OTTAWA — Canada’s free-trade deal with South Korea will have major long-term economic implications for Canada — but it could also solidify the prime minister’s legacy heading into the 2015 election, and stem criticism the Conservatives are big talkers and poor finishers on trade.
For Prime Minister Stephen Harper, the free-trade agreement announced Tuesday — along with the Canada-European Union deal struck last fall — may also further define his political brand vis-à-vis NDP Leader Tom Mulcair and Liberal Leader Justin Trudeau, who are still scrambling to establish their economic credentials.
It may also help divert attention from the portrait of Harper his critics have painted based on the Senate scandal and his controversial new elections act. The Conservatives are hoping the successive trade deals (and a return to balanced budgets in 2015) will help position the prime minister as a strong economic manager and not the undemocratic bully his political rivals suggest.
“Harper has built and maintained an edge (over the other leaders) on economic management. That in all likelihood is flowing from this kind of (trade) activity,” said Tony Coulson, vice-president with the polling firm Environics Research Group.
“In the big picture, most Canadians are onside with (free trade) and in particular this kind of thing plays with the Conservative base.”
Even the opposition parties noted Tuesday that they support fre trade with Korea if it opens new markets for Canadian companies.
But the NDP also said that simply signing a free-trade agreement doesn’t make it a good deal for Canada, and that the devil was in the details, which will only be known once the agreements are tabled in Parliament. Liberal trade critic Chrystia Freeland said her party also supports free trade and is “broadly supportive” of the Canada-Korea deal, although the party hopes the government allows a healthy debate.
Opposition parties may have little choice but to follow Harper’s lead on the free-trade push.
The trade agreement with Korea is Canada’s first in the Asia-Pacific region and could be a catalyst to completing trade deals with Japan and the Trans-Pacific Partnership of 12 Pacific Rim nations over the next few years.
The Korean deal follows an agreement-in-principle last October on a trade deal with the EU. The two trade pacts will give Canada preferential, duty-free access to a massive EU market and a foot in the door in the critical Asia-Pacific region.
“This is a win for Stephen Harper. He hasn’t had a lot of wins in the last year,” Ian Lee, assistant professor at Carleton University’s Sprott School of Business in Ottawa, said Tuesday.
“It gets our toe in the most important region in the world,” he said.
For Harper, the latest deal — along with the EU trade agreement — is also a chance to help put to rest the notion that the Conservatives can’t close important free-trade agreements (negotiations with Korea dragged on for nearly a decade).
The larger deals also follow years of the Conservative government settling for trade agreements with a number of smaller economic players, such as Panama, Jordan, Colombia, Honduras, Peru and the European Free Trade Association (Iceland, Liechtenstein, Norway and Switzerland).
It may also help the prime minister as he looks to drive home that the Conservatives are positioning Canada for a changing global economy and are the only party that can be trusted to run the country.
South Korea is the world’s 15th-largest economy and the fourth-largest in Asia. The country is Canada’s seventh-largest merchandise trading partner and its third-largest in Asia (after China and Japan).
Now, federal officials believe Japan will be interested in completing trade negotiations with Canada so as not to lose any competitive advantage in the global economy.
But while the Canada-Korea deal has broad support from a number of sectors, it’s also sparking some concern in seat-rich Ontario from political and business leaders such as Premier Kathleen Wynne, a Liberal, and Dianne Craig, the CEO of Ford Motor Company of Canada.
Ford Motor Company says it cannot support the agreement because it won’t reverse what it calls a “one-sided automotive trade flow.” In 2013, approximately 124,000 South Korean-built vehicles were imported to Canada, according to Ford, while 2,800 Canadian-built vehicles were exported to South Korea.
NDP international trade critic Don Davies said his party is worried the deal could have devastating impacts on the Canadian auto and manufacturing sectors.
“The Conservatives take a very simplistic, ideological approach that simply signing an agreement is a positive economic development,” Davies said. “That’s not the case. That’s why the details matter.”
Freeland, speaking for the Liberals, said in a statement, “The prime minister has a responsibility to lead this national discussion in an open and transparent manner. ”
Key facts about the South Korea deal:
- South Korea gross domestic product: $1.1 trillion.
- Canada gross domestic product: $1.8 trillion.
- Canada-South Korea merchandise trade in 2012: $10.1 billion.
- Average South Korea tariffs on Canadian goods: 13.3 per cent.
- Average Canadian tariffs on South Korean goods: 4.3 per cent.
- Tariff lines to be eliminated by South Korea once deal fully implemented: 98.2 per cent.
- Tariff lines to be eliminated by Canada once deal fully implemented: 97.8 per cent.
- Tariff lines to be eliminated by South Korea on first day of implementation: 81.9 per cent.
- Tariff lines to be eliminated by Canada on first day of implementation: 76.4 per cent.
- Compiled by the Canadian Press.
