Introduction

The Republic of Korea (ROK) known as South Korea sits at the southern end of the mountainous Korean Peninsula. Its 48 million people occupy a land area of 97,100 square kilometres, less than half the size of Victoria.

Australia and South Korea share a broad and deeply-rooted set of global interests and values and, as fellow liberal democracies in Asia, are complementary middle powers. Like Australia, South Korea depends on the open international trading system to power its economy. And like Australia, South Korea has undergone extensive reform—transforming into a developed economy and building a vibrant democracy out of the ashes of the Korean War in just two generations. South Korea's rapid industrialisation began in the 1960s and required large quantities of raw materials. Australia was able to supply these much-needed natural resources to South Korea's industrial giants—such as the steelmaker POSCO, which is one of Australia's largest corporate clients.

The conclusion of a high-quality free trade agreement (FTA) will ensure continued growth in services trade and diversified investment opportunities for both countries. The FTA will provide Australian and Korean consumers with more choice and cheaper prices. It will also secure Australia's position as a key provider of resources to South Korea.

Government, business and people-to-people links

The first recorded contact between Australia and Korea was in 1889, when Australian missionaries landed in Busan. During the Korean War, from 1950 to 1953, Australian personnel fought across the peninsula as part of the United Nations operations to defend South Korea. Since then, a steady flow of tourists, working holiday-makers, businesspeople and migrants has exposed Koreans to Australian culture. People-to-people links in the corporate sector through the Korea–Australia and Australia–Korea Business Councils help to consolidate private sector linkages between our two economies.

More than 88,000 people of Korean ancestry live in Australia, according to the 2011 census, and their success has contributed to good relations. In 2012 there were 27,000 Korean student enrolments across all education sectors. As of April 2012 there were 169 Australian university students studying in Korea. In 2011, it is estimated that there were over 650 first year university Korean language enrolments in Australia. Broader cultural, academic, business and community exchanges are growing and since its establishment in 1992 the Australia-Korea Foundation has played an important role in supporting such exchanges.

Of the passenger movements between our countries, over 70 per cent are by Korean nationals. South Korea shares with Australia a strong sporting culture, and links through soccer – which is very popular in Korea – have strengthened with Australian participation in Asia Cup and Asia Champions League matches since 2006.

Australia exported $25 billion in goods and services to South Korea in 2011, of which nearly $7 billion was iron ore and another $7 billion was coking and steaming coal. Two-thirds of South Korea's steel needs are met by Australian iron ore, and Australia provides 40 per cent of South Korea's coal needs.

The country is poor in agricultural and energy resources. Australia has played a vital role in securing South Korea's food and energy needs. We exported $773 million worth of beef to South Korea in 2011, plus large quantities of wheat, sugar, flour and dairy products, along with crude oil, uranium and growing volumes of liquefied natural gas. South Korea supplies manufactured goods such as Hyundai and Kia cars, Samsung flat-screen TVs, and LG whitegoods and mobile phones.

The East Asian regional economy is undergoing profound changes, and Australia- South Korea economic relationship reflects this. Build-and-ship exporting has given way to investments in longer and stronger production and supply chains. Australian and Korean companies are increasingly establishing a physical presence in each other's economies. Australian firms such as Macquarie, ANZ, Boral and Woodside have invested in South Korea.

High-level Australian political engagement with South Korea is active. Prime Minister Gillard has visited South Korea three times, and a steady stream of ministers and parliamentarians continues in both directions. Australia and South Korea hold regular foreign and trade policy discussions, including through a senior-officials-levels strategic dialogue established in 2012, defence policy talks and other consultations that bring together officials and private sector representatives from both countries.

Australia has a real stake in security developments on the Korean Peninsula, reflecting our deep integration with the North-East Asian economy. The Korean War did not conclude with a peace treaty, but with a military armistice. Australia remains a member of the United Nations Command on the peninsula, and our military representatives still sit across from North Korean negotiators at the peace village of Panmunjom in the demilitarised zone from time to time and conduct investigations into armistice violations. Australia and South Korea share a strong defence relationship and engage in a comprehensive program of strategic dialogue and practical activities. Australian military support for South Korea has been practical and effective; for example, after the sinking of South Korea's naval ship Cheonan in 2010, Australian specialists participated in an international investigation into the incident.

