Former Minister for Trade
Australian Commonwealth Coat of Arms

10 March 2009

Views expressed in public consultations for participation in FTA negotiations with the Republic of Korea

On 5 March 2009, following a summit meeting with the Korean President Lee Myung-bak, the Prime Minister announced that agreement had been reached between Australia and Korea to launch negotiations for a free trade agreement (FTA).

The first formal round of negotiations will be held in Australia in May.

In line with the Government’s commitment to ensuring Australia’s trade objectives are pursued on the basis of full community consultation, public consultation on Australia’s participation in a possible FTA with Korea commenced towards the end of 2008.

On 6 December 2008, the Department of Foreign Affairs and Trade, via a press advertisement, emails to stakeholders and its website, called for public submissions on the expected costs and benefits of participation and specifically invited comment on the economic, regional, social, cultural, regulatory and environmental impacts expected to arise from Australia’s participation.  The Department received more than 40 written submissions from a variety of stakeholders. All non-confidential submissions received will shortly be available on the Department’s website.

In addition, consultations with stakeholders, including industry, business, community and labour representatives and government agencies, and with State and Territory officials, have commenced, and will continue in coming months.

This consultation process built on an earlier call for public submissions during the drafting of the joint non-government feasibility study.

Overall, there is widespread interest in and support for Australia’s participation in an FTA with Korea. Most of those who made submissions believe there will be benefits from such an FTA, and support the commencement of negotiations. Numerous submissions noted that concluding an FTA with Korea at the earliest possible opportunity would be important in protecting and advancing Australia’s position in the Korean market, particularly in light of trade preferences Korea had, or was intending to, extend to Australia’s competitors.

Input received through the consultation process will inform the development of the Government’s priorities and objectives for Australia’s conduct of negotiations in the Australia-Korea FTA.  The Government is committed to conducting ongoing public consultations with stakeholders throughout negotiations on the Australia-Korea FTA.

Summaries of Views Expressed

Strategic/Regional Advantages:

  • Several submissions noted that Korea is actively seeking greater integration with other regional economies, having concluded FTAs with nine of the ten ASEAN nations, the United States, and Chile and begun discussing possible economic agreements with India, Japan and China, among others. In the context of shifting geopolitical relations on the Korean peninsula and within North East Asia, continued Australian political and economic engagement with Korea was seen as vital.
  •  In addition, several submissions identified the mutual strategic benefit to be gained by deepening the ties between Korea, which depends on Australian food, energy and minerals, and Australia, which depends on Korean markets for its products. 
  • Greater harmonisation of Korean business and regulatory culture with emerging regional norms was also seen as a potential advantage.
  • BHP Billiton’s submission commented that “a free trade agreement with Korea is an opportunity to build deeper trade and investment ties between our two countries.  Strong trade and investment ties benefit both parties as they secure markets and assure security of supply”.

    ANZ Bank suggested that, in addition to increased investment and trade flows, an Australia-Korea FTA would have a broader “positive impact on the business and regulatory culture in Korea”.

    Commercial Potential:

  • Most submissions sought improved market access from an FTA with Korea.  A particular focus for many contributors was their concern that the Korea-United States (KORUS) FTA, once ratified, would reduce tariffs on several US products that compete directly with Australian products in the Korean market.  This also was a concern in relation to some other FTAs Korea has recently concluded.  A bilateral FTA was seen as a key mechanism to ensure Australian products maintained competitiveness, and these stakeholders strongly supported the negotiation and early conclusion of an FTA which minimised competitive disadvantage.
  • According to one submission, Korea’s recently-concluded FTAs with Chile and the United States represent the “threat of a significant loss of competitive position against such suppliers if Australia does not succeed” in concluding a liberalising FTA with Korea that delivers market access at least equivalent to those FTAs. The submission describes as “urgent” the need to “catch-up … to restore a non-discriminatory environment in Korea”.

