Freetrade: Don't Sweat the Small Stuff

In a Utopian world, all international trade deals would result in a 100% win - win success rate. But in our world, we look at the big picture and negotiate deals where the benefits far outweigh the negatives. The new Canada -- South Korean free-trade agreement is a great example of that principle.

After 10 years of hard-nosed bargaining, Prime Minister Stephen Harper and President Park Geun-Hye signed an agreement in principle that will eliminate 98.2% of tariffs on Canadian goods entering South Korea and eliminate 97% of tariffs on Korean goods entering Canada. The real winners are consumers and innovative companies looking for expansion into new markets. In Canada, the agricultural sector, construction industry, information technology, aerospace, transportation, consumer electronics, energy (particularly liquified natural gas) and financial services sectors all applauded the deal.

On the negative side, Dianne Craig, C.E.O. Ford Canada opposed the deal. She accused South Korea of using "non tariff barriers" and actively interfering in its currency to unfairly subsidize its exports (Kia and Hyundai vehicles) and protect its home market". She said South Korea is "one of the most closed automotive markets in the world". In fact, the evidence supports her position -- last year Canada imported 124,000 vehicles from South Korea while exporting only 2000. But the new deal should change that imbalance, otherwise why do General Motors Canada, Toyota Canada and Honda Canada support the agreement?

Vested companies, special interest groups, lobbyists and politicians of left, right, or centre can argue forever over details and flaws of this or any other free trade agreement. But when you step out of the swamp and look at the big picture, you'll usually find an enormous potential value. The Canada - South Korea free trade agreement gives us a foothold in the most important region in the World - the Asia/Pacific market. The Korean deal is the first in that area; now negotiators are looking at using it as a catalyst to open trade talks with Japan and 12 Pacific Rim nations.

Cracking those markets, in addition to last year's duty-free access to the massive European market and smaller players like Jordan, Columbia, Norway, Peru etc... will stimulate an enormous boost in private sector investment, production, employment and profitability. What a great time for Canada!