The Canada-Korea Free Trade Agreement: Benefits and Opportunities for the Canadian Mining Sector

The CKFTA is Canada's first FTA in the Asia-Pacific region. It strengthens Canada's presence in the important South Korean market and helps expand our economic footprint in this dynamic and vibrant part of the world. It also offers exporters, investors and service providers strategic access to regional and global value chains, and levels the playing field vis-à-vis their key competitors from the U.S., the EU, Australia and other countries that have concluded an FTA with South Korea. As such, the CKFTA provides a platform for Canadian companies to become increasingly competitive in the region. In terms of economic impact, the CKFTA is projected to boost Canada's GDP by $1.7 billion and result in an increase in Canada's exports to South Korea by over 30%.

Overview of Opportunities in South Korea

• South Korea has very limited mineral resources, relying on import to meet approximately 97% of its needs in mineral resources. It imports more than 46 kinds of minerals from over 100 different countries to meet its needs.
• In terms of metal and mineral resources, South Korea's is the world's third-largest importer of coal and the fourth-largest importer of iron ore. With regard to uranium, Canada supplies approximately two-thirds of South Korea's domestic demand.
• Although South Korea is Canada's sixth-largest market for commodities exports, there remains significant export growth potential as Canada does not rank in South Korea's top 10 suppliers of mineral resources and currently supplies a mere 10% of South Korea's coal imports.
• With South Korean firms eager to diversity their global supply sources for metals and minerals and to secure stable, long-term supply agreements, opportunities exists for South Korean investments into Canada's mining sector and for joint Canada-South Korea mineral development projects in third countries.
• Between 2011 and 2013, South Korea imported an annual average of $2.8 billion worth of metal and mineral products from Canada ($494 million for metals; $2.3 billion for mineral products).
• Products of export interest include unwrought and unalloyed aluminum, aluminum alloys, unwrought nickel, nickel powders, certain ferro-alloys, and cobalt powder.

Improved Market Access for Canadian Mining Exports to South Korea

The CKFTA significantly improves market access opportunities for Canada's metals and minerals sector by eliminating tariffs on all Canadian exports, including aluminum, iron, steel, nickel, non-ferrous metals, precious gems and metals, and other mineral products. As of January 1, 2015, 98.7% of tariff lines on metals and minerals became duty-free and all remaining tariffs will be eliminated within five years (current duties of up to 8%).

For example, with the CKFTA's entry into force on January 1, 2015, tariffs were eliminated on the following metals and minerals:

• gold  (duties of 3%);
• nickel and nickel products (duties of up to 5%);
• diamonds (duties of up to 5%); and 
• copper and zinc (duties of up to 8%).

Coal already benefits from duty-free access to South Korea and Canadian exporters will continue to reap the benefits of duty-free access.

Duty-free access gives Canadian metals and minerals exporters preferential access to the South Korean market, and levels the playing field vis-à-vis South Korea's current FTA partners such as the United States and the European Union.

Increased Access for Services and Improved Temporary Entry

Canadian service providers in the mining sector benefit from increased and more transparent and predictable access to the South Korean service market. For example, Canadian companies benefit from preferential market access in key areas of export interest, including foreign legal consultancy services, business services and services incidental to mining. This means that Canadian companies face reduced barriers when offering services in those sectors of the South Korean market.

The CKFTA also removes barriers to temporary entry for various professionals related to the mining industry, including engineers and physical scientists, to fulfil contracts in the South Korean market.  The Agreement facilitates the movement of business persons by removing barriers to entry such as economic needs tests, and ensuring new barriers are not introduced in the future, such as quotas and proportionality tests.

These temporary entry provisions are the most ambitious that South Korea has ever negotiated, which gives an advantage to Canadian companies over their U.S. and EU competitors.

Reduced Non-Tariff Barriers

The Agreement contains strong disciplines on non-tariff measures, which help Canadian businesses reap the benefits of the Agreement and prevent market access gains from being undermined by a lack of transparency or unjustified trade restrictions. These strong disciplines are backed up by comprehensive bilateral dispute settlement provisions. Specifically, the Agreement:

• promotes and requires (in the absence of good reason not to) the use of internationally accepted standards that minimize duplicative certification and testing of products;
• improves transparency with respect to standards and regulatory development by ensuring that companies have access to information, such as laws, regulations and administrative rulings, that can affect trade;
• encourages cooperation in bilateral, regional and multilateral forums on ways to promote increased transparency; and
• establishes a committee whereby any standards-related concerns can be addressed and dealt with on a timely basis.

Other Key CKFTA Benefits for the Mining Sector

Investment

The CKFTA's investment provisions provide investors from both countries with a greater certainty, transparency and protection for their investments, while preserving the full right of governments to regulate in the public interest. Among other things, the Agreement provides strong disciplines against discriminatory and arbitrary treatment, protection from expropriation without prompt and adequate compensation, and access to independent international investor-state dispute settlement. The CKFTA thereby encourages increased investment activities between Canada and South Korea.

Origin Procedures and Trade Facilitation

The Agreement simplifies the process of clearing goods through South Korean customs in view of:

• clear and transparent origin procedures to administer effectively the rules of origin without creating unnecessary obstacles to trade;
• access to advance rulings on the origin or tariff classification of products;
• the promotion of border procedures automated through the use of information technology in order to expedite procedures for the release of goods; and
• an impartial and transparent system for addressing any complaints about customs rulings and decisions.

Intellectual Property

The CKFTA's Intellectual Property chapter provides clear and transparent intellectual property rules that help protect Canadians that own copyright, patent or trademark rights in South Korea. The Agreement's robust provisions on the enforcement of intellectual property rights help ensure that Canadian intellectual property rights-holders can do business with confidence in the South Korean market.

Government Procurement

The Agreement provides Canadian suppliers of products and services preferential access to procurement opportunities of South Korean central government entities. Through the Agreement, Canadian suppliers of products and services benefit from secure and predictable access to covered procurement by South Korean central government agencies for contracts valued above 100 million South Korean Won (roughly $100,000). South Korea's overall government procurement market is estimated to be worth $105 billion annually.

Canadian mining exporters, investors and service providers thus stand to gain considerably from the CKFTA.  

For more information on the CKFTA and prospective benefits from this Agreement, please visit Canada-Korea Free Trade Agreement, or contact the Trade Commissioner Service in South Korea (seoul-td@international.gc.ca).