Opinion: Kiwis now have a free trade deal with Korea but expect politicians there to put up a big battle to fend off Kiwi goods
New Zealand exporters currently pay $229 million a year in export duties. The FTA will save exporters about $65 million in duties alone.
Korea is New Zealand’s sixth largest export market. It has a highly protected agricultural sector. The barriers on New Zealand goods has the impact of narrowing Koreans’ opportunity of consuming probably the best agricultural products in the world.
The Korean market has a total of nine trade agreements in force covering 47 countries. New Zealand has to compete with all these 47 countries and their preferential rates if they supply similar products and services to Korea.
My recent discussions held with top executives of New Zealand exporting industries indicated that a trade agreement with Korea will open doors for a lucrative market for Kiwi exports.
Although the FTA with Korea has now been sealed, the agreement will not come into force without the approval from the Korean parliament. However if you believe it will all be smooth sailing for New Zealand, think again.
Though New Zealand has a strong relationship with Korea that goes back to the Korean War, the Korean parliament still has the possibility of taking a more politically-sound decision. It is therefore safe to say that the Korean parliament will continue its attempt at safeguarding its local industries.
In 2013, Korea was the 6th and 8th largest export and import partner of New Zealand with bilateral trade between the two standing at $4 billion in the June ending June, 2014. New Zealand is not a significant trade partner for Korea in terms of numbers. That will further cement parliament’s move to put barriers to the deal.
The FTA can pave way for Korean consumers to enjoy New Zealand’s high quality agricultural products with its clean green image. Since Korea imports over half of its agricultural needs, the FTA will benefit Korea – provided the Korean parliament can cast its vision beyond protecting domestic industries.
What New Zealand needs to emphasise post FTA, is that the agreement can help lift the quality of Korean lives by providing access to high quality products and services at competitive prices.
Mere protection is just a cost to the consumer, because at the end, consumers incur the price of protection by paying a higher price for products that can be gained from overseas at a lower cost.
Innovate, not protect
If the Korean parliament really wants to protect its industries, it should take measures to motivate Korean industries to innovate.
Economies that focus on research and development will move up the innovation chain. Innovation that is led by strong research and development will ultimately lead to investments that will go into developing better products and services for consumers.
New Zealand with its strong agricultural expertise and strong research base in the agriculture sector can possibly help Koreans in research and development in the same area.
Joint efforts could be those targeted at benefitting both the New Zealand and Korean farmers.
Trade should not be confined to just an exchange of goods; it should include the exchange of knowledge and expertise for the benefit of consumers of the partner nations.
It is the time for New Zealand to show the Koreans how New Zealand’s agricultural success can be leveraged by Korea for its own agricultural industries’ benefits.