Forex news: USD/CAD: Canada-South Korea free trade deal lifts loonie
**iNVEZZ.com, Tuesday 11 March:**
Canada and South Korea have concluded negotiations on a free trade agreement that is expected to boost Canada’s exports of agricultural products and South Korea’s exports of automobiles, with planned tariff reductions scheduled to take place over a multi-year time frame.
This, the first trade deal Canada has struck in Asia, comes after more than nine years and 14 bargaining rounds in the making. The pact offers what Canada’s prime minister Stephen Harper today called an open door “to the lucrative Asia-Pacific market for Canadian businesses”.
The news has lifted the loonie against the greenback and at the start of the day’s North American trading the USD/CAD touched a four-day low of 1.1077. Right now, the currency pair is trading at around 1.1085, down 0.19 percent intraday.
Technical strategists at Scotiabank “expect today’s range in USDCAD to fall between 1.1050 and 1.1150”.
Under the FTA, South Korea will gradually eliminate tariffs on nearly 87 per cent of products coming from Canada. As an example, levies on Canadian beef and pork are to be progressively eliminated over a period of five to 15 years, depending on the product.
“Let me sum it up this way: much of the world’s economic growth over the next generation will be in Asia”, said Prime Minister Harper. “With this deal today, we have opened the door to opportunities that will boost Canadian prosperity now and for decades to come.”
The government hopes to see the agreement implemented “as soon as possible”.
For its part, Canada’s 6.1 percent tariff on imports of South Korean passenger cars are to be phased out in three annual cuts – with the first cut coming as soon as the agreement comes into force. South Korea’s eight per cent tariff on imports of Canadian-assembled cars would be eliminated as soon as the agreement was implemented, as well as South Korea’s three to eight per cent tariff on imports of Canada-origin automotive parts.
But not everyone is buying into the touted benefits of the new agreement.
Dianne Craig, CEO and president at Ford Canada, says in a statement that South Korea “will remain one of the most closed automotive markets in the world” under the new agreement. She cites recent similar deals between the Asian country and both the US and the EU, which have “failed to reverse this one-sided automotive trade flow”.
“No Canadian manufacturer”, believes Craig, “can compete with a market controlled by non-tariff barriers and currency manipulation”. She adds that the free trade accord does not address these critical issues.
Although Ford Canada has indicated its lack of enthusiasm for the pact, Prime Minister Harper observed today in Seoul that the company has access to the South Korean market through its US parent and the FTA allows “other Canadian sectors to have the same access that Ford already has”.