CIIT Committee Report

I.        INTRODUCTION

In November 2007, the House of Commons Standing Committee on International Trade agreed to study Canada’s ongoing free trade negotiations with the Republic of Korea (referred to in this report as South Korea, or simply Korea). These negotiations are believed to be entering their final stages and, for this reason, the Committee felt that an examination of the potential impacts of a free trade agreement (FTA) on the Canadian economy would be timely.

The desire to study this subject was motivated by two considerations. The first was concerns over ongoing job losses in the Canadian manufacturing and forestry sectors. While the Canadian labour market on the whole is strong — the unemployment rate in 2007 was the lowest in over 30 years — there are significant pockets of weakness in those specific sectors. Since 2004, employment in manufacturing has declined by 10.8%, while the number of jobs in forestry and logging has trended downward since the expiry of the Softwood Lumber Agreement in 2001. Several Committee members wanted to ensure that Canada did not conclude a free trade agreement with Korea that would exacerbate the challenges already facing those industries.

The second, and related, consideration was to consult with business and labour groups to assess their expectations of free trade with Korea. Committee members wanted to gain a strong understanding of the potential benefits and drawbacks of an agreement, as well as of the specific concerns of Canadian business and labour stakeholders. With this information, the Committee would be in a good position to evaluate the benefits and shortcomings of any trade deal with Korea, should an agreement be finalized.

A more immediate objective of this study, however, was to ensure that the Government of Canada did not sign a trade deal that was not in the best interests of Canadians. Indeed, views on the potential impact of Canada-Korea free trade were mixed. While some witnesses believed that an FTA would be an overall benefit to Canada, others identified a number of specific issues and concerns that, in their view, could be sufficient reason to abandon free trade talks altogether.

This Committee hopes that Canada will not sign an agreement that harms the country; it would be illogical to do so. However, this is not to dismiss the very real concerns expressed by witnesses over issues like market access, non-tariff barriers (NTBs) and the importance of a level playing field vis-à-vis Canada’s major competitors in Korea.

It is our view that a well-designed free trade agreement has the capacity to deal with these issues. Indeed, we hope that Canada will not sign any agreement that fails to do so. Given the fact that trade negotiations with Korea could be approaching the endgame, our report is timely; as long as talks are ongoing, the concerns expressed by witnesses can be addressed at the negotiating table. We believe that the recommendations included in this report will help the Government of Canada — and by extension Canadian trade negotiators — to achieve the best deal possible. That is, a deal that ensures that the specific needs of Canadian businesses, from diverse sectors of the economy, are reflected in the final text of the agreement.

This report begins with a brief summary of the status of trade negotiations at the time the report was tabled in the House of Commons, as well as an overview of Canada’s economic relationship with South Korea. The following section summarizes the case for free trade with Korea. Section IV examines the concerns expressed by some witnesses about the potential impact of free trade. The report concludes with a series of recommendations to the Government of Canada on steps that must be taken to ensure that any trade deal maximizes the potential benefits to Canada.