"Canada Also Striving for Market Diversification... Exports Must Expand to Asia and Europe" [De-Globalization? New Order!] ⑬

What Should Korea Do?
Canada Has Withdrawn Most Retaliatory Tariffs Imposed by the U.S.
Implementing Policies to Fundamentally Transform Trade Structure
Korea Should Also Respond with Export Diversification Strategies
Multilateral Cooperation

"We need to reduce our dependence on the United States and China and diversify our exports to Asia, North America, Europe, and other regions. Canada is also striving to diversify its export markets for goods and energy to various countries, including Asia and Europe."

Hyun Jungsik, a professor at the University of Alberta in Canada and an international trade expert, stated this in a recent written interview with Asia Economy regarding how to respond to U.S. tariff impositions and the ongoing U.S.-China conflict. Professor Hyun predicted, "It is unlikely that Canada will impose high tariffs on countries without free trade agreements, as Mexico has done."

―What is the atmosphere like in Canada regarding the U.S. tariffs? Unlike the European Union, Korea, and Japan, Canada has not yet reached an agreement.

▲Canada has already withdrawn a significant portion of its retaliatory tariffs against the United States. At the same time, the country is implementing various policies aimed at fundamentally transforming its trade structure over the mid to long term by diversifying its export markets for goods and energy. Negotiations with the United States are also ongoing. Of course, there are frequent reports that several manufacturing sectors, including the automobile industry, have been severely impacted by the U.S. tariffs. The unemployment rate is also quite high. However, in addition to the tariff issue with the United States, various other issues such as housing shortages, healthcare, and immigration policy are also intertwined. There is a certain level of social consensus that Canada should prioritize its own interests in policymaking.

―Mexico imposed a 50% tariff on countries without FTAs, such as Korea, China, and Japan. Is there a possibility that Canada will do the same?

▲That possibility is low. Mark Carney, the Prime Minister of Canada, is an economic expert who previously served as the governor of both the Bank of Canada and the Bank of England. He is well aware of the negative side effects that excessive protectionist policies can have on the domestic economy. Canada is responding by diversifying its previously U.S.-dependent trade structure to include Europe and Asia, while also focusing on eliminating inter-provincial trade barriers to revitalize the economy.

―The ongoing U.S.-China conflict continues to pose risks. Are there any countermeasures?

▲This is a highly important yet challenging issue. First and foremost, a policy of export diversification should be pursued. In particular, it is necessary to reduce dependence on major export destinations such as the United States and China and to diversify exports to Asia, North America, and Europe. Canada has an astonishingly high level of trade dependence on the United States. As a result, it has suffered significant damage from trade friction with the U.S. Currently, Canada is also making efforts to diversify its export markets for goods and energy to Asia, Europe, and other countries. Examples include the construction of energy pipelines and the expansion of ports for liquefied natural gas (LNG) exports.

―Korea is in a situation where it must navigate between the United States and China, not only in terms of diplomacy but also in industry.

▲The United States is a long-standing ally of Korea. It is necessary to maintain good relations with the U.S. in both diplomatic and industrial aspects from a mid- to long-term perspective. In particular, ongoing exchanges and cooperation with the U.S. are essential in areas such as security and advanced technology. However, from Korea's perspective, the vast export market in Asia is also extremely important. I believe it is also necessary to continue maintaining cooperative relationships with China and various Asian countries by utilizing multilateral free trade agreements such as bilateral FTAs or the Regional Comprehensive Economic Partnership (RCEP).

―Some suggest that Korea should seek solutions through globalization excluding the United States, such as through RCEP or the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP).

▲Pursuing globalization without the United States could pose mid- to long-term risks. In particular, the United States is a core market for Korea's major industries, including automobiles, batteries, and semiconductors. Rather than considering a trade order that excludes the U.S., it is more advantageous to diversify exports and supply chains to other regions in addition to the United States. The RCEP has already come into effect, and Korea is a participant. However, since the agreement focuses on tariff reductions, it does not provide as strong economic integration (in terms of easing non-tariff barriers or regulatory standardization) as individual FTAs or the CPTPP. Nevertheless, it is expected to be somewhat effective in achieving supply chain and export diversification in the Asian market.