By way of various media releases last evening, the Federal Government has confirmed that negotiations for the Australian FTA with Korea ("KFTA") have been completed, subject to completion of the form of the KFTA and Parliamentary approval by both nations. The commencement date is not clear although media releases refer to benefits over 15 years up until 2030 which would suggest a commencement date in 2015.
Korea is a significant market being our third – largest export market and fourth largest trading partner. The KFTA will reportedly deliver benefits for Australian exporters of goods from the elimination of tariffs, especially in some agricultural areas, in resources and energy and in certain areas of manufactured products. Services and investment also benefit including significant gains for the Australian legal profession.
However, Korea is also a very developed manufacturing economy and it has been widely recognised that sensitive Australian manufacturing sectors such as motor vehicles, automotive parts, steel products and textiles, clothing and footwear will also face increased competition from Korean products. As readers would be aware, we have worked extensively in these areas which are currently under significant pressure and are subject to progressive trade liberalisation.
The DFAT summary of Key Outcomes is at http://www.dfat.gov.au/fta/akfta/fact-sheet-key-outcomes.html
There are also some more subtle and interesting developments from the KFTA. First, the benefits are being portrayed over a 15 year period which may suggest that there are only limited immediate gains. Second, the KFTA is also being portrayed as a strategic move to protect Australia's competitive position as our competitors (US, the EU and ASEAN countries) already enjoy preferential access to the Korean market. Third, the KFTA reportedly includes an Investor/State Dispute Resolution mechanism (albeit with some "carve outs" for sensitive areas). This would not have happened under the former Federal Government and may point the way to how this issue may be overcome in other proposed FTA.
Further, do not expect a totally comprehensive deal as the former Federal Government would have required. There is a sense that the current Federal Government is more inclined to strike a pragmatic deal which delivers the best perceived outcomes at this stage.
We await the details on the KFTA with interest, including the specific words of the agreement, information on which goods and services have been excluded from the agreement, the schedules of tariff concessions and the details of the rules of origin and certificate of origin regime which will apply.
As always we will keep you informed of developments