The free trade agreement between Korea and New Zealand, struck last week, is likely to help boost South Korea’s industrial product exports. At the same time, the domestic agricultural and livestock industries are expected to be hit by competition from cheaper New Zealand rivals, experts said.

“The elimination of tariffs on some of Korea’s key industrial products under the latest FTA is expected to expand Korea’s exports,” said Park Ji-eun, a researcher at the Institute for International Trade. “This is because while New Zealand has world-class competitiveness in commodities, its manufacturing industry is vulnerable to competition.”

The trade deal was announced on the sidelines of the G20 Leaders’ Summit in Brisbane, Australia, to go into effect by early next year. The pact, however, needs to be formally signed and requires parliamentary approval.

Once the red tape is cleared, the two countries will eliminate tariffs on 96 percent of mutual trade and services between Korea and New Zealand. They include beef, butter, kiwi fruit and mutton from New Zealand.

In return, tariffs on South Korean washing machines and tires will be lifted immediately after the deal becomes effective. Those on auto parts, heavy construction equipment and refrigerators will be lifted within the ensuing three years.

The two sides also agreed to exclude rice and other sensitive agricultural produce ― including apples, garlic and chili peppers ― from the deal. Despite this, other industries such as beef processing, cheese, butter and fisheries are likely to be hit.

As New Zealand is the third largest beef exporter to Korea, following Australia and the United States, its competitiveness will be further bolstered with the tariff benefits from the FTA.

Overall, New Zealand is South Korea’s 44th-largest trading partner and two-way trade between the countries is worth about $2.8 billion. Despite the relatively small bilateral trade volume, New Zealand which heavily relies on imports for most industrial products can help boost Korean exports, according to economic experts.

Further, trade between the two countries grew 8.2 percent on average since 2008.

Talks between the two sides for a free trade agreement began in 2009 but were stalled due to concerns here about the impact agricultural products from New Zealand on domestic producers.

By Park Han-na (hnpark@heraldcorp.com)