The dairy, meat and kiwifruit sectors have welcomed the deal but the deer industry said it was disappointed.
Two way trade with South Korea was $4 billion in the year to June 30 and cost New Zealand exporters $229 million in duties.
“The FTA will put NZ exporters back on a level playing field with competitors from Korea’s other FTA partners, such as the United States, Chile and the European Union,” Key said.
Australia, Canada and China were also forming agreements with South Korea.
The Foreign Affairs and Trade Ministry website said the deal would boost bilateral trade and investment links with NZ’s sixth-largest merchandise trading partner.
Examples of the Korean tariffs included 89% on butter, 45% on kiwifruit, 40% on beef, 8% on cosmetics and up to 11% on processed wood products.
“The growing disparity between the high tariff rates imposed on NZ goods and the reducing preferential rates under the FTAs that Korea has concluded with NZ’s competitors threatens the sustainability of NZ businesses’ links to Korea.
“The FTA will address this imbalance so that NZ businesses can continue to trade in the Korean market,” MFAT said.
“Many NZ businesses also face a range of challenging non-tariff barriers and frequently changing regulatory conditions when providing goods, services or investment in the Korean market.
“Navigating complex requirements around labelling, standards testing or certification can be difficult and onerous.
“Improving co-operation and understanding between regulators under an FTA will make it easier to do business with Korea.
“Many NZ primary and intermediate products are important inputs for Korean manufacturing.
“Global competition for these products has increased in the wake of NZ’s other FTAs.
“An FTA with NZ will be a tool to ensure ongoing supply to Korea of much-needed products for domestic consumption and manufacturing,” it said.
Korean imports into NZ were mainly capital and consumer items such as vehicles, electrical equipment and machinery.
MFAT said many major Korean brands were already household names in NZ which could become an ideal test-bed for products before they were introduced into larger markets of Western consumers.
Trade Minister Tim Groser said “The FTA will deliver real economic benefits for both our countries. It will create more opportunities for our business and will deliver cheaper products to consumers. It’s a win-win agreement.
“There are positive outcomes for agricultural exports as well as the forestry sector, the fisheries industry and exporters of all industrial goods. Government procurement, trade in services and investment are all subject to high quality commitments.”
Once ratified the deal would eliminate tariffs on 48% of existing NZ exports and duties on them would largely be eliminated within 15 years, he said.
Dairy Companies Association chairman Malcolm Bailey said the deal would eliminate tariffs on most products over reasonable periods.
“For cheese, there will be a transitional quota of 7000 tonnes growing at 3% per year until elimination. For butter, there will be an 800 tonne quota increasing at 3% per year until elimination.”
The agreement included a permanent quota on milk powder which began at 1500 tonnes then increased at 3% a year until year 10.
All compared very well with agreements between Korea and the EU, US and Australia.
"With other larger countries having concluded FTAs already with Korea, it was undoubtedly a hard road for Minister Groser and his negotiators to get these outcomes.
“They have done a fine job in those circumstances and the dairy industry deeply appreciates their efforts," Bailey said.
"NZ exporters currently face import tariffs on dairy of between 8% and 176%.
“In the absence of this deal, this would have resulted in NZ dairy exports being at a disadvantage compared with EU, US and Australian exporters who already have FTAs in place.
"In concluding this deal the Government has ensured that NZ's trade opportunities will not be curtailed as a result of export competitors enjoying lower tariff rates than us. That has been a very real worry for the NZ industry."
The deal would provide a major boost for red meat exports, Beef + Lamb NZ chairman James Parsons said.
“This deal is great news for sheep and beef farmers and meat exporters.”
Trade volume had dropped significantly in recent years, at least in part because of the tariff advantage enjoyed by US beef exporters.
NZ beef had a 40% tariff when it entered the Korean market. US beef has a 32% tariff. Both those tariffs will be phased out over 15 years.
"We know this negotiation has been a tough one but for our beef exports it is a lifeline in a market that we were at real risk of losing,” Parsons said.
Last year the Korean tariffs on NZ beef exports were $43.5m, adding $1.34/kg carcaseweight of cost. In the deal’s first year that would be cut to $1.25/kg.
“We were at risk of losing our competitiveness in the Korean market due to the US FTA and other deals that Korea has signed with beef exporters in recent months but this deal will make sure that we don’t fall further behind our competitors,” Meat Industry Association chairman Bill Falconer said.
“Ensuring meaningful access to Korea has been one of the industry’s highest trade priorities,” he said.
Zespri growers paid about $20m in Korean tariffs in the last year.
“It is hugely satisfying that the industry can focus on building sales in the South Korean market, which will benefit both NZ and South Korean growers as well as South Korean consumers,” Zespri chief executive Lain Jager said.
“With volumes of our new SunGold variety increasing to over 50 million trays by 2018, this gives us a strong platform to build sales in this market.”
The absence of an FTA and the resulting tariff disadvantages as well as the subsequent uncertainty around the investment environment had held back development of that market.
But Deer Industry NZ chairman Andy Macfarlane said it was deeply disappointed.
South Korea took about 60% of NZ’s deer velvet antler production. Frozen deer velvet, which accounted for about 75% of NZ’s $20m velvet exports to Korea, had been completely excluded.
Processed (dried) deer velvet was included but the phase-out period for the 20% tariff was 15 years.
“While the inclusion of processed velvet will be helpful for our struggling processers over the longer term, the drawn-out reduction in the tariff could be too little, too late for some,” Macfarlane said.
“Korean deer farmers and velvet processors appreciate the benefits of collaborating with NZ producers to develop the market for their products and appeared generally supportive of an FTA with NZ.
“We are simply at a loss as to why frozen velvet has been excluded.
“Although this FTA was imperative for some industries, it clearly falls short of the comprehensive trade agreements that NZ has negotiated previously. In future negotiations we will have to live with the precedent that has been created.
“For the deer sector, this is much less than what we had thought was possible but we do recognise that this deal will deliver benefits for the wider primary sector and for the NZ economy generally.”
While the deer velvet sector was not worse off the deal would inhibit the growth of a more direct export trade to Korea for frozen velvet, which would have enabled a closer connection between producer and customer, he says.
“Large food companies in Korea were looking at NZ frozen deer velvet as an ingredient in new health products and its exclusion from the FTA will hinder those opportunities.”
“We will focus on the positives and look to emphasise the long-term opportunity for export of processed velvet products to Korea,” Macfarlane said.
NZ Winegrowers and the International Business Forum also welcomed the deal.
