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New Zealand And Korea Free Trade Agreement To Benefit Bilateral Trading Relationships

World Trade

Open Eyes Opinion {source: New Zealand Trade & Enterprise}

New Zealand and Korea: new opportunities

Author: By Ryan Freer, NZTE Trade Commissioner for the Republic of Korea, 21 May, 2015
SOUTH KOREA SEOUL 155865011

New Zealand’s recently signed Free Trade Agreement (FTA) with Korea highlights an excellent bilateral and trading relationship, and puts us in a strong position to increase our market share in Korea. The New Zealand-Korea FTA is our most commercially significant and ambitious free trade agreement since the New Zealand-China FTA in 2008.

Under the FTA, tariff reductions mean New Zealand exporters will save an estimated NZ$65 million in duties in the first year. Duties on New Zealand’s current exports will largely be eliminated within 15 years of entry into force.

Ryan Freer

Not only will it become cheaper for New Zealand to do business with Korea, but our products will become more affordable to Korean buyers – boosting trade and growth for both our economies.

Large Korean conglomerates, retailers, importers and distributers have already begun to factor New Zealand into their forward looking trade and investment strategies.

New Zealand and Korea have become increasingly close, with total trade between the two countries growing more than 10 percent per annum on average over the last five years.

It is worth noting as well that Korea’s purchase power is growing. The country has become the world 8th largest trading nation – a remarkable effort considering in the early 1960s its primary exports were squid and seaweed, and its trade profile was ranked below countries like Ethiopia and Zimbabwe.

Korea now has the world’s 13th-largest economy with over 51 million consumers, and it is our fifth largest market for exported goods.

Great opportunities exist for New Zealand exporters in food and beverages, clean technology, high-value manufacturing and ICT.

Food and Beverages

The FTA will transform markets for New Zealand’s primary producers and farmers, with gains across beef, salt, dairy, horticulture, wine and seafood.

New Zealand food and beverage producers currently compete with firms from Australia, the US, and the European Union, who all have FTAs with Korea.

Korea imports 60 to 70 percent of its food and agricultural needs, and the proportion is increasing as local producers struggle to keep pace with demand.

Korea’s impressive economic growth and increasing wealth are creating substantial shifts. Consumers are becoming increasingly health focused and conscious of food safety. Traditional Korean staples such as rice, for example, are losing ground to high-quality meat, fruit, vegetables and dairy products.

New Zealand is well placed to help meet this demand. We already enjoy a sterling reputation in Korea as a global ‘food bowl.’ Demand for our products continues to increase – driven by recognition that they are sourced from a clean and natural environment, are safe and delicious, and offer both premium quality and value for money.

Large Korean conglomerates, retailers, importers and distributers have already begun to factor New Zealand into their forward looking trade and investment strategies.

Clean tech, High Value Manufacturing and ICT

With demand for clean technologies rising in the energy-intensive Korean market, New Zealand businesses are well positioned to support low carbon energy initiatives.

Our strengths in manufacturing high-value, low-volume products, as well as our specialist expertise in aviation, medical devices, precision engineering and marine manufacturing, all create opportunities to enter global supply chains via partnerships with Korea’s manufacturing conglomerates.

New Zealanders are known for being innovative and creative, which is apparent in the ICT sector. Our clear strengths in software development, design and support services can be applied globally through companies such as Samsung and LG.

Services

The FTA will mean greater opportunities for services industries in both countries. Across a range of sectors, New Zealand service suppliers will benefit from improved commitments on services market access that will open opportunities in areas such as education, legal, and professional services – over and above the commitments Korea has made through the World Trade Organisation (WTO).

The FTA leaves a door open for further policy dialogue and enhanced private sector engagement in the agriculture, forestry and fisheries industries.

Next steps

Once translated, signed and ratified, the FTA will enter into force. These processes are likely to take some months.

NZTE is ready to assist new-to-market exporters to find capable, established and knowledgeable local distributors and partners. NZTE can also provide tailored market insights, and help established players expand local market presence.

With a strong trade profile and increasing demand for high quality and safe products, the prospects are bright for the New Zealand-Korea trade relationship.

Ryan Freer is NZTE’s Trade Commissioner for the Republic of South Korea. He is based in Seoul.

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