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Support for a South Korea-New Zealand free trade deal has been increasing in recent months as both sides realize the potential positive impact on their respective economies of such a deal.

Support for a South Korea-New Zealand free trade deal has been increasing in recent months as both sides realize the potential positive impact on their respective economies of such a deal.

Hee-Beom Lee, chief executive of the Korean International Trade Association (Kita), and Korea’s Free Trade Agreement (FTA) Alliance, an alliance of three other major industry lobbies pushing for the country’s international expansion, which he is also a co-chairman of, are heavily advocating the Korean government’s push to negotiate free trade deals with many important countries such as New Zealand. South Korea wants to more than double its total bilateral trade to $5 billion within a few years, which would clearly help expand the country’s local industries worldwide.

Talks about a South Korea-New Zealand FTA have been on the table as early as 1999, when South Korean President Kim Dae-jung suggested the idea during his visit to New Zealand that year. In 2003, the Korea-New Zealand Business Council said that an FTA between the two countries could potentially double exports within five years. In October 2005, the Wellington Regional Chamber of Commerce and the Busan Chamber of Commerce and Industry signed an agreement committing both Chambers to push their respective governments for an FTA . They argued that the two countries had very complimentary economies, with South Korea’s strong high-technology industry and New Zealand’s competitive agricultural and livestock industry. They hoped to start FTA negotiations with services and investments and then finish with negotiations on goods, which is a more sensitive issue for both countries.

However, early talks about the FTA have been stalled by concerns and reservations from the Korean side. The lack of political will in Korea to start an FTA with New Zealand was cited as one of the main hindrances to a deal. Moreover, in November 2005, South Korea’s Foreign Ministry said its agricultural industry is very likely to suffer from cheaper imports from New Zealand. Korean farmers have stood firmly against free trade agreements in the past because they fear that the flood of agricultural imports due to lower trade barriers will ruin their livelihoods.

But support for the FTA has been gradually increasing in the past year since a joint feasibility study, completed in December 2007 by the New Zealand Institute of Economic Research and the Korean Institute for International Economic Policy, reported that an FTA “would offer economic benefits to both countries” and that it would increase real GDP by $5.9 billion for Korea and $4.5 billion for New Zealand over the 2007-2030 period. The report also showed how complementary the two economies are. New Zealand exports much-needed raw and intermediate materials such as logs, beef and aluminum to Korea while Korea exports quality manufactured goods such as electrical equipment, cards and machinery to New Zealand. According to the International Monetary Fund Trade statistics, South Korea exports to New Zealand in 2007 totaled $699 million while New Zealand exports to South Korea totaled $981 million.

In May 2008, New Zealand Prime Minister Helen Clark held talks with Korean President Lee Myung-Bak to discuss the timing of the start of free trade negotiations. It is now expected that negotiations will start in the first half of 2009.

In January 2009, the New Zealand government started asking for submissions from the public regarding their views and interests about the FTA with South Korea. It particularly wants specific issues that New Zealanders want to be addressed during the negotiations as well as the outcomes that they want to see from the FTA.

In February 2009, it was reported that South Korean companies, such Hyundai Hysco and SK Energy, are keen on the free trade deal, citing the huge investment potential of New Zealand resources. Hyundai Hysco had already signed a contract to participate in an oil and gas exploration in the Taranaki Basin.

It was also recently reported that South Korea’s increase of support for the FTA with New Zealand comes as the country aggressively pushed an agenda to strengthen bilateral relations with many influential countries, including the U.S., Japan, and India. South Korea hopes to use these trade agreements to strengthen its export-oriented economy and secure food and commodity imports.

Expectations for the South Korea-New Zealand FTA are high as the two countries start entering negotiations for the deal this year, but the ultimate effects of the free trade will remain to be seen in the next few years.

Source: AsiaEcon.org
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Source: www.asiaecon.org |

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