KAFTA – a boon or bane for Australia ?

 

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From left: Australia’s trade minister Andrew Robb with his South Korean counterpart Yoon Sang Jick.

Source:The Guardian

KAFTA (Korea-Australia Free Trade Agreement) is a “high-quality deal” for the Australian services sector, which employs 80 percent of Australians declared Trade Minister Andrew Robb. “KAFTA opens up all sorts of doors across legal, accounting, financial, engineering, telecommunications, education, environmental, as well as film and television services,” he said. It would seem that a lot of industries are considered to receive a boost from signing the free trade agreement. However the more important question to be asked is whether the agreement is finest arrangement for Australian jobs and that the best possible access to Korea’s market is real?

Though labor knows that this FTA can enhance Australia’s economic growth by creating more jobs, forging more competitive local industries and also giving consumers greater choice at lower prices, but this can only be achieved depending on the quality of the deals which governments negotiate.

The deal which is anticipated to increase Australian exports to Korea by 73 percent over the coming 15 years as well as give a $653 million boost to the Australian economy annually, saw mixed reactions amongst various interest groups.

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Source: Australian Government, Department of Foreign Affairs and Trade

The agriculture sector hailed the FTA which will see the removal of tariffs on majority of Australia’s exports to South Korea including beef, dairy, sugar, wine seafood, grapes cherries and mangoes.

Beef producers will be the biggest winners of the deal since the Beef tariffs for the past 15 years varied between 40 and 72 percent which are now being abated to zero. However, the Australian Government has agreed to give the South Korea the right to reinforce significant tariffs on Australian beef if ever the volume of beef exports crosses over the 2% of total exports to South Korea a year.

Rice and honey were the only significant agricultural commodities to be excluded from the deal and will continue to face exorbitant tariffs. It has left the Australian rice and honey industry enraged.

Rice Growers Australia executive director Ruth Wade says the Federal Government needs to make amends, adding that the deal is “free trade” in name only.

The executive director of the Australian Honey Bee Industry Council, Trevor Weatherhead says that’s in contrast to New Zealand’s free trade deal with Korea, which will see NZ honey subject to zero tariff when its FTA is fully implemented.

As a result, the Australian honey industry will continue to attract tariffs up to 250 percent.

The Australian government admits that some sectors may face increased competition from Korean imports, such as motor vehicles, automotive parts, steel products and textiles, clothing and footwear.

Labor is also afraid of the potential impact of KAFTA on Australia’s automotive manufacturing sector.

South Korea being no.1 exporter of cars to Australia has an immediate auto-industry benefit as Australia agreed to remove tariffs on South Korean compact and midsize cars as soon as the pact comes into effect. This is in contrast to the threats faced by auto industry in Australia, following the decisions by Ford, Holden and Toyota to stop making cars in Australia. This has sparked fears amongst thousands of auto component manufacturers regarding their job security.

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Labor Senator Penny Wong said she was concerned about the impact of “any” proposed ISDS mechanism.

Source: The Sydney Morning Herald

The agreement also includes a controversial provision for a mechanism called investor-state dispute settlement (ISDS). This would allow South Korean corporations to sue the Australian government if it does something that negatively affects the profit stream of a South Korean government. This raises concerns amongst labor regarding the impact of ISDS on Australia’s ability to legislate in areas such as health policy, environmental standards and social policy.

Although the government claims that it has retained carve-outs and safeguards in important policy areas, the labor populace however still remains to be convinced. The labor feels that it is the responsibility of the government to allay their fears regarding the implementation of the social policies such as the Pharmaceutical Benefits Scheme, which is an important part of Australia’s social safety net.

Though removal of trade barriers may boost Australia’s trade with Korea as well as make Australia’s economy more robust- but this can only be achieved depending on the quality of the deals which governments negotiate. There are many issues that need scrutiny to ensure proper upkeep of the national interest of Australian public.

References

  1. http://www.abc.net.au/news/2013-12-05/australia-south-korea-to-sign-free-trade-agreement/5137934
  2. http://www.smh.com.au/national/south-koreans-free-to-sue-thanks-to-new-free-trade-agreement-20131205-2ytx1.html
  3. http://www.abc.net.au/news/2013-12-05/australia-south-korea-to-sign-free-trade-agreement/5137934

 

 

 

 

 

 

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