Detail on Australia’s FTA agreement with Korea welcomed

Jon Condon, 18/02/2014

Trade and industry bodies have welcomed the Federal Government’s publication today of further details on Australia’s pending Free Trade Agreement with Korea.

The agreement will see tariffs reduced on a number of products in several farm sectors – including red meat, dairy, grains, sugar, pork and horticulture – over timeframes ranging from a few years to 15 years, providing significant value to Australian farmers.

Federal Trade Minister Andrew Robb said the agreement would eliminate or phase-out tariffs on 99.8 percent of Australia's exports to Korea.

As highlighted in this original FTA conclusion article on Beef Central, modelling by the Centre for International Economics suggests that the agreement would double Australia’s current levels of beef exports to Korea by 2030, expected to be worth an extra $846 million a year.

Conversely, the CIE modelling found that without the agreement, imports of Australian agricultural goods would decline by 29pc by 2030.

National Farmers Federation president Brent Finlay said the deal recognised agriculture as one of Australia’s export strengths, and would open opportunities for the sector in Korea.

“While the deal doesn’t deliver everything our agricultural sector had advocated for, it is a strong step towards securing Australia’s important trading future with Korea and in improving international market access for Australian agricultural goods,” Mr Finlay said.

Korea is Australia’s fourth largest market for beef, after China, the US and Japan, last year taking 144,000t of Australian beef (see Beef Central’s 2013 export summary here).

Since the US struck its own Free Trade deal with Korea at the start of 2012, Australian beef has been at an alarming and growing competitive disadvantage in the market.

Currently Australia is at an 8pc tariff disadvantage to the US in beef competition in Korea, and that differential grows by an additional 2.66pc each year, until an FTA with Australia is ratified. The tariff burden is beginning to weigh heavily on beef trade out of Australia.

If the deal is ratified before the end of 2014, the 8pc tariff rate will reduce to 5.4pc, until tariffs are phased out altogether over the next 15 years.

Negotiations for the KAFTA agreement concluded in early December 2013 after four years of intense dialogue. While the agreement is yet to be formally ratified, signature is scheduled for coming months.

“We thank the Minister for Trade, Andrew Robb, for brokering this deal,” NFF’s Brent Finlay said.

 “The NFF and our members are heavily involved in all of Australia’s trade negotiations regarding agriculture, so we understand how complex and challenging it is to secure an agreement.

“It is pleasing that Australia has managed to forge an agreement with Korea that has dealt with some sensitive agricultural issues. That said, this deal does not deliver outcomes for all agricultural industries, most notably rice,” Mr Finlay said. 

“We have long advocated for trade agreements to be all-inclusive, factoring in all of our important agricultural commodities, and this deal goes a long way towards this outcome.

There were plenty of opportunities ahead for the Government to continue its good work by building on gains made on the Korean deal in other negotiations, with the China, Japan and Trans Pacific Partnership negotiations underway, Mr Finlay said.

“These are all markets with enormous growth opportunities and where significant barriers to trade in agriculture still exist. Achieving strong outcomes for the Australian agricultural sector will be crucial,” he said.

Urgent ratification needed

Industry groups say the key now is for Australia to move swiftly to formally ratify the deal with Korea to minimise the tariff damage. Trade Minister Robb says he anticipates the agreement coming into force towards the end of 2014, and he is confident that the South Korean and Australian parliaments will support the agreement.

"They've got processes to go through, because of course, to make all these concessions to us, there are pockets of concern amongst industries which might be affected in Korea. But they've made a very conscious decision as a government, they are really leading much of Asia in terms of trade liberalisation and they're going to benefit as a country, I have no doubt, as a consequence,” Mr Robb said.

Other industry sectors were more measured in their assessment of today’s announcement.

Australian Industry Group chief executive, Innes Willox said while KAFTA was a welcome addition to Australia’s regional trade networks, it was a mixed result for some manufacturers.

“The big winners from KAFTA are agriculture and agribusiness and professional services and investment,” he said.

“For manufacturers, the agreement offers a more mixed result.  While Australian manufacturers will be able to export 88pc of goods to Korea tariff-free, the corresponding abolition of Australian tariffs on Korean goods will result in a big rise in competition from Korean imports in our local market.  This includes cars, auto parts, tires, textiles, clothing and footwear.” 

For fully assembled motor vehicles and items like tires, tariffs are abolished immediately the agreement enters into force, which is expected to be early next year. For sensitive areas such as automobile components, batteries and electrical instruments many tariffs will be phased-out over three to five years.

“The impact on Australian manufacturers needs to be monitored and factored in as the Government considers its approach to industry policy,” Mr Willox said.

  • The full text of the 1800-page Korea-Australia Free Trade Agreement can be accessed here.




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