Market accessTrade Relationships and AgreementsAnti CounterfeitingAseanAustraliaChinaGulf Cooperation CouncilHong KongIndiaJapanKoreaMalaysiaRussia Belarus KazakhstanSingaporeThailandTrans PacificExport controlsNZ Inc Country and Regional StrategiesAPECEASNZ and the WTOOECDTrade and economic analysisTrade lawTrade scholarships
The Republic of Korea is New Zealand’s fifth-largest bilateral trading partner. In 2010, goods trade between the two countries was a balanced NZ$1.4 billion in each direction. Korea is also New Zealand’s second-largest source of foreign students and sixth-largest source of overseas visitors. There are more than 30,000 ethnic Koreans living in New Zealand, which is the largest expatriate Korean community in the world in per capita terms.
While two-way trade has grown significantly since the two countries forged their close relationship on the battlefields of the Korean War, it has not reached its full potential. Korea is the world’s 12th-largest economy and a key regional player. A Free Trade Agreement would help unlock unrealised potential in trade and investment flows between Korea and New Zealand, as well as enabling each other’s companies to conduct their business more efficiently, which would benefit consumers. The two economies would become more resilient and better positioned for Asia Pacific economic integration.
Negotiations towards an FTA with Korea were announced by New Zealand Prime Minister John Key and Korean President Lee Myung-bak during the latter’s visit to New Zealand in 2009.
Since then four rounds of negotiations have taken place. Initial offers for the elimination of goods tariffs were exchanged in September 2009, and initial services, investment and government procurement market access offers were exchanged in June 2010.
top of pageAlthough good progress has been made in many areas, significant differences remain on agricultural market access and cooperation issues, fisheries, and temporary entry. New Zealand is working hard to address Korean perceptions about the impact of an FTA on its domestic agricultural sector. Because New Zealand provides only about 3 per cent of Korea’s total agricultural imports, does not produce rice, is counter-seasonal, does not export fresh milk to Korea, and produces grass-fed beef, we do not compete with sensitive Korean production.
An independent joint study into the benefits and feasibility of an FTA was completed in 2007. It found that New Zealand and Korea are two of the most complementary economies in the Asia-Pacific region and that an FTA would deliver economic benefits for both countries. The analysis, by the New Zealand Institute for Economic Research and the Korean Institute for International Economic Policy, suggested that the FTA would provide gains to real GDP between 2007 and 2030 of US$4.5 billion for New Zealand and US$5.9 billion for Korea.
The most immediate value to New Zealand would be in tariff savings. New Zealand exporters pay NZ$195 million total tariffs each year to Korea. Some examples of the Korean tariffs include: 89 per cent on butter, 45 per cent on kiwifruit, 40 per cent on beef, 8 per cent on cosmetics, and up to 11 per cent on processed wood products.
Many New Zealand businesses also face a range of challenging non-tariff barriers and frequently changing regulatory conditions when providing goods, services or investment in the Korean market. Navigating complex requirements around labelling, standards testing, or certification can be difficult and onerous. Improving cooperation and understanding between regulators under an FTA would make it easier to do business with Korea.
Korean consumers and importers would also benefit from an FTA. Korean exporters to New Zealand would save around NZ$5 million in tariffs. More significantly, an FTA would help Korea tackle the challenge of rising prices by giving consumers access to cheaper goods and a wider range of products. These benefits would contribute to reducing the cost of living for the average Korean, allowing greater freedom to spend more money on other priorities such as education and leisure.
New Zealand can also be part of the long term solution to Korea’s food security concerns. New Zealand agribusinesses supply safe, healthy food to Korean consumers, and the counter-seasonal nature of New Zealand’s and Korea’s growing cycles could ensure a steady supply of high quality agricultural produce year-round. New Zealand also already works collaboratively with some Korean farmers and industry to improve productivity. An FTA would fast-track the expansion of existing food innovation and agri-tech collaboration to other agencies and sectors.
Many New Zealand primary and intermediate products are important inputs for Korean manufacturing. Global competition for these products has increased in the wake of New Zealand’s other FTAs. An FTA with New Zealand would be a tool to ensure ongoing supply to Korea of much-needed products for domestic consumption and manufacturing.
Korean imports into New Zealand are mainly capital and consumer items such as motor vehicles, electrical equipment, and machinery. Many major Korean brands are already household names in New Zealand and an FTA would allow Korea to further expand those business relationships. New Zealand provides an ideal test-bed for products before they are introduced into larger markets of Western consumers.
You can read more about the case for a New Zealand-Korea FTA in a short pamphlet produced in:
Korea’s existing trade agreements give preferential treatment to Chile, Singapore, India, ASEAN, the European Union, and Peru. It has an FTA with the United States awaiting final ratification, while negotiations with other countries, including Australia, Colombia, Turkey, Mexico, Canada, and the Gulf Cooperation Council, are ongoing.
The growing disparity between the high tariff rates imposed on New Zealand goods and the reducing preferential rates under the FTAs that Korea has concluded with New Zealand’s competitors threatens the sustainability of New Zealand businesses’ links to Korea. Many New Zealand businesses will be effectively shut out of the Korean market if this imbalance continues.
Negotiators need to have detailed information on business interests relevant to an FTA with Korea. Preliminary discussions were held with a range of business organisations in 2008. A public submissions process in early 2009 saw submissions received from a wide range of interested parties.
We still want to hear from interested businesses or individuals on barriers they face in the Korean market.
If you would like further information about the New Zealand-Korea FTA negotiations, please contact Brody Sinclair by:
