On a trip to Seoul last July Prime Minister John Key got the green light from newly elected South Korean President Park Geun-hye to restart negotiations for a free-trade agreement between the two countries.
In December the Koreans followed that up by announcing their intention to complete negotiations with NZ, Australia and Canada, at the same time as they expressed an interest in joining the Trans-Pacific Partnership (TPP) talks.
The three countries are all involved in the TPP and Korea’s renewed interest in concluding deals with them was seen as a means of proving its credentials to join the larger negotiations.
Since then South Korea has reached deals with Australia and Canada but NZ is still waiting.
“I think what has changed a bit on Korea’s estimation of TPP is that they have now kind of got the message about its value in terms of its impact on regional supply chains.”
Stephen Jacobi
International Business Forum
The sixth round of talks concluded earlier this month and negotiators are due to meet again at the end of the month.
In the meantime NZ’s market share, in beef and kiwifruit in particular, is being eaten into by rivals facing lower tariff barriers because of their free-trade agreements with the Koreans.
If last year is any guide, NZ exporters will pay $200 million in tariffs on goods crossing the Korean border this year.
The International Business Forum’s executive director Stephen Jacobi said Korea was still to make a final decision on whether it wanted in on the TPP and was analysing the potential economic impact of joining.
But he said business leaders he spoke to in Seoul last week increasingly recognised the TPP as a means of not just reducing tariffs – which has been achieved to a large degree through its network of existing free-trade agreements – but helping clear other barriers to trade, such as unwieldy border and customs procedures.
“I think what has changed a bit on Korea’s estimation of TPP is that they have now kind of got the message about its value in terms of its impact on regional supply chains.”
TPP was also attractive to Korean business because of potentially less-restrictive rules of origin for its exports, Jacobi said.
Those would allow Korean multinationals like Samsung to claim tariff reductions in overseas markets on goods with high levels of imported components that might have bypassed them in its existing trade agreements.
The small size of NZ’s consumer market and low tariff barriers had held back getting a deal with South Korea but its interest in the TPP could help conclude negotiations with NZ that started in 2009, Jacobi said.
It was uncertain whether Korea could join the TPP as part of the current 12 countries or would have to wait until an initial deal was done before joining the talks, he said.
