Canadian beef and pork exporters say Canada's free trade agreement with South Korea will help them regain market share in the Asian country, which has recently turned to supplies from the United States and other countries that struck deals first.
Canada and South Korea said earlier on Tuesday they had wrapped up talks on a long-delayed free trade deal, Canada's first in fast-growing Asia.
The pact is also expected to shore up demand for Canadian farm products like wheat, canola and rye whisky, all of which will see immediate tariff-free access upon implementation of the deal, likely next year.
Disputes about autos and beef held up the deal, which was nearly a decade in the making. South Korea was one of many nations to ban Canadian beef after a 2003 outbreak of mad cow disease, and one of the last to restore trade in 2012, removing a major irritant.
In the meantime, however, the United States' trade pact with South Korea came into force two years ago.
"Prior to the (Canadian) deal, we were losing market share. Quite frankly we were pushed out of the market," said Gary Stordy, spokesman for the Canadian Pork Council.
The recovery for meat exports can now begin, although the U.S. head start in the market will be difficult to overcome.
Canadian fresh and frozen beef is subject to a 40 percent tariff, 8 percentage points higher than beef from the United States. South Korea, a high-end beef market for steaks and short ribs, accepts only beef from cattle under 30 months of age from both countries.
The tariff on Canadian beef is due to fall over 15 years in equal annual steps, with the first cut occurring when the deal is implemented. If that happens in early 2015, it would coincide with the next scheduled reduction in South Korea's tariff on U.S. beef, ensuring the U.S. advantage does not grow even larger, said John Masswohl, director of government and international relations for the Canadian Cattlemen's Association.
Even so, the difference in tariffs will keep Canadian beef at a disadvantage for more than a decade, unless Canada is a winner at another bargaining table in the meantime. Masswohl said Canada will press at Trans Pacific Partnership talks to obtain faster tariff reduction from South Korea to match the U.S. rate.
South Korea was Canada's fourth-biggest beef export market in 2002, worth some C$40 million ($36 million) in annual sales. By last year, it had fallen to seventh place, with sales worth less than a quarter of the 2002 value.
Canada's largest beef plants are owned by U.S.-based Cargill Inc and Brazil's JBS USA Holdings Inc.
The South Korean tariff on Canadian pork, ranging from 22.5 to 25 percent by product, is due to fall over four years from implementation for frozen products. Tariffs will fall over four to 12 years for chilled pork.
The goal for pork exporters, who include Toronto-based Maple Leaf Foods Inc and Quebec's Olymel Ltd, will be to restore Canadian sales to South Korea to normal levels around C$129 million annually, up from last year's C$76 million, said Jacques Pomerleau, executive director of Canada Pork International, a marketing promotion agency.
Canada was the biggest pork supplier to South Korea in 2008, but has since fallen behind the United States, Germany and Chile, clinging to an 8 percent market share, Pomerleau said.
Within the agriculture sector, Canada will maintain its high tariffs on dairy, poultry and eggs, while South Korea will protect certain farm products such as rice.
DUTY-FREE WHEAT AND CANOLA
Canada's two biggest crops will gain fast access when South Korea scraps upon implementation its 1.8 percent to 3 percent tariff on wheat and 10 percent duty on canola.
Just as importantly, the pact makes it easier to resolve any future trade disputes over non-tariff issues, said Cam Dahl, president of the Cereals Canada industry group.
"As tariffs disappear, those who love protectionism will find other ways of closing borders," he said.
The deal looks to double Canadian exports to South Korea of canola, an oilseed crushed mainly for vegetable oil, from its current range of C$60 million to C$90 million annually, said Rick White, chief executive of the Canadian Canola Growers Association.
South Korea will phase out duties on canola oil, a more valuable product than canola seed, over three to seven years, depending on the type.
The deal may also give so-called pulse crops, such as beans, a bigger foothold in Korea. Canada, through companies like Alliance Grain Traders Inc, is a major exporter.
Tariffs on Canadian rye whisky and on ice wine will fall immediately upon implementation.