KAFTA – a snapshot

This Snapshot was published as an information pamphlet before KAFTA entered into force and has not been updated.

Australia and Korea have one of the strongest and most complementary trading relationships in the Asia-Pacific region. The Korea-Australia Free Trade Agreement (KAFTA) reduces trade and investment barriers, making it easier for Australians to do business with Korea – our 4th largest trading partner.

KAFTA is a world-class, comprehensive agreement that substantially liberalises Australia’s trade with Korea - our fourth-largest trading partner. The Agreement helps level the playing field for Australian exporters competing with those from the US, the EU, Chile and the Association of South East Asian Nations (ASEAN), who benefit from existing trade deals with Korea.

“The Korea-Australia Free Trade Agreement is unambiguously good news for the Australian economy”

Jennifer Westacott - Chief Executive, Business Council of Australia

Why Korea?

Korea is Asia’s fourth-largest economy with a population of 50 million people.

Australia and Korea are natural economic, political and strategic partners with common values and interests. Korea is Australia’s third-largest export market and fourth-largest overall trading partner, with total two-way trade exceeding $30 billion in 2012-13.

KAFTA will strengthen and expand opportunities for Australian companies doing business with Korea. Bilateral investment between Australia and Korea has grown and diversified, with the stock of Korean investment in Australia growing 25-fold to $12 billion between 2001 and 2012.

How will KAFTA help Australian companies compete in Asia?

KAFTA is Australia’s first Free Trade Agreement (FTA) to be concluded with a major trading partner in North Asia. FTAs with Japan and China are under negotiation. Together these three economies represent over 50 per cent of Australia’s exports. The opening up of Asia’s major markets is essential if Australian businesses are to successfully compete with the world in the years ahead.

What will KAFTA do for Australian businesses?

KAFTA secures Australia’s competitive position in the Korean market, where some competitors already enjoy preferential access.

On entry into force of KAFTA, 83 per cent of Australia’s goods exports (by value 2015) will enter Korea duty free. The proportion of trade being made duty-free (or covered by preferential tariff quotas) by the FTA is rising each year as tariffs are cut further, and will reach 99.7 per cent coverage on full implementation of the Agreement.

KAFTA provides new market access for suppliers of legal, accounting and telecommunications services and guarantees open access across a broad range of other services sectors, including financial services and education.

Under KAFTA, Korea will have access to the higher Foreign Investment Review Board screening threshold. This is expected to help diversify and grow investment from Korea into Australia.

KAFTA will also lower the cost of Korean products and inputs for Australian businesses as Australia removes tariffs on Korean goods.

How do FTAs benefit Australia?

Free trade agreements provide a framework for Australia's commercial relationship with trading partners, increase trade and investment opportunities, bring money into the Australian economy and help create jobs. Australia pursues high-quality, comprehensive trade agreements when they offer net benefits to Australia, are World Trade Organization-consistent and support the global trade system.

Australia is already benefiting from FTAs with New Zealand, Singapore, Thailand, US, Chile, ASEAN (with New Zealand) and Malaysia. These FTAs are helping Australians access new markets and expand trade in existing markets.

“KAFTA is particularly important to those exporters who haven’t been competing on a level playing field in Korea. It is a huge breakthrough - the value of which should not be underestimated.”

Ian Murray AM - Executive Chairman, Export Council of Australia

KAFTA at a glance - benefits of KAFTA

  • 99.7 per cent of Australia’s goods exports (by value) to Korea will enter duty-free on full implementation of the Agreement
  • KAFTA will enable Australia’s agriculture exporters to compete in this highly protected, lucrative market
  • KAFTA opens new markets in Korea for Australian law firms, accountants and telecommunications providers. It guarantees access in a wide range of other sectors including education and financial services
  • KAFTA will give greater protection and certainty to Australian investors, including the ability to directly enforce investment obligations through an Investor-State Dispute Settlement mechanism
  • Korea will guarantee access for Australian traders and investors (and their families) to stay in Korea for up to two years
  • KAFTA contains an Audio-visual Co-production Annex which will deliver new opportunities for the Australian film and television industry
  • KAFTA establishes a Professional Services Working Group to facilitate cooperation and mutual recognition between professional bodies in both countries

