Thursday , April 26 2018
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NZ Reaction to end of marathon negotiation on Korean FTA – first the positive news

Here’s a quick snapshot of what NZ Business is saying about yesterday’s conclusion of the FTA agreement

NEW ZEALAND BUSINESS FORUM  (NZIBF) welcomes end of marathon negotiations –  delighted Trade Minister Groser and his officials have got it over the line.

NZIBF Chairman Sir Graeme Harrison noted  Korea is a significant trading partner for New Zealand and a number of key export sectors including dairy, meat and kiwifruit stood to be severely disadvantaged if NZ could not achieve a more level playing field with its key competitors in the Korean market notably Australia, Canada, the European Union and the United States all of whom have already concluded FTAs.

Sir Graeme said the negotiation had been difficult and all that New Zealand might have wished is unlikely to have been achieved.

“While we still need to analyse the content of the FTA, we are confident that officials were fully aware of New Zealand interests and have done the very best they can. Korea’s growing interest in joining the Trans Pacific Partnership (TPP) provides us an opportunity to seek stronger outcomes in those areas where our full ambition may not have been realised”.

The New Zealand International Business Forum has been active in Korea in recent years to assist the Government to secure this FTA, holding two Korea New Zealand Business Roundtable events with its partner the Korean International Trade Association (KITA).

“We congratulate both Korean and New Zealand Governments and stand ready to work with our partners to ensure this new agreement leads to new business and strategic partnerships across a range of sectors”.



DCANZ notes the  agreement will result in elimination of tariffs on the vast majority of dairy tariff lines 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 also includes a permanent quota on milk powder which begins at 1500 tonnes and then increases at 3% per annum until year 10.  All of these results compare very well with the results of the previous FTAs that Korea has concluded with the EU, US and Australia.

 DCANZ chairman, Malcolm Bailey, said that the agreement was a good outcome given these had been very difficult negotiations. “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,” said Bailey.

New Zealand is a longstanding and trusted supplier of dairy products to Korea. Korean dairy consumption is continuing to expand in-line with rising incomes and imported products play a role in meeting consumer demand that cannot be met by domestic production alone.

 “In 2013, Korea was New Zealand’s 19th largest dairy export market, with trade valued at USD$200.5 million,” said Bailey. “New Zealand exporters currently face import tariffs on dairy of between 8 and 176 percent.  In the absence of this deal, this would have resulted in New Zealand 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 New Zealand’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 New Zealand industry.”

The agreement with Korea will also complement New Zealand’s existing trade agreements in North Asia including those with China, Hong Kong and Taiwan. “New Zealand’s growing suite of trade and economic co-operation agreements is testament to the commendable bipartisan approach successive New Zealand Governments have taken to trade liberalisation.  This approach continues to be to the benefit of New Zealand as a whole, as well as the dairy sector,” Bailey said.



(Over past year  Zespri growers have paid approximately $20 million in tariffs into this important market_

“It is hugely satisfying that the industry can focus on building sales in the South Korean market, which will benefit both New Zealand and South Korean growers, as well as South Korean consumers,” says Zespri CEO Lain Jager.

“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.”

South Korea is a very important market to Zespri but the absence of an FTA and the resulting tariff disadvantages as well as the subsequent uncertainty around the investment environment has held back development until now. “Zespri has worked with the governments of New Zealand and South Korea for a number of years at all levels to encourage the FTA process and find an outcome to benefit both the South Korean and New Zealand kiwifruit industries, as well as the Korean consumer. We are hugely excited at the future potential of the FTA and congratulate all those who have worked tirelessly to achieve this result,” says Jager.



Beef + Lamb New Zealand (B+LNZ) and the Meat Industry Association (MIA) reckon the the recently-concluded free trade agreement will provide a major boost for New Zealand’s red meat exports there.

“This deal is great news for sheep and beef farmers and meat exporters,” said Beef + Lamb New Zealand Chairman James Parsons.

Korea is New Zealand’s fourth-largest beef export market by volume, taking nearly $110 million of beef exports last year. However, the trade volume has dropped significantly in recent years, at least in part due to the tariff advantage enjoyed by US beef exporters under that country’s 2012 FTA with Korea.

New Zealand beef currently faces a 40% tariff when it enters the Korean market, but the FTA will remove that tariff over a 15 year period. The Korean tariff on US beef is currently at 32% and is also being phased out over 15 years.

Last year the Korean tariffs charged on New Zealand’s beef exports added up to about $43.5 million. That is effectively about $1.34 of additional cost per kilogram of carcass weight on beef products that were shipped to Korea.

The additional cost imposed on New Zealand’s beef exports by these tariffs will start going down from the day that the FTA enters into force. In the first year of implementation the tariff cost is forecast to come down to about $1.25 per kilogram of carcass weight.

“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,” said MIA chairman Bill Falconer.

“Ensuring meaningful access to Korea has been one of the industry’s highest trade priorities.”

The FTA negotiation with Korea had been running since 2009, which indicates that some issues had taken significant time to resolve.

“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,” said Parsons.

“Huge credit has to go to the government negotiators who have been working on this FTA with Korea, and to Trade Minister Groser. They’ve done an excellent job for Kiwi sheep and beef farmers and exporters,” said Falconer.

B+LNZ and MIA work together to improve access for sheep and beef products to overseas markets, including by providing in-depth analysis in support of the Government’s FTA negotiation efforts.


About Fran O'Sullivan

Fran O’Sullivan is Managing Director of NZ INC. She is a former editor of the National Business Review and a prominent columnist for the New Zealand Herald, where she writes on business, politics, and international affairs, and manages the annual high-profile Mood of the Boardroom project. Fran took up the position of Editorial Director – Business for NZME in April 2015.

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