Canada-Korea Economic Relations: Challenges and Prospects

Article excerpt

Much has been said about Korea's phenomenal economic transformation. In the span of a few decades, it went from being one of the poorest countries in the world to being the world's 13th-largest economy, largely due to its export-driven economic development strategy. In 1960, Korea's share of global exports was 0.03 percent. In 2007, it reached 2.7 percent. During the period from 1990 to 2006, exports increased 8.3 times, while domestic demand increased only 2.03 times. Korea's GDP has grown 746-fold and at an average of 6.8 percent since 1948, mainly as the result of hard work, careful planning, and cohesive economic goals and policies. The evolution in Korea's exports is also evidence of the resolve and ambitious goals of its leaders and people. By the end of the Korean War, Korea's most notable export was scrap metal from military tanks to Japan. About one third of the steel used to build the Tokyo Tower came from this source.

Korea has successfully transformed from a labour-intensive economy to one that is highly competitive, with advanced information and a technological knowledge base. The current Korean government's strategic objective is the continued technological enhancement of the nation's economic, industrial, and social activities. Its policy measures are designed to set technology as a driving force for the future growth of Korea, to strengthen core competence in technology, and to link technology-innovation development to society. Technological progression in Korea also facilitates its globalization process. Thus, the growth ofthe Korean economy continues to outpace that of other industrial countries; it is quickly becoming a wealthy country. Korea has long been referred to as one ofthe four Asian "tigers," along with Singapore, Hong Kong, and Taiwan. But today, as the world's i3th-largest economy, the nth-largest nation, and the seventh-largest energy consumer, Korea should no longer be considered a tiger.

Despite Korea's global economic standing, it is too often overlooked by Canadian policymakers. From the perspective ofthe value of trade in goods and services, as well as human exchanges, Korea is as significant as China and Japan. Yet Korea does not receive an adequate level of Ottawa's attention, particularly in terms of consideration as a commercial priority. Ironically, Korea doesn't always sufficiently recognize Canada, either. Canadian and Korean business people and policymakers arguably take their bilateral trade for granted.

There is no doubt that Korea and Canada are important trade partners in goods and even more in services. Korea is Canada's seventh-largest merchandise trading partner and the third largest in Asia behind China and Japan. Trade volume between the two countries has increased by an average of 10 percent every year since 1980. In 1980, total trade was equivalent to US $721 million. In 2008, two-way trade in goods between the two countries reached $9.8 billion. Canadian merchandise exports to Korea were worth $3.8 billion and Canadian merchandise imports were worth $6.0 billion.1

One of the attractive features of the Canada-Korea trade relationship is that these two countries have complementary industrial and trade structures. Canadian exports to Korea are largely commodity products, including mineral fuels and oils, wood pulp, nickel, machinery, and aluminum. Leading Canadian imports from Korea include electrical and electronic equipment, motor vehicles and parts, machinery, and iron and steel. From the traditional theory of comparative advantage perspective, this is a noteworthy point: a free trade agreement between Canada and Korea could be particularly mutually beneficial as each country's production and export specializations mean complementary comparative advantages.

With growing economic interdependency, Canada and Korea have been engaged in negotiations to reach an agreement since July 2005. In March 2008, the countries met for the 13th round of negotiations, followed by an intersessional meeting on agricultural, sanitary, and phytosanitary issues in May 2008. …