Canada-South Korea Free-Trade Deal Shows Small Gains for Both Sides: Report

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By Bill Curry, The Globe and Mail Jan 20, 2015

Canada’s free-trade deal with South Korea will hurt the domestic auto sector, but the pain will be softened by the fact that Canadians will have a bit more money to buy new cars, according to the first detailed analysis of the trade pact.

The Canada-Korea Free Trade Agreement took effect on Jan. 1, and the C.D. Howe Institute is releasing a report on Thursday that estimates the expected impact of the deal over the next 20 years.

Overall, the research concludes the deal will show small and comparable gains for both sides. Canada will get an additional $3.1-billion in gross domestic product in contrast to $2.3-billion for South Korea. However, South Korea will do slightly better than Canada when the effect is measured as a percentage of GDP, according to the institute.

The report projects production will decline by $114-million for auto makers in Canada because cheaper imports will be available from South Korea, which will increase its exports to this country by $1.2-billion.

“The impact on Canadian [auto] production is negative, but small,” said Dan Ciuriak, the report’s lead author and a former deputy chief economist for the Department of Foreign Affairs. The report says the agreement will boost economic growth in Canada, leading to higher incomes that will allow consumers to spend more on goods, including vehicles.

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