Information and contacts

For more information on KAFTA: www.dfat.gov.au/trade/agreements/kafta/

Department of Foreign Affairs and Trade
RG Casey Building, John McEwen Crescent,
Barton ACT 0221

Phone (02) 6261 1111

Austrade: Information for new and existing exporters www.austrade.gov.au | 13 28 78

Last Updated: 8 April 2014

Case Study: Reid Fruits

Reid Fruits specialises in growing and exporting premium quality dark cherries to consumers in over 20 countries. Fresh Tasmanian cherries can be on Asian supermarket shelves within four days of harvest.

Reid Fruits has been exporting cherries to Korea for over five years. However the company has found it difficult to penetrate the market due to high tariff barriers of 24 per cent and competition from suppliers in other countries who enjoy improved market access under their FTAs.

Under KAFTA, cherries will enter Korea duty free immediately upon entry into force, levelling the playing field for Reid Fruits and allowing its quality cherries to be more competitive.

“KAFTA will help us increase our sales to Korea. It will make our cherries more competitive and more appealing to Korean consumers” said Lucy Gregg, Business Development Manager at Reid Fruits.

Case study: Blackmores

Blackmores is a market leader in the vitamin, herbal and mineral supplement market in Australia, with strong market positions in New Zealand, Thailand, Malaysia, Singapore, Hong Kong, Taiwan, Macau, China, Cambodia and a growing presence in Korea. Blackmores has over 600 employees across Australia, New Zealand and Asia.

Since launching in Korea in 2010, Blackmores has established itself as a high-quality premium natural health brand with Korean consumers. However, Blackmores faces a competitive disadvantage with exports from the US and EU enjoying tariff-free entry while Australian exports face tariffs of up to eight per cent. Under KAFTA, Korea will provide tariff-free entry for all of Australia’s pharmaceutical, vitamin and health supplement products within three years of entry into force of the Agreement.

“Blackmores is pleased to learn of the positive conclusion of the KAFTA negotiations and welcomes a new era of competitive trading that awaits Australian companies exporting to Korea” said Blackmores CEO and Managing Director, Christine Holgate

Case Study: Treasury Wine Estates

Treasury Wine Estates (TWE) is a global company with over 80 brands including Penfolds, Rosemount Estate and Lindeman’s. The company has revenues of about AU$1.7 billion and employs more than 3,500 people across 16 countries.

TWE is the only Australian wine company with a branch office in Korea.

Under KAFTA, upon entry into force, all Australian wine will enter Korea duty-free, falling from the current tariff of 15 per cent.

“KAFTA will provide a platform to build Australia’s brand image as a producer of premium wines” said Andrew O’Brien, General Manager, South East Asia, Japan, Korea and India at Treasury Wine Estates.

Case Study: ANZ Bank

ANZ has had a presence in Korea since 1978 and offers a range of commercial banking products and services to support the activities of both its international and local customers in their business activities in Korea.

Under KAFTA, ANZ will be well-placed to benefit from enhanced transparency around licensing of financial institutions and regulatory decision-making, as well as streamlined licensing procedures for Australian suppliers in Korea.

“KAFTA will facilitate a greater range of services to Korean companies from Australian services providers, boosting already strong bilateral economic and trade links” said CEO of ANZ  Korea , Kiseok Kim

Case Study: Stanbroke

Stanbroke is an Australian family-owned and operated beef company, dedicated to quality. Stanbroke is the largest privately-owned vertically integrated beef business in the world. The company breeds, backgrounds, finishes and produces fine Australian beef, managing its own beef production process from paddock to plate.

Stanbroke’s cattle are processed in a state of the art processing plant and the beef is delivered to a range of global customers.

KAFTA is critical for the long term viability of the business by ensuring Australian beef is competing on a level playing field in Korea. Korea will eliminate its 40 per cent tariff on beef upon full implementation of KAFTA. It is expected that KAFTA will significantly assist Stanbroke to strengthen its brand position and relationships with business partners.