The opening up of the major markets of Asia is essential if Australian businesses are to successfully compete with the world in the years ahead.
That is why it is so pleasing to conclude a historic free trade agreement with one of our most important partners in the region, the Republic of Korea. In fewer than 100 days in office, the government has secured access to Australia's third-largest export market and Asia's fourth-largest economy.
This means real economic benefits to Australian exporters, and will help underwrite our prosperity for decades. It means Australia can continue to back its strengths, to take the things that we do as well as anybody in the world, to the world.It means that Australia can continue to back its strengths, to take the things that we do as well as anybody in the world, to the world.
South Korea is a regional powerhouse with a population of 48 million middle-class consumers. It is already our third-largest beef market, and biggest market for sugar. The Australia-Korea Free Trade Agreement will build on this competitive position.
Independent economic modelling estimates that, under the FTA, exports of agricultural goods to South Korea would be 73 per cent higher than otherwise by 2030, contributing to a total 5 per cent increase in Australia's total agricultural exports. Mining exports would be 17 per cent higher and manufacturing exports would be 53 per cent higher.
KAFTA also secures markets which have been under pressure from our major competitors. Korea has already been granting preferential access to the US, the EU and ASEAN countries through its respective FTAs. If the government did not conclude this FTA, modelling predicts that by 2030 our agricultural exports to Korea would have declined by 29 per cent. This is the direction we were headed. Make no mistake; this is a great outcome for agriculture. When implemented our beef, wheat, sugar, dairy, wine, horticulture and seafood industries will see 99 per cent of all tariffs eliminated for Australian exports.
The agreement will create new opportunities for Australian automotive suppliers into Korea, our third-largest export market for automotive components, with gearbox exports valued at $122 million in 2012. Under the FTA, Korean tariffs as high as 8 per cent on automotive exports, including gearboxes and engines, will be eliminated, some immediately.
Resource commodities and simply transformed manufactures accounted for three-quarters of the value of Australia's merchandise exports to Korea in 2012 – about $18 billion. Under KAFTA, Korea will also eliminate tariffs for all resources and energy products over time.
The agreement will also open up a raft of new opportunities for Australian services in Korea, including legal, accounting, financial, services, not to mention education and environmental services.
KAFTA is a forward-looking, modern agreement that encourages and supports investment flows between our two nations. Its conclusion is a powerful message to the region that we welcome foreign investment.
In this agreement the government has taken the decision to include a provision for investor-state dispute settlement. This is something mature governments can choose to do. It creates confidence for investors, both Australian and Korean, while protecting each countries' right to regulate in important areas such as public health and the environment.
There is another dimension to KAFTA. As well as its critical importance as a trading partner, the Republic of Korea is a major strategic ally in the region. Our two nations have deeply held shared values and interests, including a commitment to democracy, stability and economic development in the Asia-Pacific region.
KAFTA represents the alignment of Australia's foreign policy with its economic interests – a key example of the government's policy of economic diplomacy.
Korea represents the first of three FTAs to be concluded with our major trading partners in North Asia – the others being Japan and China. Together these three economies represent 50 per cent of Australia's exports.
KAFTA is a clear signal to both our region and the world that Australia is indeed open for business.
- Trade Minister's Office: (02) 6277 7420
- DFAT Media Liaison: (02) 6261 1555