Mr. Burney said earlier that we cannot have a surplus everywhere, or in every sector and with every country. Obviously that's true, but from a policy perspective, you don't want to go out and do things that make your deficits worse; that simply makes no sense in terms of Canadian interests. It is inevitable, given the precariously unbalanced position we're starting from with Korea, that a free trade agreement will make those imbalances even worse.
There are also two slides on pages 4 and 6 of the handout illustrating the growth of our imports from and our exports to Korea over the last decade, and they show how we arrived at that imbalance.
It is particularly evident that since the Korean financial crisis, or the broader Asian financial crisis in 1997, they have turned to exports aggressively to promote their economic recovery, while keeping a very firm cap on imports with a variety of techniques, including macroeconomic policy levers; active management of the exchange rate, which is very different from how we do it in Canada; taxation policies to shift consumer spending away from imported products; and of course various non-tariff barriers.
Our exports to Korea today are smaller than they were in 1997, despite a decade of economic recovery in Korea. There is no evidence whatsoever that a free trade agreement along the lines of the NAFTA model will change that.
In the auto industry, in particular, automotive imports from Korea have accounted for 70% of the growth in Korean imports since 1997. It's not just small vehicles any more. It's important to recognize that the Korean products are significant competitors in at least nine distinct segments of our market—not just compact cars, but mid-size cars of increasing quality, cross-over utilities, and minivans. So the impacts will be felt across a range of products that compete directly with what we make in Canada.
Meanwhile, our automotive exports to Korea, which were never big to start with, have fallen by over 90% since 1997. That is despite Korean tariff reduction. Korean tariffs were at 50% in the eighties; they reduced them to 20% later in the eighties, and then to 8% in 1995, yet this has had no visible impact on our exports to Korea—and neither will a free trade agreement.
Let me just quickly conclude by referring to a couple of Mr. Burney's comments earlier. One is in terms of the rationale for doing this. I've heard this several times, and I heard it from him again today: the main reason to do it is that we haven't done one in a while. With all due respect, we need a better reason to go and negotiate an agreement than the fact that we haven't done one for a while.
In particular, if we look at the record of the bilateral free trade agreements that we have negotiated—since the one with the U.S. in particular—every one of them, other than the U.S. agreement, has led to a much larger increase in our imports from the country involved than in our exports. The worst case is the Chilean free trade agreement. We actually export less to Chile today than we did before we signed a free trade agreement, yet our imports from Chile have more than tripled. If that record is replicated in the Korean case, it would be a disaster for the Canadian auto industry and many other sectors.