Korea FTA levels the playing field

 

The first New Zealand Free Trade Agreement (FTA) since 2011 is currently in process and looks to be ratified later this year. If so, Kiwi exporters can expect some huge benefits across a broad sweep of industries, not the least beef, lamb, forestry, fisheries and kiwi fruit. 

At present, New Zealand exporters to Korea pay $229 million each year in duties. The Korea-New Zealand Free Trade Agreement (KNZFTA) ratification would see an estimated $65 million in duties saved in the first year of signing, as well as duties on exports largely to be eliminated within 15 years.

Peter McRae, CEO of Platinum Freight Management, says in essence, the KNZFTA secures the long-term future of New Zealand exporters in the Korean market who have been under threat from competing nations’ FTAs with Korea. 

“It levels the playing field for exporters,” he says. 

“Korea’s agreements with the US, EU and Chile, for example, see our competitors enjoy preferential tariff rates which until now New Zealand businesses had no way to beat.

“Let’s look at kiwifruit as an example. Exporters currently face a tariff of 45 percent on kiwifruits shipped, while a major competitor in the Korean market, Chile, has duty free access. In dollar figures we’ve seen local kiwifruit growers paying more than $20 million in duties in the past year alone. 

“Similarly, beef exports face 40 percent duty and already suffer an eight percent tariff disadvantage relative to exports from the US and EU.

“The wins will sweep across many other sectors too, such as dairy – particularly for cheese, butter and protein products – processed deer velvet, buttercup squash, cherries and wine. There are also good outcomes for the forestry sector, fisheries and industrial goods exports.

“But one may ask will there be any industries affected negatively by competition from imported Korean goods or services?

“I would say that the New Zealand market is already largely open to imports from other countries. The removal of the remaining tariffs on Korean products may improve the price for New Zealand consumers.

“The biggest winners would be importers of steel, clothing, shoes and household goods, such as tableware and whitegoods, with these industries seeing import duty rates of between five and 10 percent reducing to zero, but with the GST still applicable.”