JOINT PRESS RELEASE

THE HON. TONY ABBOTT MP, PRIME MINISTER THE HON. ANDREW ROBB AO MP, MINISTER FOR TRADE & INVESTMENT AUSTRALIA CONCLUDES FTA NEGOTIATIONS WITH THE REPUBLIC OF KOREA
Australia has concluded negotiations for a Free Trade Agreement (FTA) with the Republic of Korea, our third-largest goods export market and fourth-largest trading partner. Building stronger trading relationships in Asia was a key election commitment and part of the Coalitions plan to build a strong, prosperous economy. As a result of the Agreement, tariffs will be eliminated on Australias major exports to Korea and there will be significant new market openings in services and investment. The FTA translates to higher economic growth and more jobs for Australians. As part of the FTA, tariffs of up to 300 per cent will be eliminated on key Australian agricultural exports such as beef, wheat, sugar, dairy, wine, horticulture and seafood, as well as resources, energy and manufactured goods. The FTA will also provide new market opportunities in Korea for Australian services in education, telecommunications and a range of professional services including financial, accounting and legal services. The benefits of the FTA start flowing immediately and will be long-lasting. Independent modelling shows the Agreement would be worth $5 billion between 2015 and 2030 and boost the economy by around $650 million annually after 15 years. Agricultural exports to Korea will be 73 per cent higher after 15 years as a result of the FTA and overall exports to Korea will be 25 per cent higher resulting in the creation of more than 1700 jobs. Australian automotive suppliers would benefit from the immediate removal of tariffs as high as eight per cent; the wine industry from tariffs of 15 per cent and Australian wheat growers, potato farmers and cherry, grape and mango producers would all stand to benefit. The Agreement also opens up opportunities for creative collaboration between Australia and Korea with producers able to develop screen content for the international marketplace. The FTA secures Australias position in a major market where competitors like the United States, European Union and ASEAN countries are already benefitting from preferential access.
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Minister Robb and his Korean counterpart, Trade Minister Yoon, concluded negotiations earlier this week. The Agreement will be signed and come into operation following domestic approval processes in Australia and Korea. Bilateral trade between Australia and Korea reached $32 billion in 2012 and this agreement will help take that to a new level. Australia and Korea are natural partners and this FTA will bring our economies and societies even closer and underpin a strong relationship for years to come.

5 December 2013

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AUSTRALIA AND KOREA FTA (KAFTA) KEY OUTCOMES

Korea is Asias fourth-largest economy with a population of 50 million people. It is Australias third-largest export market and our fourth-largest trading partner. The Korea-Australia Free Trade Agreement (KAFTA) will benefit Australian exporters, importers, workers, consumers and investors by opening trade and investment markets between Australia and Korea. With one in five Australian jobs linked to trade, this agreement will provide an important boost to Australias economy. SECURING AUSTRALIAS COMPETITIVE POSITION IN KOREA The FTA secures Australias competitive position in this major market where our competitors such as the United States, European Union and ASEAN countries are already enjoying preferential access. Independent modelling1 shows the impact on Australia from the US and EUs FTAs with Korea would be significant, reflecting Korean importers choice to source beef, sugar and dairy products from these markets. If we do not proceed with an FTA, our exports to Korea would be 5 per cent lower by the time the US and EUs agreements are fully implemented (by 2030). Korean imports of Australian agricultural goods would decline by 29 per cent by 2030, with mining and manufacturing exports also declining, by one and seven per cent. BENEFITS OF KAFTA The results of independent modelling show the FTA will be worth over $5 billion in additional income to Australia between 2015 and 2030 and will result in an annual boost to the economy of around $653 million after 15 years of operation. After 15 years of the FTAs operation by 2030 our exports to Korea would be 25 per cent higher than they otherwise would have been. By 2030, exports of agricultural goods to Korea would be 73 per cent higher than otherwise, contributing to a total 5 per cent increase in Australias total agricultural exports. Mining exports to Korea would be 17 per cent higher and manufacturing exports would be 53 per cent higher. Increased exports under the FTA would create over 1,700 jobs on implementation.

AGRICULTURE The FTA will make a difference at the farm gate. From mango exporters to macadamia and potato growers, Australian farmers will enjoy improved access to the Korean market. Tariffs of up to 300 per cent will be eliminated on key Australian agricultural exports including beef, wheat, sugar, dairy, wine, horticulture and seafood. Australias beef exporters will be big winners from the FTA. Australia is the largest supplier of beef to Korea but our major competitor, the US, is already benefiting from beef tariff cuts from its 2012 FTA with Korea. In beef, the US currently has a 5.4 per cent advantage. The KAFTA will help Australian exports compete on a more level playing field and will enable Australian beef producers to capitalise further on Koreans growing taste for Australian beef. Australian cheese producers will gain duty-free access to Koreas growing middle class market. Australian cheese exports currently face Korean tariffs of up to 36 per cent.

Performed by the Centre for International Economics

More information on Australias trade and investment relationship is available from DFAT www.dfat.gov.au/geo/rok/brief_index.html and Austrade www.austrade.gov.au/Republic-of-Korea-profile/default.aspx More information on the Korea-Australia Free Trade Agreement is available at DFATs FTA website www.dfat.gov.au/geo/rok/fta/.

Australian sparkling, red and white wines are currently subject to a tariff of 15 per cent but wine from the US, EU and Chile enter duty free. The FTA will provide a boost to the wine industry, whose exports to Korea have been steadily decreasing since 2007. With this deal, Australian wines have the best chance to take advantage of a growing market. Korea is already Australias biggest export market for sugar and exporters will enjoy immediate elimination of Korean tariffs on commencement of the agreement. Other key beneficiaries of the FTA include Australian wheat growers, potato farmers and cherry, table grape and mango producers.

