially with a new government, I think it's hard," said Randy Kwon, beef sales manager in Seoul for Cargill Korea Ltd. "In my industry, we really want to see some progress on an FTA because we're exporters of Canadian beef. ... [But] I don't think there is any progress."

With a report from Bill Curry

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