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Did the US Take a Bite Out of Canada-Korea Trade?

On last night’s The National, Terry Milewski introduced the Canada-Korea trade deal as follows:

The truth is that Canada is a latecomer to free trade with South Korea. The European Union and the United States both got there first, and their free trade deals took a big bite out of Canada’s exports. So, the government really had to catch up.

It is true that trade deals with South Korea came into force in mid-2011 for the EU and in early 2012 for the US, but how did they affect Canadian exports?

In US dollars, Canada’s international exports edged up from $451.6 billion in 2011 to $458.1 billion in 2013. Within those totals, exports to South Korea fell from $5.1 billion to $3.3 billion – a big bite out of this small trade flow, but a nibble of less than half of one percent of Canada’s worldwide exports.

And 2011 is hardly a representative base of comparison. In no other year has Canada ever sold more than $3.7 billion of merchandise to South Korea. Last year’s $3.3 billion was pretty typical of our annual exports to South Korea since 2006.

Furthermore, US exports to South Korea also declined from $43.4 billion in 2011 to $41.6 billion in 2013. It is not as if the US is grabbing Korean market share at Canada’s expense. At most, advocates of the free-trade deal could argue that sales to South Korea decreased at a slower pace from the US than from Canada.

The Canada-Korea deal is touted as a boon to Canadian agriculture. But US agricultural sales to South Korea fell from $5.1 billion in 2011 to $3.2 billion in 2013. Interestingly, American agricultural exports to South Korea under a free-trade deal almost perfectly mirrored total Canadian exports to South Korea without a deal. Given the overall decline of North American sales to South Korea in the past couple of years, we cannot blame the Korea-US deal for the drop in Canadian exports.

As I argued on Monday’s Power & Politics, the Canada-Korea deal threatens to deepen our trade deficit by facilitating more imports from South Korea while depriving Canada of the industrial-policy tools that South Korea used to develop its manufacturing sector. The technical summary posted yesterday confirms that the deal will expose Canada to more investor-state disputes, as my union had warned.

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