Canada: Opening The Canadian And South Korean Markets: The Canada-Korea Free Trade Agreement

Last Updated: May 1 2014
Article by Jean-Guillaume Shooner and Samuel Singer

On March 11, 2014, Canada announced that it had concluded negotiations with South Korea to enter into a bilateral free trade agreement. The Canada-Korea Free Trade Agreement (the "CKFTA") is Canada's first free trade agreement in the Asia-Pacific region. Once in force, this trade agreement with Canada's third-largest merchandise trading partner in Asia will significantly open Canadian and South Korean markets to bilateral investment and import/export opportunities.

The CKFTA is the ninth free trade agreement that the Canadian government has concluded in the last seven years, demonstrating the government's continuing commitment to reducing trade barriers. As indicated in a previous Tax Law update, Canada also recently reached an ambitious agreement-in-principle with the European Union on a Comprehensive Economic and Trade Agreement, which, once in effect, will liberalize trade between Canada and the European Union's 28 member countries.


With a population of 50 million and a GDP of US$1.1 trillion, South Korea's rapid growth over the last 30 years has positioned the country as the world's 15th largest economy. In parallel, during the course of the CKFTA negotiations, South Korea also concluded free trade agreements with the United States and the European Union, and a recent drop in Canadian exports to South Korea has been attributed to the free trade agreement in force between South Korea and the United States since 2012. The conclusion of CKFTA negotiations is therefore particularly welcome news for some sectors. The CKFTA will place Canadians on equal footing with their American and European competitors, and, in some circumstances, even provide Canadians with an advantage.

The Agreement

The underlying principle of the CKFTA is the removal of almost all discriminatory treatment of goods so as to facilitate free trade between Canada and South Korea. From its first day in force, the CKFTA will eliminate many of the existing duties on tariff lines between the countries, with 81.9 percent of South Korean duties and 76.4 percent of Canadian duties removed. Once fully implemented, duties between the two countries will be practically non-existent, with 98.2 percent of Canadian tariff lines and 97.8 percent of South Korean tariff lines eliminated.

As South Korean duties are currently notably higher than Canadian duties, the elimination of most of South Korean duties will be particularly beneficial to Canadian exporters. South Korean exporters targeting Canadian markets will also gain a significant advantage. Certain key aspects of the CKFTA are highlighted below on a sector-by-sector basis.

Agricultural and Agri-Food Products

Immediately upon implementation, South Korea will eliminate 86.8 percent of duties on tariff lines, and Canada will eliminate 50.7 percent. Over the course of a progressive implementation schedule, Canada will eliminate an additional 36.3 percent of duties on agricultural products, and South Korea will remove duties on a number of tariff lines, including beef and pork products. The elimination of tariffs on agricultural and agri-food products was a Canadian priority and should provide a boom to Canadian agricultural and agri-food product exporters in South Korean markets.

The Automotive Industry

A key priority in the CKFTA negotiations was the automotive sector, with both countries aiming to increase their vehicle and automotive parts manufacturers' access to the other country's markets. The result of extensive negotiations on this topic is that, from the date of the CKFTA's entering into force, South Korean tariffs will be eliminated on all automotive parts and on all light vehicles. Canada, on the other hand, will eliminate its tariffs on passenger vehicles, light vehicles, and automotive parts on different schedules for each respective category, over a period ranging from three to five years, with a significant proportion of Canadian tariffs for automotive parts being removed when the CKFTA comes into force.

The speedy elimination of Canadian tariffs has been the subject of great concern in the Canadian automobile manufacturing sector. Rules of origin concessions that allow Canadian manufacturers to classify manufactured products as Canadian even if they have non-Canadian constitutive parts are generally seen as concessions that offset the tariff elimination, as is an expedited dispute resolution process. The Canadian government is also emphasizing that the CKFTA's immediate elimination of South Korean tariffs offers Canadian exporters expedited access to South Korean markets compared to their U.S. and European competitors, whose trade agreements with South Korea only provide for a gradual reduction of tariffs. From the South Korean automotive industry's perspective, tariff reduction under the CKFTA will significantly increase access to Canadian markets, and will reduce the cost of imported automotive parts.

Forestry and Wood Products

South Korea is the Canadian forestry industry's fourth most important export destination, and this industry will benefit from the elimination of all tariffs on all forestry and wood products within ten years. Upon implementation, over 57 per cent of South Korean duties on forestry and wood product tariff lines will be eliminated, with an additional set of duties eliminated at three years and the balance thereafter.

Industrial Products

The CKFTA will eliminate duties on over 95 per cent of tariff lines on industrial goods as soon as it comes into force. At the five year point, an additional 4.2 per cent of tariff lines on industrial goods will no longer be subject to duties, with the balance eliminated within ten years. From both the South Korean and Canadian export and import perspective, this will result in a significant increase in the ease with which goods flow between the two countries.


The CKFTA ensures non-discriminatory treatment for Canadian investors in South Korea, including most favoured nation treatment, protection from expropriation, and a dispute resolution mechanism in the form of international independent arbitration. South Korean investment in Canada will continue to be subject to review under the Investment Canada Act, where applicable.


The CKFTA establishes mechanisms to facilitate movement between the two nations for contract service suppliers and independent professionals, as well as their spouses, and for business visitors, traders, investors, and transferees within the same company. Service providers will also benefit from a lock-in mechanism, whereby any future South Korean liberalization that benefits Canadian service providers will become an obligation "locked-in" under the CKFTA.

Financial service providers will gain increased investment protection, be ensured best treatment status on par with any other foreign country, and have access to special dispute resolution mechanisms.


For South Korean and Canadian exporters/importers, and foreign direct investors in both nations, the long-awaited CKFTA offers many potential benefits. Its progressive implementation mechanisms, however, create a shifting landscape with the tariff treatment of goods changing quickly over the course of brief time intervals. To maximize access to the CKFTA's benefits and avoid unanticipated tariff treatment, the CKFTA will need be navigated carefully. More generally, both South Korean and Canadian investors interested in taking advantage of the CKFTA should ensure that they have a comprehensive understanding of the new agreement and its effect on their business strategy.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

Similar Articles
Relevancy Powered by MondaqAI
In association with
Practice Guides
by Mondaq Advice Centres
Relevancy Powered by MondaqAI
Related Topics
Similar Articles
Relevancy Powered by MondaqAI
Related Articles
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Mondaq Free Registration
Gain access to Mondaq global archive of over 375,000 articles covering 200 countries with a personalised News Alert and automatic login on this device.
Mondaq News Alert (some suggested topics and region)
Select Topics
Registration (please scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of

To Use you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions