Korea and Australia have reached a free trade agreement after resolving controversial issues over beef and an investor-state dispute settlement clause, trade officials in Seoul said Thursday.
The FTA, which was virtually concluded Wednesday during the trade ministers’ talks in Bali, Indonesia, will be the Park Geun-hye administration’s first trade deal. If effectuated, the FTA will be Korea’s 11th such deal.
The FTA would lower the tariffs for Korean automobile and electronic export products, while providing trade barriers for local agricultural and livestock industries, officials said.
“As a result of the bilateral ministerial talk held on Wednesday, Korea and Australia agreed that their two-way FTA negotiations have successfully rounded off,” Trade Minister Yoon Sang-jick told reporters in a press briefing Thursday.
“After a thorough legal review of the draft agreement, we will initialize a provisional version hopefully in the first half of next year.”
On the premise that the parliament ratifies the agreement without delay, the final pact is expected to take effect in early 2015.
The trade minister visited Indonesia’s Bali earlier in the week to participate in the ministerial conference of the World Trade Organization.
“The two countries reached an agreement on most pending issues, especially the Investor-State Dispute settlement clause,” Yoon said.
The trade negotiations of Korea and Australia first kicked off back in 2009 but fell apart in the following year, largely due to Australia’s opposition to the controversial ISD clause, which allows investors to file a compensation suit against the state.
The two countries resumed the talks in November this year, while multilateral regional trade blocs such as the U.S.-led Trans-Pacific Partnership picked up momentum in the global forum.
“Australia, which was quite eager to have the bilateral FTA settled, agreed that a protection measure is needed for Korean investors,” said Woo Tae-hee, the ministry’s chief FTA negotiator.
The Oceanian state has signed more than 10 trade agreements so far but this is the first time that it consented to an ISD clause, he explained.
As for the concerns that the FTA may infringe upon the domestic agricultural and livestock industries, the Trade Ministry said that sufficient prevention measures had been adopted.
“The tariff on highly sensitive items such as beef and dairy products will be abolished on a long-term basis of 10 years or more,” Woo said. Currently about 40 percent tariff has been imposed to beef from Australia.
Exceptional provisions such as the Agricultural Safe Guard or Trade Rate Quota will also be applied as to minimize the impact of the trade pact on the domestic market, he added.
Australia, on the other hand, agreed to immediately abolish all tariffs on most of Korea’s key export items, such as automobiles, electronics and machine goods, according to the trade chief.
“It is true that the Korea-Australia FTA is more conservative, meaning that it allowed a narrower range of market opening on agricultural and livestock goods,” said Kim Duk-ho, international cooperation director of the Ministry of Agriculture, Food and Rural Affairs.
“Though supplementary protection measures will have to be established, we expect relatively slight damage to local industries.”
As of last year, Australia was Korea’s seventh-largest trading partner, while Korea was the fourth-largest partner for Australia, as well as its third-largest car exporter.
The trade volume between the two countries reached $29 billion last year.
By Bae Hyun-jung