Former Minister for Trade
Australian Commonwealth Coat of Arms

Canberra, 10 March 2009

Australia – Korea Free Trade Agreement

Mr Speaker, I rise to make a Ministerial Statement to the House.

It is my pleasure to announce to the House that the Government has decided to launch negotiations on a bilateral free trade agreement (FTA) with the Republic of Korea.

The Prime Minister visited Seoul in August last year, where he agreed with the President of the Republic of Korea, Lee Myung-bak, that Australia and Korea would hold preparatory talks to explore the possibility of entering FTA negotiations.

This followed the release of a joint non-government FTA feasibility study in April 2008 that concluded that a free trade agreement between Australia and Korea that liberalised substantially all barriers to trade and investment offered significant opportunities to further strengthen our highly complementary and growing bilateral trade and investment relationship, and deliver gains to both countries through closer economic integration.

Economic modelling undertaken for the joint study estimated that a comprehensive FTA covering goods and services trade and investment would increase the present value of real GDP of Australia by US$22.7bn and of Korea by US$29.6bn over the period 2007-2020.

Following the completion of two rounds of officials-level preparatory talks in December last year, last week on 5 March 2009, the Prime Minister and President Lee announced that the two countries had agreed to launch FTA negotiations. On the same day, I met my Korean counterpart, Kim Jong-hoon, and we have agreed to hold the first formal round of negotiations in May.

This is a welcome development for the Government, for Australian business and for the wider Australian community.

The Republic of Korea is the world’s 14th-largest economy. It is Australia’s fourth-largest export market, our sixth-largest overall trading partner, and a growing partner for investment in both directions.

Moreover, Korea is a valued regional partner, with which we are expanding our broader relationship. I note here the Joint Statement on Enhanced Global and Security Cooperation made by the Prime Minister and President Lee on 5 March.

Korea is also our third-largest source of overseas students, after China and India, and tourism links between Australia and Korea are strong. Both these areas point to the good health of our people-to-people exchanges.

Closer economic integration with Korea, the only one of our top four export markets with which Australia has not yet commenced or concluded FTA negotiations, promises to deliver further gains for Australian exporters, investors, consumers and the economy as a whole.

An FTA will enable Australia to protect and enhance the position of Australian business in this market, particularly in the face of trade preferences that Korea is gradually extending to our major competitors. This sentiment was a common feature of the submissions received by the Government to date.

An FTA will help protect Australia’s competitive advantages in this important market. It has particular importance for Australian resources and agricultural producers, including the beef industry. We will also seek to improve opportunities for services exporters, including the financial, education and legal sectors. The agreement would also seek to enhance the position of Australian investors in the Korean market.

An FTA also provides a means to strengthen institutional arrangements in each country and provide a strong base for building flexible and productive commercial relationships, supportive of further trade and investment.

Negotiating and concluding an FTA with Korea is an important initiative which reflects the strength of the bilateral relationship, and sets our two countries on a course towards even closer relations.

I’ve spoken before about the importance of trade. This agreement with Korea to launch negotiations comes as we continue to push for a conclusion to Doha through the G20 and having just signed the ASEAN-Australia-New Zealand FTA. These are all important platforms upon which we continue the case for further liberalisation bilaterally with our sixth largest trading partner.

Doha will be a matter of priority for G20 Leaders when they gather in London early next month and Australia is committed to ensure it is firmly on the agenda.

While there are obviously issues in the Doha negotiations on which we have yet to secure consensus, in relative terms, Doha is ‘low hanging fruit’ in our response to the crisis. We now need to harvest that fruit.

That’s why we continue to push to give substance to the Washington G20 Leaders instruction that Ministers should meet to finalise the Doha modalities.

In practical terms this means we need to pick up from where we left off in these negotiations, and not retrace past steps – so that we are able to make Doha a part of the equation in our response to the crisis.

The Government’s commitment to the primacy of the multilateral trading system is well-established.

Australia believes the multilateral trading system developed through the WTO is vital to global prosperity. This rules-based system has provided certainty and security to trade and has helped build global economic cooperation.

A successful conclusion to the Doha Round would counteract aslide towards protectionism and would help stimulate economic confidence in the current economic climate. It would also help promote sustainable economic development and reinforce confidence in, and reliance on, the multilateral trading system.

Since the 1950s, world trade has grown three times as fast as world output. Each successful multilateral trade round has provided a boost to world trade growth.

We need the stimulus that trade reform would bring and the Doha Round would deliver a significant impact. As WTO Director General Pascal Lamy noted here in Australia last week, by removing over US$150 billion in tariffs, Doha would provide a significant boost to global demand and consumption.

Given the extent of the downturn, more than ever the world economy also needs the confidence boost that a breakthrough on Doha would bring and this has been, and remains, our priority.

Because boosting trade reform does more than stimulate economic activity. It is also the best insurance policy against protectionism.

Concluding Doha also provides insurance against protectionism through new disciplines on tariffs and subsidies.

A report released by the International Food Policy Research Institute in December showed starkly the costs of failing to conclude the Doha Round – based on what is on the table - if countries were to revert to protectionist measures.

The report estimated that the opportunity cost of not concluding the round would be a drop in world trade of US$336 billion. In contrast, the report found that a world-wide resort to protectionism could contract world trade by US$728 billion.

