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Report On Business Which companies will benefit from the South Korean trade deal?

Nova Scotia-based Tangier Lobster Co. stands to benefit when tariffs are dropped on Canadian lobster exported to South Korea.

Tangier Lobster Co.

The Canada-South Korea free-trade agreement, which took effect on Sept. 22, is set to help Canadian companies boost sales to the East Asian country's 50 million citizens, many of whom have plenty of disposable income.

The agreement will eventually put Canada on an equal footing with the European Union and the United States, which already have trade pacts with the country.

Among the Canadian sectors that stand to benefit are seafood, wine and forestry products.

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Feeling the pinch

About 15 Canadian and 15 American companies ship lobster to South Korea, but since 2012, tariffs on American lobsters were dropped, and their exports skyrocketed.

"The Americans are 2-1/2 years ahead of us, but better late than never," said Stewart Lamont, managing director of Nova Scotia's Tangier Lobster Co. Ltd.

In 2013, $905-million worth of Atlantic Canada lobsters were exported, making them Canada's most valuable seafood export.

But Canadian lobsters entering South Korea carry a tariff of 20 per cent. The new agreement will see nearly 70 per cent of fish and seafood lines become duty-free within five years and all remaining duties erased within 12 years.

Mr. Lamont says Canada's harder-shelled, meatier lobster is superior to the U.S. product and less costly than Australia's "rock lobster" variety.

South Korea has a big appetite for seafood and a vibrant restaurant culture and is a "wonderful place to do business," said Mr. Lamont, who has 13 years of experience doing business there.

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In 2012, South Korea ranked ninth as an export destination for Canadian fish and seafood, with those products worth $44.8-million, and nearly $17-million of that from lobster.

Canada has been a small player in South Korea's voracious seafood marketplace, says Geoff Irvine, executive director of the Lobster Council of Canada. With the trade pact in force, he predicts Canadian lobster exports will rise, assisted by storage technology that allows live lobsters to be held for months, and a reputation for a sustainable product from a pristine environment.

In May, Korean Air Cargo launched weekly lobster shipments to Incheon, South Korea, from Halifax's Stanfield International Airport. The trip takes 38 hours for boxes filled with live lobsters and surrounded by ice.

A toast to the future

South Koreans aren't known for drinking wine, but as the health benefits of red wine filter into the country's psyche, Canadian vintners are smiling.

"South Korea has a real interest in red wine," said Miles Prodan, president of the B.C. Wine Institute. "There is a marked shift from hard liquor toward wine."

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In 2012, just 1 per cent of all alcohol consumed in South Korea was wine. But from 2002 to 2012, the value of imported wine rose to $147-million (U.S.) from $28-million, Mr. Prodan said.

Canada has been a small player, with just 37,000 litres exported to the country in 2013, and much of it ice wine.

The trade pact, which will eliminate the 15-per-cent tariff on Canadian wine over three years, will allow Canada to compete with exporting nations that already enjoy free trade agreements with the country, Mr. Prodan said. The top five wine exporters to South Korea are France, Chile, Italy, the United States and Australia, all of which have signed pacts.

But raise a glass to Canada's ice wine: All import tariffs are gone now that the agreement has been ratified.

At Quails' Gate Winery, near Kelowna, B.C., director of international sales Peter Wille says he will visit Asia next year to promote Canada's premium wines.

"When you walk into a liquor store there you see a French, Portuguese, Italian [wine] section. It's not often you see a Canadian section," Mr. Wille said. "Our philosophy? Show that Canada is a recognized appellation."

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Stacking hopes for wood products

South Korea is Canada's fourth-biggest export market for wood products. In 2012, Canada sent $504-million worth there.

While Canadian pulp and paper exports to South Korea have been duty-free since 2004, Canadian wood carried tariffs as high as 10 per cent, making U.S. wood more attractive, said Joel Neuheimer, the Ottawa-based director of international trade with the Forest Products Association of Canada.

With the trade agreement in force, all South Korean tariffs on forestry and value-added wood products have been eliminated.

By province, B.C. is by far the largest exporter of wood to South Korea, followed by Alberta and Quebec, Mr. Neuheimer said.

Creating new Korean markets for wood products will require creativity, he said. "Canadian companies should be making deliberate efforts to introduce more residential and non-residential wood construction," Mr. Neuheimer said.

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The wood products association doesn't have an office in the country, but the staff at Canada's Foreign Affairs office or its South Korean embassy are valuable contact points, he said.

The agreement

  • South Korea is Canada’s seventh-largest trading partner, with two-way commerce totalling about $10.8-billion in 2013.
  • With 50 million people, South Korea is the world’s 15th biggest economy.
  • This trade agreement is Canada’s first in the Asia-Pacific region.
  • Once the pact is in force, Canadian exports to South Korea could jump 30 per cent.
  • The agreement puts Canada on equal footing with the United States and European Union, which already have free-trade agreements with the Asian nation.
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