Clarky's Comment - June 2009, Korea Free Trade Agreement

Korea Free Trade Agreement

During the week commencing 8th June, I joined 32 other Kiwis in Seoul for the Korea New Zealand Business Round Table. Organised by the NZ International Business Forum www.nzibf.co.nz and the Korea International Trade Association www.kita.org this event had the objective of engaging with senior Korean business leaders in support of the Free Trade negotiations that were taking place in the same week in Seoul. The event was endorsed by President Lee, Myung-Bak of Korea and Prime Minister John Key, and was attended by Trade Minister Tim Groser and his Korean counterpart Jong Hoon Kim.

The gathering and concurrent FTA negotiations were covered extensively by the press in Korea.


Roundtable delegates - Photo courtesy NZIBF.

In addition to the two governments concluding the Free Trade Agreement, the event explored ways for NZ and Korean businesses to make the most of the free trading environment. The big winners will be dairy, meat, kiwifruit, seafood and other food producers that currently face very high tariff barriers in Korea.

But forestry should also be a winner. Our single biggest (by volume and value) export to Korea is logs. While logs attract just 2% tariff at present, sawn timber, veneers and plywood attract tariffs at 5% - 8% from NZ and 0% from Chile. This is sufficient, along with other factors to discourage Korean firms from establishing processing facilities in New Zealand. Other factors that are moving the economics in favour of processing in NZ rather than shipping logs are:

  • The high and volatile cost of bulk shipping.
  • The heavy reliance of Korea on imported fossil fuels for electricity generation, and the rising cost of those fuels.
  • The real possibility that Korea will take on binding emission reduction targets or introduce domestic measures that put additional cost on energy generated from fossil fuels, based on CO2 emissions, to encourage development of renewable generation.

Peter Clark presents to the Business Roundtable on the use of wood and forests to help achieve "green growth" targets. Photo courtesy NZIBF.

In addition there is a strong case for increased use of wood in Korean buildings. President Lee is strongly promoting "green growth" as the way forward for Korea, and has devoted a lot of government funding and resources to finding ways to achieve that.