British High Commission Canberra
Australia and the Korea finalise a Free Trade Agreement.
On 5 December, trade negotiators sealed the Korea-Australia Free Trade Agreement (KAFTA). Signing is expected by mid-2014, taking effect from 2015. The text will not be released until signing. The deal was struck in Bali on the eve of the WTO trade talks.
Australia-Korea two-way trade was worth £17bn in 2012. Korea is Australia’s third-largest export customer (mainly iron ore, coal) and ninth-largest import source (petroleum, cars, machinery). Two-way total foreign investment is £12bn.
Australia’s biggest gains were in agriculture, a 40% tariff on beef exports to be phased out over 15 years and faster elimination of tariffs on sugar, sheep meat, dairy and wine.
Australia will immediately eliminate a 5% tariff on Korean manufactures: cars, machinery and electrical appliances.
Korea will remove tariffs on Australian manufactures over seven years and on resources products over ten.
Korea won a relaxation of foreign investment restrictions and acceptance of investor-state dispute settlement (ISDS) provisions.
Australian professional services gain significantly improved access, especially for law firms.
KAFTA had been stalled for a year. The election of the Abbott government in September brought a renewed push on bilateral trade agreements. Trade minister Andrew Robb revitalised negotiations with more accommodating positions on foreign investment. Korea was keen to complete as it considers joining the Trans-Pacific Partnership (TPP).
Australia lifted its foreign-takeover review threshold, which triggers a national interest test, for Korean companies from A$248m (£134m) to $US1 billion, bringing it into line with thresholds for the US and New Zealand. But the FTA also tightens the review threshold for agribusinesses to $53m and on foreign purchases of agricultural land down to $15m.
Canberra agreed to ISDS provisions after securing safeguards in public welfare, health and environment.
Australia is the largest supplier of Korea’s growing beef market and feared the US would overtake it following the US-Korea FTA last year.
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