SERVICES The FTA will provide significant new market openings for Australian service suppliers, particularly in education, telecommunications, financial, accounting and legal services. This agreement represents some of the best services outcomes Australia has secured in any FTA. For example, the agreement will allow Australian law firms access to Koreas legal consulting services market by permitting Australian firms to establish representative offices in Korea and Australian lawyers to advise on Australian and public international law. Within two years, Australian law firms will be permitted to enter into cooperative agreements with local law firms and within five years to establish joint ventures and hire local lawyers. An Audiovisual Co-production Agreement will deliver new commercial opportunities for our creative industries with an audio-visual co-production agreement facilitating film and television collaboration.

RESOURCES AND ENERGY Resource commodities and simply-transformed manufactures accounted for three-quarters of the value of Australias merchandise exports to Korea in 2012 (approximately $18 billion). While many Australian mineral and energy exports to Korea enter duty free, Korea applies tariffs of up to eight per cent on a range of priority resource products. Under KAFTA, Korea will eliminate tariffs for all resources products over time (10 years). Some of the resources products that will benefit from KAFTA include crude petroleum, natural gas, unwrought aluminium, gold, propane, ammonia, sea salt, unwrought lead, cobalt mattes and articles and titanium dioxide. MANUFACTURED PRODUCTS Korea applies tariffs of up to 13 per cent on a range of manufactured products. Under KAFTA, Korea will eliminate tariffs for all manufactured products (not including energy and mineral resources or forestry products) within seven years. Some of the manufactured products that will benefit from KAFTA include pharmaceuticals, including vitamins; motor vehicle parts such as gear boxes; engines; floating structures (tanks, coffer-dams, landing stages, buoys and beacons); and electrical switchboards.

More information on Australias trade and investment relationship is available from DFAT www.dfat.gov.au/geo/rok/brief_index.html and Austrade www.austrade.gov.au/Republic-of-Korea-profile/default.aspx More information on the Korea-Australia Free Trade Agreement is available at DFATs FTA website www.dfat.gov.au/geo/rok/fta/.

INVESTMENT AND INVESTOR-STATE DISPUTE SETTLEMENT KAFTA provides improved access and protection for Australian investors and investments in Korea. Australian investors are already active in Koreas financial and infrastructure sectors, among others. Australia is open for business and welcomes further Korean investment. Korean investment has helped build Australias economic capacity in key industries. For example: Korea Zincs investment in Townsville helps us to export zinc to the world. Korean cutting edge technology is being used to construct the multi-billion dollar Prelude floating LNG processing plant. The FTA includes an investor-state dispute settlement mechanism. The Government has ensured the inclusion of appropriate carve-outs and safeguards in important areas such as public welfare, health and the environment. This will provide new protections for Australian investors in Korea as well as Korean investors in Australia, promoting investor confidence and certainty in both countries.

SENSITIVE SECTORS Some sectors may face increased competition from imports of Korean products and services, such as motor vehicles, automotive parts, steel products and textiles, clothing and footwear. This will be in line with the progressive liberalisation already underway in the Australia economy.

SNAPSHOT OF THE AUSTRALIA-KOREA TRADE RELATIONSHIP Total two-way trade reached $31.9 billion in 2012 more than five per cent of Australia's total international trade. In 2012, Australian exports to Korea were valued at $21.6 billion, accounting for over seven per cent of all Australian exports. Total goods exports were valued at $19.8 billion. Korea is Australias largest market for sugar ($496 million). Total services exports were valued at $1.8 billion, comprising mostly education-related travel services ($754 million) and recreational travel services ($664 million).
Australia's major goods exports to Korea 2012
Coal, $5.4b, 27.3%

Australia's major goods imports to Korea 2012

Refined petroleum, $2.7b, 27.3%

Other, $5.9b, 29.6%

Other, $3.5b, 35.8%

Sugar, $496m, 2.5% LNG, $591m, 3.0% Beef, $646m, 3.3% Telephones, $234m, 2.4% Monitors and projectors, $217m, 2.2%

Crude petroleum, $1.4b, 7.1% Based on ABS catalogue 5368.0 and partner country data.

Iron ore, $5.4b, 27.3%

Excavating machinery, $1.2b, 12.1% Based on ABS catalogue 5368.0.

Passenger motor vehicles, $2.0b, 20.2%

Australia imported $10.3 billion of total goods and services from Korea in 2012. Of this, goods imports accounted for $9.9 billion. Services imports were valued at $455 million, including transport services of $218 million.

More information on Australias trade and investment relationship is available from DFAT www.dfat.gov.au/geo/rok/brief_index.html and Austrade www.austrade.gov.au/Republic-of-Korea-profile/default.aspx More information on the Korea-Australia Free Trade Agreement is available at DFATs FTA website www.dfat.gov.au/geo/rok/fta/.

GROWING BILATERAL INVESTMENT Bilateral investment between Australia and Korea is modest, but has grown significantly over the past decade. At the end of 2012, total Korean investment in Australia was $12.0 billion, up from $637 million in 2002. Over the same period, Australian investment in Korea increased more than three-fold, from $3.0 billion in 2002 to $10.4 billion in 2012.

More information on Australias trade and investment relationship is available from DFAT www.dfat.gov.au/geo/rok/brief_index.html and Austrade www.austrade.gov.au/Republic-of-Korea-profile/default.aspx More information on the Korea-Australia Free Trade Agreement is available at DFATs FTA website www.dfat.gov.au/geo/rok/fta/.