As Canada looks beyond the U.S. market to Asia in order to expand its export, technology and partnering horizons, the world’s top ranking country according to Bloomberg’s Innovation Index must not be overlooked.
As of January 1, 2019, 95% of Canada’s exports have benefited from duty-free access into the Republic of Korea (“Korea”) under the Canada-Korea Free Trade Agreement enacted in 2015 (CKFTA). The agreement presents a great opportunity for Canadian businesses seeking to expand abroad, as Korea is the world’s 10th largest economy and Canada’s ninth-largest importer. While many Canadian businesses have taken advantage of the agreement—exports to Korea have increased from $4 billion CAD in 2015 to $6.3 billion CAD in 2021—there is room for future expansion as Canadian businesses wishing to also access the potential of the Korean market can continue to take advantage of an economy with a GDP of $1.6 trillion USD.
In 2018, Korea’s individual consumer expenditure growth was $14,174 USD per capita and grew an average of 2.5% annually over the past five years. It is Asia’s third largest e-commerce market. The high disposable income per capita presents a strong consumer opportunity for Canadian businesses, including SMEs.
Korea has also emerged as a major player in the growing electric vehicle (EV) industry. According to SNE Research, Korea’s three main battery manufacturers – LG Energy Solution (LGES), SK Innovation and Samsung SDI – accounted for more than 30% of global EV battery shipments in the first half of 2021. In March 2022, LGES and Stellantis announced the largest single automotive investment in Canadian history with a new joint partnership to build a $5 billion CAD lithium-ion battery production plant in Windsor, Ontario.
In this report, which draws on research by the Government of Canada’s Trade Commissioner Service along with other sources, we explore the opportunities for growth in the commercial relationship and further collaboration between Canada and Korea. Taking into account the increased trade opportunities resulting from the CKFTA’s enactment, we look at what key sectors in the Korean New Deal (KND)—a 220 trillion won ($233 billion CAD) investment aimed at accelerating the adoption of digitalization and green technologies—offer in terms of business potential for Canada. We also examine Korea’s influence in Asia as a possible avenue of collaboration for Canadian business-- relationships in Asia which will no doubt be continued and expanded under Korea’s recently elected President Yoon Suk-yeol.
To prompt further action, at the end of the report we outline several suggestions for the Canadian government and Canadian businesses.