OTTAWA, Ontario Canadian steelmakers could benefit indirectly from a free-trade agreement (FTA) between Canada and South Korea, sources told AMM sister publication Steel First.
The FTA is Canadas first in the Asia-Pacific region, the countrys foreign affairs department said (amm.com, March 12).
Steelmakers in Canada said the industry would welcome the move if government policy supports greater investment and equal footing in the sector and its key customers.
While the deal is a "significant step in the governments plan to expand market access that can benefit Canadian industrial exporters," it will need "effective provisions (and) related policy measures to ensure fair trade and increased investment in Canada," the Canadian Steel Producers Association (CSPA) said.
"Otherwise, the potential benefits of FTAs can be eroded by market-distorting trade that unfairly injures domestic producers," the CSPA said, adding the government should adopt policies that encourage Koreas automotive producers to invest in Canada, creating Korea-owned manufacturing plants.
South Korea doesnt have any production facilities in Canada, CSPA president Ron Watkins told Steel First.
Without Korean investment in Canada "we just allow these products to come in with no stipulation that they have to invest and employ people here," according to Angelo DiCaro, staff representative of the Canadian Auto Workers (CAW) union.
The union is concerned that the accord isnt reciprocal due to significant nontariff barriers impeding Canadian auto sales to Korea, he said, noting that less than 100 vehicles were exported to Korea in 2013, while imports from the Korean Peninsula topped 100,000 vehicles.
But with proper government support, the deal could boost Canadian assembled vehicles and auto parts exports to Korea, Watkins said. "We estimate the automotive sector claims about one-third of annual steel production," he said. "The stronger the auto industry, the bigger the investments in the sector, the bigger opportunity there is to sell steel to them. In 2012, the industry produced about 14 million tonnes of steel."
The deal will eliminate Korean tariffs on all light vehicles (8 percent) and all auto parts (ranging from 3 percent to 8 percent).
Meanwhile, Canada will drop tariffs on all light vehicles (6.1 percent, to be eliminated within three or five years); all automotive parts (69.8 percent of tariff lines to be duty-free on implementation); and all remaining tariffs to be phased out within three to five years (up to 8.5 percent).
Most direct steel trade is already duty-free in Canada, and steel exports to Korea are small because Korea already has a strong steel-producing industry, Watkins said.
"We strongly support this most recent milestone of the Canadian governments active trade agenda," Mining Association of Canada president and chief executive officer Pierre Gratton said.
Canadas iron and steel imports from Korea were valued at $254.45 million in 2012, while exports of the products to the country were about $49 million.
A version of this article was first published by AMM sister publication Steel First.