Our security cooperation with South Korea is of global reach. The leaders' Joint Statement on Enhanced Global and Security Cooperation in 2009 laid the groundwork for greater cooperation on counter-proliferation, peacekeeping, disaster relief and other civil–military operations, and expanded our shared security concerns to cover non-traditional threats such as transnational crime, piracy and people smuggling.

In recent years, South Korea and Australia have drawn closer together as partners in shaping responses to shared challenges, including regional and international security, global and regional economic governance, climate change, and development cooperation. South Korea was a founding member of the Asia–Pacific Economic Cooperation (APEC) forum. Then Australian Prime Minister Bob Hawke announced its establishment in Seoul in January 1989. Australia and South Korea are influential members of the Group of Twenty (G20), the pre-eminent global economic forum, where we work together to improve global economic governance and maintain the open markets so vital to global prosperity. The two countries also work closely in the IMF and World Bank, sharing constituencies and rotating chairing arrangements. More broadly Australia and South Korea promote deeper Asian regional integration, notably through the East Asia Summit.

Both countries have rapidly scaled up their spending on development assistance to other countries. The 2009 Memorandum of Understanding on Development Cooperation reflects our common interest in advancing development outcomes in the Asia–Pacific region. As host of the fourth High-Level Forum on Aid Effectiveness in 2011, South Korea took the lead in bringing together donors and aid recipients for the first time to develop a monitoring framework for international aid. As the Korean International Cooperation Agency expands its overseas presence, particularly in Southeast Asia and the Pacific, where Australia has long experience working with local partners, the two countries will be able to strengthen cooperation to ensure effective development outcomes.

Towards 2025

Although currently at different ends of value chains, with Australia focused on resources and South Korea on intermediate finished goods, there is tremendous potential for the two countries to partner in services and innovation. Australian service providers, including finance, health, education and retail firms, are well placed to power a new phase of consumer-driven growth through investment in South Korea.

South Korea is a world leader in high-technology manufacturing. Corporate giants such as Samsung, SK Hynix and LG are well known for researching, developing and commercialising consumer gadgets and hardware. Given our international profile in breakthrough research and development, Australia is well suited to work with Korean firms to bring the next wave of consumer technologies to market. Both countries' early investment in the field of information technology, and record of innovation, will be of benefit to the other, creating further opportunities in the dynamic online environment.

By 2025, Korean manufacturers with offices or headquarters in Australia will be matched by Australian banks, consultants, law firms and accountants with a presence in South Korea capable of navigating the local business environment fluently and with confidence. Australia and South Korea will increasingly look to each other to provide content for digital broadcasters and services—with Australia as a purveyor of high-quality educational programming, for example, and South Korea as a regionally recognised engineer of popular culture.

South Korea is seeking to strengthen its resource security by diversifying its import sources and investing in mines. It has recently signed three major LNG contracts to source gas from Australia with Santos (Gladstone LNG), Total (Ichthys) and Shell (Prelude). By 2015, when full production is expected to begin, these contracts should provide around 25 per cent of South Korea's LNG, up sharply from the current 2 per cent.

There is also great potential to deepen our cooperation on climate change and green growth. Both countries are working towards the introduction of flexible carbon trading schemes by 2015 and have agreed to cooperate in multilateral climate negotiations, credible integrated carbon markets and domestic climate action, including carbon measurement, reporting and verification. South Korea is taking the lead in diffusing green growth plans and technologies to the developing world through the Global Green Growth Institute, of which Australia is a founding member.

In the future, the Australian and South Korean armed forces will have built considerable mutual understanding and interoperability, making us more effective in joint operations and better equipped to respond to emergencies and regional disasters. South Korea is likely to continue to develop as a significant regional supplier of military equipment and will look to Australia's high-technology armed forces as potential buyers.

Australia will continue to work with South Korea in facing the challenge of denuclearising the Democratic People's Republic of Korea (DPRK) known as North Korea and seeking its economic development. Should Korean unification occur, it will make herculean demands on South Korean economy, fiscal resources, social services and governance. As well as aid and resources, Australia would be able to offer expertise in development (particularly of mineral resources), social services provision, security and social inclusion should the North Korean regime undertake a fundamental shift in direction.

By 2025, Australian political leaders, officials, business people and broader community will have built stronger habits of consultation and cooperation with their Korean counterparts and will look to South Korea as a natural partner on questions of global strategic, economic and environmental governance. Ministers, major corporate actors, state governments and educational institutions will be meeting regularly with South Korean counterparts. Working together and consulting frequently will allow us to coordinate more effectively as responsible middle power partners.