News came recently that Australia has finalised a Free Trade Agreement (FTA) with the Republic of South Korea. The historic agreement was signed into official existence at a lavish ceremony in Seoul on the 8th of April. This powerhouse of Asian economic prestige is currently Australia’s third-largest market of export and the fourth-largest trading partner in general. With $32 billion-worth of trade between our two nations this latest deal marks an important step in closer economic co-operation and hopefully a mutually beneficial economic future.
The export benefits for Australian producers are cause for celebration with high tariffs being eliminated important exports in the agricultural, raw material, energy and manufacturing sectors. For years the Republic of South Korea has maintained tariffs as high as 300% and this deal marks an important move for Australian businesses into the Asian market. Whilst it is easy to employ rhetoric on economic benefits citizens are right to question what tangible benefits the agreement ensures.
A few of the more important ones include:
- Korea will eliminate the 40% tariff on beef over the next 22 years.
- The 8% tariff on Australian cars will be waived.
- 15% tariffs on Australian wines are to be scrapped.
- Australian law and finance firms will be able to establish officially sanctioned offices in South Korea. Within two years they will be free to advise not only on matters of Australian law and finance but Korean too. This creates a whole new sector for the Australian service industry.
- The flow of key Australian goods such as natural gas, mined minerals and important manufactured goods like gearboxes and engines will have their tariffs removed immediately.
- Harmonisation of regulatory frameworks will ensure safe business practices for both sides of the deal.
The Republic of South Korea is a 50 million people strong market and the access gained by Australian companies to this large trade bloc ensures a healthy avenue of potential economic growth for all kinds of Australian businesses.
The benefit to Australians in terms of imports are many too. New regulations for Korean businesses will ensure products arriving on our shores will be built to the same exacting standards as that of Australian manufacturers. We can also expect Korean businesses to take advantage of relaxed business legislation for their companies and begin to provide new jobs on Australian soil.
The forecasted financial benefits of the new agreement currently stand at an extra $5 billion of economic activity for Australian firms over the next 22 years. After this period the deal is projected to add an extra $650 million annually.