Korean Free Trade Costs Jobs
Canadian Loonie Up, Exports Down While South Korean Imports Gain
A proposed free trade agreement with South Korea appears to have only one international trade winner - and it's not Canada.
After South Korean and Canadian negotiators met in Ottawa in late October, Canadian Auto Workers (CAW) union president Buzz Hargrove proclaimed that an impending Korean free trade will cost thousands of Canadian manufacturing jobs.
Korea’s proposed free trade deal with the U.S. already faces stiff resistance. Democratic presidential candidate John Edwards fears that Korean free trade will take away full-time salaried positions. America’s beleaguered automotive industry will be particularly hard hit.
Together with municipal leaders from Ontario manufacturing cities including Windsor, St. Catharines and Woodstock, Hargrove implored Canada’s three major political parties to reject any Korean trade deal by denying approval in Parliament.
Free Trade Cost-Benefit Analysis
Hargrove bases his position on a CAW analysis that projects that an international trade treaty with Korea will cost Canadians 33,000 jobs.
Canadian Trade Minister David Emerson refuses to comment on Korean free trade talks scheduled to resume at the end of November. Perhaps this is because the CAW’s cost-benefit analysis appears to have some merit.
The study reviews the impact of Canada's five prior free trade agreements. Also projected is the difference by which South Korean exports will outpace Canadian imports under the free trade treaty.
With a population approaching 50 million, fast-growing Republic of Korea is now the world’s tenth largest economy. South Korea is Canada’s third-largest trading partner from the Pacific Rim group of countries, trailing only China and Japan. According to Statistics Canada, South Korea generated 11% of Canadian exports to and 12% of imports from the Pacific Rim in 2003.
South Korean Shipments to Canada
The following figures show the top five Korean commodities exported to Canada in 2003.
- Vehicles and parts … C$1.5 billion (30% of total Korean exports to Canada)
- Electrical machinery and equipment … $1.4 billion (27%)
- Non-electrical machinery and mechanical appliances … $834 million (16%)
- Rubber products … $146 million (3%)
- Primary and semi-manufactured iron and steel … $141 million (3%).
The above commodities represent almost 80% of South Korean exports to the Great White North. Automotive exports have gained the most, up nearly 500% since 1994.
Canadian Export Sales to Seoul
In 1993, Canada was Korea’s 8th largest supplier of imports. Due to competition from emerging markets like China, Canada dropped to 23rd place in 2003.
The top five Canadian shipments to Seoul amount to 59% of total Korean imports.
- Wood pulp … C$458 million (24% of total Korean exports to Canada)
- Coal … $209 million (11%)
- Aluminium … $174 million (9%)
- Organic chemicals … $148 million (8%)
- Electrical machinery and equipment … $142 million (7%).
Korean imports from Canada were down more than 40% in the ten years since 1993. For example, grains accounted for almost 20% of Canadian exports to South Korea in 1994. By 2003, Canadian grain had lost significant market share to Australian, Chinese and Ukranian exporters. Canadian grain now represents only 2% of total Canadian shipments to Korea.
Free Trade Darkens Canada’s Job Outlook
Due to a stronger Canuck dollar, Canadian products are becoming more expensive on the international trade stage. Analysts expect Canada’s exports to South Korea to significantly lag the growth of imports from Korea.
South Korea’s top exports from Canada are in the low-employment resource sector like mining and lumber. In contrast, South Korean shipments to Canada are job-rich product sectors including automobiles, computer, televisions and electronic circuits.
Under the proposed free trade treaty, Canada will be hit with the costly double whammy of a rising trade deficit with Korea coupled with a heavy loss of high-paying manufacturing jobs to the Pacific Rim.
Sources for this Article
This article presents independent calculations and insights based on data drawn from the CIA World Factbook, Statistics Canada article ‘Tiger by the Tail? Canada’s Trade with South Korea’, Toronto Star article ‘Trade deal to cost jobs: CAW’ (October 24, 2007).
