The Canada-Korea Free Trade Agreement: Benefits and Opportunities for the Canadian Forestry and Value-added Wood Products 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

• The South Korean government’s focus on green policies, including sustainable housing, presents opportunities for Canadian wood as a green building material that is safe, modern, and cost effective.
• South Korea imports 90% of the wood products used domestically. 
• South Korean consumers’ view of wood as a natural and healthy product that promotes wellness may contribute to increased demand for wood-frame housing.
• The South Korean high-end construction market presents good opportunities for Canadian building products, particularly rural or leisure housing featuring unique wood designs. 

Improved Market Access

The CKFTA provides enhanced market access for Canadian forestry and value-added wood products such as lumber, plywood and oriented strand board.

With the CKFTA’s entry into force on January 1, 2015, South Korea eliminated tariffs on nearly 58 percent of forest products and 85 percent of total trade. All remaining tariffs on Canada’s exports will be eliminated within 10 years.

For example, South Korean tariffs will be eliminated within three years on:

• spruce, pine and fir lumber, from a current rate of 5 percent.

Duties on the reminder of Canada’s exports will be eliminated within ten years, including:

• oriented strand board, from a current rate of 8 percent;
• fiber board, from a current rate of 8 percent;
• particle board, from a current rate of 8 percent; and
• plywood, from a current rate of up to 10 percent.

Tariff elimination provides Canadian forestry and value-added wood products with preferential access to the South Korean market, and levels the playing field vis-à-vis South Korea’s current free trade agreement partners.

Simplified Origin Procedures and Trade Facilitation

The CKFTA makes it easier and less costly for Canadian forestry and value-added wood products companies to do business in the South Korean market. For example, 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.

Reduced Non-Tariff Barriers

The CKFTA 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. Specifically, the Agreement:

• promotes and requires (in the absence of a 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; and
• encourages cooperation in bilateral, regional and multilateral forums on ways to promote increased transparency.

The CKFTA also establishes a subcommittee on trade in forest products (and prospectively a working group related to building products) to address trade issues in this area and facilitate cooperation and information sharing including in the areas of standards and regulatory issues. The Agreement also establishes a sanitary and phytosanitary (SPS) committee that enables experts to consult and collaborate on forestry-related SPS issues.

The strong disciplines on technical barriers (and other provisions) are backed up by comprehensive dispute settlement provisions, and help facilitate trade between Canada and South Korea.

Other Key CKFTA Benefits for the Forestry and Value-added Wood Products Sector

Investment

Canadian companies investing in South Korea benefit from the Agreement’s investment chapter provisions.  These provisions provide Canadian investors with a more transparent and predictable investment environment, and help mitigate any risks associated with investing in South Korea. Among other things, the investment chapter provides protection against discriminatory and arbitrary treatment, protection from expropriation without prompt and adequate compensation, and access to independent international investor-state dispute settlement.

Intellectual Property

The Intellectual Property chapter in the CKFTA 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.

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).