A report released by the World Bank on 8 March also dramatically demonstrated the potential impact of falling global demand on world trade. The report found that world trade is on track to register its first decline in trade volumes since 1982 – and the largest decline in 80 years.

This emphasises the point that just as world trade growth is a multiple of world growth, it also declines as a multiple of declining world growth.

More than ever, we need to engage with our major trading partners to do everything we can to support trade, particularly in our region.

I reported last August on the conclusion of negotiations for a region-wide ASEAN-Australia-New Zealand Agreement. A lot has happened on the global stage since then. We understood the timeliness of acting to conclude an agreement with ASEAN, and the need to use the ASEAN agreement as a platform for further liberalisation

Last month in Thailand, I joined with Trade Ministers from the ten countries of ASEAN and New Zealand to sign this historic free trade agreement. The ASEAN-Australia-New Zealand FTA was a milestone in our regional economic integration. ASEAN as a group is our single-largest trading partner; with total trade worth more than $80 billion. It will deliver new opportunities across the board for Australian exporters with the potential for new high-value, ongoing jobs here in Australia.

The ASEAN trade agreement is also significant in light of our agreement to start negotiating an FTA with Korea, because both of us, Australia and Korea, have now concluded plurilateral agreements with ASEAN.

Extending the principles of openness to bilateral trade arrangements will culminate in freer flows of trade and investment for our respective business communities.

Pursuing high-quality, WTO-consistent FTAs is one such way we can play our part in supporting growth, jobs and livelihoods at home and abroad.

This Government does not take the benefits of trade for granted.

Securing trade deals that improve the lot of Australian business and the Australian community takes hard work, commitment and flexibility.

This initiative will help strengthen Australia to sustain its economic future, which is particularly pertinent given the current global economic uncertainty.

I note that our ASEAN partners have also made important commitments to maintaining open trade flows – as evidenced by the recent affirmation of ASEAN leaders to stand firm against protectionism.

The commitment by ASEAN leaders to multilateralise the Chiang Mai Initiative is another welcome demonstration of a regional response to a global problem, and once implemented will boost confidence within the region in governments’ capacities to more effectively manage short-term shocks.

The Rudd Government has emphasised the importance of reviving Australia’s regional influence as an active but independent regional ‘middle power’ helping to shape multilateralism in the Asia-Pacific region.

As a like-minded partner in the region, Korea is a natural partner for Australia in pursuing many of our regional and global objectives.

For Australia and Korea, two important trading nations in the Asia-Pacific region, and two founding members of the Asia-Pacific Economic Cooperation (APEC) forum, commencing FTA negotiations at this time signals to the world our shared practical commitment to trade and economic liberalisation.

A commitment to transparent and inclusive trade policies was a core part of our election platform.

Our open, consultative approach to the study which preceded this announcement and the decision to enter into these negotiations honours that commitment.

We have ensured that we have provided extensive opportunities for public input from all segments of the Australian community on this proposed initiative.

In early December, the Government called for public submissions from stakeholders on their interests or concerns regarding an FTA with Korea. More than 40 submissions have been received to date, including from companies, peak industry associations, non-government organisations, unions and individuals.

Most of these submissions support the negotiation of an FTA with Korea.

The Government also has commenced public consultations, and will continue this in coming months, to ensure that a wide range of stakeholder views on the Australia-Korea FTA are heard.

Already, the submissions received and consultations conducted have allowed us to hear from a wide range of stakeholders about their views on Australia’s possible participation.

From the input received to date, the Government assesses that stakeholders, on the whole, see an FTA with Korea as providing improved opportunities for trade and prosperity for Australia. This view is backed up by the Mortimer Review of Export Policies and Programs, commissioned by the Government and released on 22 September 2008, which found that Australia should conclude an FTA with Korea in order to improve access to new markets.

Of course, negotiating an FTA also involves some sensitivities on both sides. Managing such issues is a normal part of trade negotiations. As outlined in the attached document, certain sectors of the economy have expressed a concern over the implications of an FTA with Korea. The government is well aware of these concerns, and will continue with consultations on these sensitive areas throughout the negotiations.

Taking into account this input, the Government has formed the view that we should proceed to negotiations.

In deciding this, one priority of the Government will be to maintain and build on existing standards in our current free trade agreements, while retaining the flexibilities that we regard as important from those agreements.

I now table a document which, together with this Statement, outlines the views we have heard as part of the consultation process.

Taking these views into account, the Government’s priorities include our desire to:

I note that some submitting parties have requested that their submissions not be made public.

While the Government can see significant opportunities from an FTA with Korea, we also are aware of the need to retain domestic policy flexibility in a range of areas.

In the lead-up to the first negotiating round and also following the commencement of substantive negotiations, we will consult further with stakeholders to assist in developing Australia’s approach to the negotiations.

Of course we continue to welcome further input into the FTA negotiating process - indeed, we encourage this input, as it assists us in properly developing our negotiating positions.

As part of the Government’s commitment to transparency, we have indicated to all those who have made written submissions that, should they agree, their submissions will be made public on the Department’s internet site.

This is just one aspect of the Government’s ongoing commitment to inclusiveness and transparency.

As the negotiations get underway the Government will continue to consult broadly and communicate regularly with stakeholders on developments on the Australia-Korea FTA.

I thank the House.

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