Partial Equilibrium Analysis of the Impact of a Canada - Korea FTA on the Canadian Automotive Industry
This analysis looks at the impact on domestic light vehicle production of eliminating the light vehicle tariff of 6.1 percent on South Korean imports.
A priori expectations concerning the impact of trade liberalization on the domestic auto sector are that the effects on the industry would be modest for the following reasons:
- Small size of the tariff: 6.1 percent
- Small market share of Korean imports: 8.1 percent volume, 4.0 percent value
- Narrow segment of the market in which Korean imports are represented: small car, 64 percent; middle car, 9 percent; cross utility vehicle, 22 percent; sports utility vehicle, 3 percent; van, 3 percent 1. Korean producers currently don't sell vehicles in large car, luxury car, and pickup segments, which represent 30 percent of Canadian production.
- Korean vehicles are more likely to displace other imports, as total imports represent 74.1 percent of sales by unit and 75.8 percent by value.
- The export orientation of most of Canadian production (85 percent) by value. As a result, only 7,946 of the 51 012 employees in assembly are tied to domestic sales.
Footnotes
1 Based on Ward's Segment Group Classification. (Return to text.)
