The recently announced free trade agreement (FTA) between New Zealand and the Republic of Korea has been welcomed by the Minister for Trade and the red meat sector.
Prime Minister John Key and Korean President Park Geun-hye announced yesterday that the FTA negotiation had been concluded.
Welcoming the announcement Trade Minister Tim Groser said that the deal with one of New Zealand’s biggest and most important trading partners “will deliver real economic benefits for both our countries. It will create more opportunities for our business and will deliver cheaper products to consumers. It’s a win-win agreement.”
On entry into force, tariffs will be eliminated on 28 percent of current New Zealand exports. Tariff cuts under this FTA will create an estimated duty saving of $65 million in the first year alone. duties on New Zealand’s current exports will largely be eliminated within 15 years.
Exports of New Zealand meat and meat products accounted for 11 percent of this country’s $2 billion exports to Korea in the year ending June 2014, according to the Ministry of Foreign Affairs and Trade (MFAT). Worth $175 million, the meat and meat product exports incurred duties of around $70 million a year.
FTA major boost for NZ red meat exports to Korea
The FTA will provide a major boost for New Zealand’s red meat exports to Korea, according to the chairmen of Beef + Lamb New Zealand (B+LNZ) and the Meat Industry Association (MIA).
“This deal is great news for sheep and beef farmers and meat exporters,” says B+LNZ 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 percent 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 percent 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 carcase 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 carcase 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,” says 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,” says 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,” says 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.
According to MFAT, Korea’s current tariff on sheepmeat is 22.5 percent, which under the FTA will be eliminated in year 10. The current tariff for offal is 18 percent and the tariff on meat preparations, including meat extracts, ranges from 30-72 percent. Both will be eliminated in year 15.
The tariff on New Zealand venison is currently 27 percent, which reduces to zero in 10 years time.
Now that the negotiations have been concluded, the next step is for the FTA to go through a legal verification and translation process, before it can be signed.