Canada and Korea: Can the Bilateral Commercial Relationship be Deepened?

Abstract

This paper examines the actual and potential scale of the Canada-Korea bilateral relationship across a number of dimensions, including trade in goods and services, investment, technology flows, new media (digital) connections, tourism, education (student exchanges), and corporate linkages through global value chains. It uses the gravity model of trade as a conceptual framework to assess how well the relationship is performing, using Australia - the economy most similar to Canada in terms of the characteristics usually found in gravity models and, moreover, in terms of comparative advantage - as a benchmark for achievable performance, given differences in size and distance and controlling to the extent possible for relative proximity to other economies (multilateral resistance). It finds that the Canada-Korea relationship is broadly consistent with the size of, and distance (geographic and cultural) between, these economies, but that there is at least a prima facie case that the relationship has been under performing in a number of areas, reflecting a widening gap between Australia’s and Canada’s level of commercial interaction over time.

Keywords: Canada, Korea, Australia, bilateral relationship, gravity model

JEL Classification: F14