Article – KAFTA deal sealed

8 April 2014
Katie McRobert
Queensland Country Life

PHOTO: Trade and Investment Minister Andrew Robb.

THE Korea-Australia Free Trade Agreement (KAFTA) was formally signed in Seoul on Tuesday afternoon by Trade and Investment Minister Andrew Robb and his South Korean counterpart, the Minister for Trade, Industry and Energy Yoon Sang-jick.
The news follows the brokering of a trade deal with Japan which many Australian ag industry groups described as “extremely disappointing”.
While Prime Minister Tony Abbott said the Japan-Australia Economic Partnership Agreement (JAEPA) would deliver “a significant boost to Australian farmers”, with better access for key agricultural products – including beef, cheese, horticulture and wine – dairy farmers, rice and sugar growers said the deal let the sector down thanks to carve-outs and a failure to eliminate tariffs.
Rice was also a notable exception from the KAFTA, and the Ricegrowers’ Association of Australia (RGA) did not hide its disappointment when the deal was announced in December.
The Australian Manufacturing Workers Union (AMWU) accused Mr Robb last year of not only selling out Australian manufacturers but also deliberately misleading the public on the KAFTA.
“The deal could best be described as a ‘cows for cars deal’, in which we sell our beef to Korea, and in return they get better access to Australian markets for importing vehicles,” AMWU National Secretary Paul Bastian said.
Nationals senator John ‘’Wacka’’ Williams said the deals – particularly the JAEPA – will lead to good times ahead for Australian beef farmers, particularly as they recover from serious recent drought.
“It’s a win for Australian exports, and especially rural Australia, because the beef industry has had such a horrid time,” Mr Williams told Fairfax Media.
“I have no doubt that when the drought breaks in Queensland and other areas of Australia we’re going to see record beef prices and I hope they remain,” he said.
Mr Robb used the signing of the KAFTA to once again push the Coalition’s “open for business” mantra.
“The government’s swift conclusion of these historic agreements sends a strong signal that Australia is indeed open for business,” he said.
“With one in five Australian jobs linked to trade, these agreements are good for the economy, good for growth and good for job creation.”
Australian producers will see immediate benefits once the KAFTA is in effect, with potatoes to experience an immediate reduction in tariffs from 304 per cent to only 27pc; cherries to go from 24pc tariff to zero; dry grapes from 21pc to zero, and wine 15pc to zero, immediately.
However, the tariff reductions for beef and dairy, malt and barley are staggered over a 15-year period.
“It varies, but the point is that … by the end of this 99.8pc of all of our exports into Korea will be zero at the end of this exercise,” Mr Robb said.
Mr Robb conceded the text includes a trigger for Korea to reimpose tariffs on agricultural imports if our produce floods the market but the “safeguard measures” which apply to beef, malt and malting barley, maize and refined sugar were set so high they were unlikely to be reached. He said the beef tariff 15-year phase-out would “arrest a significant trade disadvantage”.
Shadow Minister for Trade Senator Penny Wong said the fundamental test for the deal would be its effect on Australian jobs.
“The trade agreement must provide genuine opportunities for Australian businesses to increase exports to South Korea in important sectors like agriculture, manufacturing and services,” she said.
She also voiced concerns about the government’s decision to include an investor state dispute settlement mechanism in the KAFTA, and said these elements of the text needed detailed examination.
The deal will also open the gate for South Korean companies looking to invest in Australia, with the foreign investment review threshold to be increased from $248 million to $1.078 billion – the same amount for New Zealand and the United States, although Australia retains the right to a lower threshold in sensitive areas such as agriculture.
Independent modelling commissioned by the government has indicated the KAFTA will create at least 15,000 jobs between 2015 and 2030. In 2015 the modelling shows job gains of 1750, with average gains of 1000 in each and every year out to 2030.
The modelling also shows KAFTA will add $650 million dollars to the Australian economy annually once in full force, Mr Robb said.
Agricultural exports to South Korea are expected to be 73pc higher after 15 years as a result of the FTA and overall exports to South Korea will be 25pc higher.
Mr Robb said building stronger trading relationships in Asia was critical to Australia’s economic future, a message echoed by producers disillusioned with the JAEPA deal.
“Signing KAFTA today takes us closer to realising our goal of finalising FTAs with our major North Asian partners – China, Japan and South Korea – which together account for 37pc of Australia’s overall trade and two-thirds of our total goods exports,” Mr Robb said.
South Korea is Australia’s fourth-largest trading partner, with bilateral trade worth $32 billion in 2012. KAFTA will significantly boost Australia’s position in this major market where competitors like the United States, European Union and ASEAN countries are already benefiting from preferential access.
On entry into force of KAFTA (which Mr Robb expects by the end of the year), 84pc of Australia’s exports (by value) to South Korea will enter duty free, rising to 99.8pc on full implementation. There will also be significant new market openings in services and investment.
Ricegrowers’ Association of Australia president Les Gordon and Australian Dairy Industry Council deputy chair Robert Poole called on the federal government to now urgently address the issue of access to the Chinese market for rice and dairy after what they called the failure of the Japanese agreement.
“Australian rice technically already has access to the Chinese market under World Trade Organisation rules but we have been waiting for protocols to be finalised for more than six years to actually gain access,” Mr Gordon said.
RGA executive director Ruth Wade said last December the rice industry had worked closely with the government to develop comprehensive trade agreements including FTAs with Korea, Japan and China and the Trans-Pacific Partnership (TPP).
“(The) announcement that the government has signed an FTA with Korea which excludes rice is particularly disappointing,” Ms Wade said.
President of the National Farmers’ Federation (NFF) Brent Finlay said the ultimate objective with any trade agreement was to obtain tangible benefits to farmers.
“Securing good deals for agriculture is always a difficult part of any negotiations and it is clearly the case for Japan, (but) given we export 60pc of the food and fibre we produce in Australia, our farmers need good commercial outcomes from future trade negotiations,” Mr Finlay said.
Courtesy of Queensland Country Life