Canada- South Korea Free Trade Pact

"thebigbossyboss" (thebigbossyboss) 03/15/2014 at 18:37 • Filed to: None

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Hello Oppo

Given the amount of hot wheels trading that goes on round here, I am surprised noone has written anything about the Canada-South Korea free trade pact that was signed this week.

Now then, onto business. A big reason this deal was pushed for was the agricultural sector. Canadian farmers had wanted this for quite a while. However, this is Oppo, so we don't care about that. (sorry farmers)

We do care about the implications for the car industry however.

(Pictured: Hyundai Tiburon...the coolest Hyundai!)

Firstly, let's start with what this deal will actually do:

1) Immediately eliminate (upon implementation of the agreement) the 8% tariff that South Korea charges on Canadian made vehicles

2) Allow Canada to export US safety spec OR E.U. safety spec vehicles to South Korea (hereafter referred to as Korea). (Remember Chrsyler makes a crap ton of Lancia Voyagers in Canada). Pretty much all mass produced cars in Canada are either E.U Spec or U.S spec, with no volume cap on vehicles.

3) Eliminate the 3-8% tariff on Canadian car parts upon implementation.

4) Eliminate, over 3 annual consecutive cuts the 6.1% tariff Canada charges on Korean vehicles. Mostly Hyundai's and Kia's.

The upshot for jalop's is cheaper Velosters. (Photo from DM car.net) I don't really know any other Hyundai's or Kia's I lust after.

What was the reaction?

Although the farming community, forestry community, and others think the agreement is great, Ford Mo Co is pissed:

(Maybe they're pissed because even with tariffs, the Hyundai Pony was the best selling car in Canada in 1983

Let's review what Ford said about Canada-E.U free trade:

"Ford is a company built on free trade. Throughout our history, Ford has supported deals that provide an opportunity to increase effective two-way trade among all partners.

Expanding trade opportunities is fundamental to Ford's business plan and the EU market represents a significant global market for our vehicles."

http://www.newswire.ca/en/story/12446…

And about Korea?

The following is from the CBC:

http://www.cbc.ca/news/politics/…

Dianne Craig, the Ford Motor Company of Canada's president and CEO said in a statement that South Korea "will remain one of the most closed automotive markets in the world" under the new deal. It cites recent agreements between South Korea and both the U.S. and the European Union, which have "failed to reverse this one-sided automotive trade flow."

Craig says the South Korean government has continued to protect its home market and subsidized its exports through non-tariff barriers and active intervention in its currency.

"No Canadian manufacturer can compete with a market controlled by non-tariff barriers and currency manipulation," she writes, adding the new agreement does not address these key issues.

Canada's Prime Minister, the Right Honourable Stephen Harper said this about Ford:

(Taken from same CBC article)

"Ford supported the Korea-U.S. free trade agreement …. What we are doing here is allowing other Canadian companies and other Canadian sectors to have the same access that Ford already has," Harper said in Seoul.

However, GM, Honda and Toyota whom all manufacture vehicles in Canada are optimistic. Honda and Toyota though are optimistic for reasons unrelated to Canada.

The Japanese Automobile Manufacturers Association of Canada [JAMA Canada], which represents Toyota Motor Manufacturing Canada and Honda Inc., lauded the decision. That was, in part, because JAMA Canada was hopeful the conclusion of the South Korean free trade agreement would accelerate trade talks with Japan that would see a 6.1% tariff on vehicles produced in Japan eliminated. General Motors Co., which has operations in South Korea and Canada, said the pact with South Korea would be a boon for consumers, leading to more competition and choices.

"We will continue to work closely with the Canadian and Korean governments to ensure the agreement is implemented in a way that brings the full benefit of fair competition to customers in both markets," the company said.

Taken from:

http://business.financialpost.com/2014/03/11/for…

Of course, we must remember, GM owns what was Daewoo, and has 5 factories in Korea. Ford does not. Although they did once sell rebadged Kia's, which we all know is a rebadged Kia Pride.

There was also this thing, another Ford Kia Venture:

Here's my take: Ford is wrong. Firstly, Canada is already flooded with Kia's and Hyundai's. Last year 124,000 South Korean cars came to Canada. Only 2000 Canadian cars were exported to South Korea. The flood has already happened. 40% of those Hyundai and Kia vehicles were imported duty free from the U.S.

I think Ford opposes this deal, because it's marginal to them. However to their arch rival GM, it's a lot better, because it gives them free trade between their 5 Korean factories and their 3 plants in Canada.

Let me know your thoughts below Oppo!! Sorry for all the words. Maybe I should go back to school and become an economist, I do love this stuff.

Luc - The Acadian Oppo > thebigbossyboss 03/15/2014 at 18:55

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Now why do I have the feeling that the cars won't be cheaper? I'm sure the Korean auto manufactures will just pocket the extra profit. I sure hope I'm wrong but do you remember what happened when we signed the free trade agreement with China?(no offense to the Chinese public, you are good people)

jmart > thebigbossyboss 03/15/2014 at 19:01

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I'm more interested in the Canada-EU free trade deal. It will be easier and cheaper to import Euro cars from the US!

promoted by the color red > thebigbossyboss 03/15/2014 at 19:05

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My aunt had one of these that she later traded in on a 2nd-gen Acura Integra. My mother remembers how much of a shitbox the Pony was to drive.

thebigbossyboss > Luc - The Acadian Oppo 03/15/2014 at 19:10

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I don't really know what you are talking about. "remember what happened when we signed a free trade agreement with China"?? We don't have a free trade agreement with China.

thebigbossyboss > jmart 03/15/2014 at 19:12

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Yeah.

http://oppositelock.jalopnik.com/the-auto-indus…

thebigbossyboss > promoted by the color red 03/15/2014 at 19:49

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Oh yeah. It was a terrible terrible car. What makes this picture mind boggling is this car sports a recently registered ontario plate from probably 5 years ago. How did someone keep one 30 years?

Luc - The Acadian Oppo > thebigbossyboss 03/15/2014 at 23:24

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I'm not really into economics so I may of worded it wrong but didn't we sign an agreement about 10-15 years ago and now everything is made in China.

regardless the point of my initial comment was that I doubt that the 6% savings will be passed on to the consumer.

thebigbossyboss > Luc - The Acadian Oppo 03/16/2014 at 15:37

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The agreement Canada signed quite a while ago, was with the USA & Mexico. (Although it was signed about 30 years ago now). It is called NAFTA. The manufacturing moving over to China really doesn't have much to do with NAFTA.

However, given over 40% of Hyundai's and Kia's are imported to Canada duty free from the USA, I agree this will probably only affect the price of a $20,000 car by a few hundred bucks.