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S Korea Adds Australian FTA To Roster

by Mary Swire, Tax-News.com, Hong Kong

10 April 2014


During his visit to Seoul on April 8, Australian Prime Minister Tony Abbott and South Korean President Park Geun-hye witnessed the signing of a bilateral free trade agreement.

During a joint news conference, Park said that: "The South Korea-Australia FTA is a comprehensive, high level FTA. In addition to having a tangible impact on drawing trade, investment and on expanding jobs and markets, the FTA will help take the full range of our relationship to a higher level."

"Once the FTA enters into force, tariffs on automobiles which account for 25 percent of Korean exports to Australia will be removed. Australia is, to South Korea, the top provider of natural resources and South Korea's largest outbound investment destination for resource development," she said.

The FTA removes Australia's five percent tariff on imports of South Korean cars with engines up to 3 liters. Park noted that the duties on other core South Korean exports to Australia will be eliminated within three years, including those on household appliances, general machinery, and automotive parts.

Australia is looking to place its exporters on an equal footing to their American and European competitors, following on from the FTAs concluded by South Korea with the US and EU.

The major benefits to Australia are in the agricultural, natural resources, and services sectors, with Australia being expected to emerge as the primary exporter of liquefied natural gas to South Korea within the next five years.

Australia's agricultural exports to South Korea are expected to be 73 percent higher after 15 years as a result of the FTA, and overall exports to South Korea will be 25 percent higher. South Korea will eliminate tariffs immediately on entry into force of the FTA for raw sugar, wheat, wine and some horticultural goods. Korea's 40 per cent tariff on beef will be reduced progressively over 15 years.

Australia is only South Korea's seventh largest trading partner, while South Korea is Australia's fourth largest. Given the size and proximity of the two countries in the Asia-Pacific region, their annual bilateral trade value has remained relatively constrained until now at just over AUD32bn (USD30bn).

It was back in 2009 that Australia and South Korea agreed to launch bilateral FTA negotiations, but the talks had stalled a year later, mainly over the terms of the investor-state dispute settlement system to be included in an agreement. Negotiations were resumed last year as the new Australian Government looked to strengthen trade relations, not only with South Korea, but also with Japan and China.

The South Korean Ministry of Trade, Industry and Energy noted that South Korea has now signed trade treaties with a total of 48 countries (including the 28 countries in the European Union and the 10-nation Association of Southeast Asian Nations). The FTA with Australia, which is expected to be in effect by the end of 2014, will then expand the size of South Korean operational agreements to 57.3 percent of global gross domestic product.

TAGS: Energy | tax | business | free trade agreement (FTA) | tariffs | Australia | oil and gas | food | agreements | manufacturing | Korea, South | import duty | trade | services | Asia-Pacific

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