    The agriculture and food sector strongly supported an early start to the negotiation and conclusion of a comprehensive FTA agreement that would encompass relevant products.  Several submissions contributed by some peak industry organisations suggested that an FTA would be useful in addressing Korea’s high tariffs on beef, pig meat, dairy products, sugar, horticultural products, wine, seafood, and wheat and barley. 

    The resources sector was also supportive, although current barriers to Australian exports were characterised as low.  One company expressed concern that gold exports to Korea were disadvantaged because of Korea’s FTA with the European Free Trade Association (EFTA), as gold exported from EFTA member Switzerland is not subject to the same 3 per cent tariff that is levied on Australian gold exports.

    The manufacturing sector expressed mixed interests in pursuing an FTA with Korea. One company stated it did not believe an FTA with Korea that encompassed automotive trade would offer fair and worthwhile advantages to the Australian automotive manufacturing industry.  A pharmaceutical industry group (Generic Medicines Industry Association) saw advantages in an FTA increasing marker access and removing regulatory barriers.

    Services

    The services industries, and particularly finance (Investment and Financial Services Association and ANZ Bank) and education (Universities Australia, Monash University), are supportive of Australia concluding an FTA with Korea, seeing it as an opportunity to improve sectoral cooperation and the regulatory framework governing their sector.

    A peak group representing engineering and IT professionals (Engineers Australia) requested that Australia consider mechanisms within an FTA to facilitate recognition of multilateral skills assessment frameworks of their profession.  However, nursing professionals peak groups noted their interest in protecting the integrity of their profession’s licensing processes.

    Korean restrictions on capital flows, and regulatory requirements, were noted as barriers to investment that could be resolved through an FTA.  It also was noted that an FTA could potentially encourage Korean investment in Australia (including mining, agriculture and service sectors).

    Several submissions expressed concern about the impact of potential liberalisation of Mode 4 Services (movement of natural persons), particularly with respect to 457 working visas.

    Cultural/Social:

  • Labour rights, environmental protection, animal welfare and the provision of public services were raised by ACTU, CPSU, ANM, AFTINET, Compassion in World Farming, and Mr Richard Stone.
  • Unions and industry peak groups reiterated their strong support for public services to be excluded from any services negotiations.
  • The ACTU submitted that “public services and ‘public goods’, whether delivered by government agencies or private providers, should be clearly and unambiguously exempted from FTAs”.  The CPSU registered its opposition to the GATS definition of ‘public services’.

    Some contributors raised concerns about labour rights in Korea, particularly with regard to freedom of association and the treatment of migrant labour, and requested that labour standards be treated explicitly in any agreement.  Concerns were also raised regarding the impact of the agreement on workers in Korea and Australia, noting that union peak bodies in Canada and the US, both of which have recently signed FTAs with Korea, have suggested that “workers in both countries will not benefit from the agreements”.

    Objections were registered to the designation within the Australia-Korea FTA feasibility study of existing Korean environment and labour standards regulations as impediments to foreign investment. Some contributors also raised concerns regarding the capacity of dispute settlement provisions in FTAs, particularly the Investor-State Dispute Settlement mechanism, to undermine the Australian Government’s capacity to regulate to protect the environment, labour standards or the provision of public services.

    The Government is conscious of community sensitivity about the important issues of labour standards, environmental standards and the provision of public services and is committed to retaining appropriate control over the setting of domestic policy in these areas.

    Regulatory/Environment:

  • Some contributors considered an FTA could help their positioning in the Korean market and facilitate regulatory burdens.  In particular, financial service providers recognised the additional value of removing regulatory barriers through an FTA. There was also potential value in promoting greater harmonisation of Korean business and regulatory culture with emerging regional norms.
  • A submission from the consumer goods sector noted that an FTA with Korea was likely to assist the process of regional regulatory harmonisation “by establishing regulatory frameworks where these issues can be addressed or progressed over the longer term”.

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