Benefits to New Zealand trade
KNZFTA is a high quality agreement covering goods and services trade between New Zealand and Korea.
A core objective of New Zealand trade policy is to broaden and deepen the opportunities available to exporters by removing and reducing barriers to trade, and establishing frameworks through which trade and investment linkages can evolve and expand.
Concluding agreements with a group of key trading partners to remove trade barriers on a reciprocal basis is one way of achieving this objective. Given that New Zealand maintains a very open trade regime, the benefits of free trade accrue disproportionately to New Zealand, even though these benefits might be phased in over a number of years.
Under KNZFTA, New Zealand exporters gain improved access to Korea, which has a population of over 50 million people and is our sixth-largest goods export market. It also achieves significant outcomes across a range of sectors, allowing New Zealand exporters to maintain and grow their presence in the Korean market.
At the time of its negotiation, key highlights included
- Tariffs will be eliminated on around 98% of New Zealand’s current exports to Korea. This will happen in stages over 15 years from entry into force.
- Following a reduction in tariffs on 1 January 2017, 66.4% of New Zealand’s exports enter Korea duty free.
- Better access to high quality Korean goods for New Zealand businesses and consumers.
- Easier goods trading through agreed rules on: customs, rules of origin, sanitary and phytosanitary measures, standards, technical regulations.
- Improved access to Korean markets for New Zealand service providers, including streamlined and transparent procedures for travel and visas.
- Open, competitive and non-discriminatory access to government contracting opportunities.
- Free and open flows of investment between New Zealand and Korea, and measures to safeguard investors interests.
- Dedicated chapters on environment and labour that provide for more effective discussion and cooperation.
- Both countries have agreed to maintain competition laws against anti-competitive business conduct such as abuse of market power and anti-competitive mergers.
- Increased cooperation to create new opportunities in areas of mutual interest such as agriculture, education, trade facilitation, science and technology, and film and television.
- A clear and detailed process to settle disputes related to KNZFTA.
Since its entry into force in 2015, KNZFTA has seen bilateral goods trade grow solidly
Two-way trade has grown by an average of 5.2% from 2015-2019, compared to an average of 4.0% between 2010 and 2015.
Growth in New Zealand’s goods exports to Korea has more than doubled since the KNZFTA entered into force, from 1.4% between 2010-2015 to 3.0% between 2015-2019.
The aggregate preference utilisation for New Zealand exporters is 94%, with most key export products seeing utilisation rates between 90% and 100%.
Key products experiencing benefits from KNZFTA include kiwifruit, butter, cheese, deer velvet, lamb and squid/mussels.
There is also evidence of the KNZFTA encouraging growth in more niche areas, such as dress patterns, smoked salmon, teeth cleaning powder, avocado oil and white chocolate. This has contributed to a marked diversification of New Zealand’s export profile into Korea since 2015.
Korea’s total goods exports to New Zealand grew by an average of 7.2% in the 2015-2019 period, marginally faster than in the pre-KNZFTA period. This growth rate was maintained after COVID-19 struck the global economy, in contrast to New Zealand’s much lower import growth from all sources.
Korean exports have grown slightly faster than New Zealand’s imports from all sources, meaning Korea has increased its market share. Iron and steel products, automotives and parts, foodstuffs and some hi-tech items have performed particularly well.
Investment has also grown significantly
New Zealand’s direct investment in Korea has grown by 60-70% per year since KNZFTA was implemented, albeit from a low base.
Foreign direct investment and portfolio investment in New Zealand by Korean firms have not grown so strongly since KNZFTA entered into force. However, Korean ‘Other investment’1 has expanded by an average of 10-15% per year.
Want to know more?
For more information about KNZFTA, including benefits, key outcomes, and potential areas for improvement, see the New Zealand-Korea Free Trade Agreement Guide and the KNZFTA Review Report, below.