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FTA talks with New Zealand no sure thing, says government

By Korea Herald
Published : Aug. 4, 2013 - 21:18
Claims made by New Zealand Prime Minister John Key that he secured a commitment from South Korea to resume talks in October on a free trade agreement were exaggerated, according to multiple sources here close to those long-stalled talks.

The government did not promise to restart formal talks in October at all, contrary to claims made by the prime minister, but it did agree to an informal sit down between chief negotiators of the New Zealand and South Korean sides, according to three different sources. Such informal talks, however, can take place at any time regardless of any special commitments, they said, requesting anonymity due to the sensitive nature of any future negotiations.

President Park Geun-hye and New Zealand Prime Minister John Key shake hands over the conference table during a one-on-one summit that took place on July 26 during Key’s five-day visit here. (Yonhap News)


Key was in South Korea with a large delegation including 30 New Zealand war veterans for the 60th anniversary of the Armistice Agreement that brought fighting in the Korean War to an end.

He made restarting talks on a New Zealand-South Korean free trade agreement a major focus of his trip, saying that restarting stalled FTA negotiations was at the top of his agenda.

He arrived on July 25 for a five-day visit that included delivering a keynote speech on July 27 during the main ceremony commemorating the armistice anniversary. Key was the highest-ranking government leader among the 27 nations represented at the event. His trip also included a one-on-one summit with President Park Geun-hye.

Key, the head of New Zealand’s conservative National Party, caused a stir when he suggested during a speech to New Zealand veterans here that South Korea should conclude FTA negotiations out of consideration for New Zealand’s contribution of 6,000 soldiers during the Korean War. Forty-five New Zealand service members lost their lives during the fighting.

“My point would simply be that we have a very deep and shared history and that history goes back a ways. We see Korea as a trusted friend. I think they see the same in us. On that basis, if you l look at other countries with which Korea has signed an FTA, like the United States, Europe and Chile, New Zealand could say that it believes it is in the same category as many of those countries,” Key said on his last day here during a luncheon with the New Zealand Chamber of Commerce.

Talks have been stalled since June 2010.

Both countries have signed FTAs with other countries and there is a real possibility of trade diversion, thereby decreasing the overall trade volume between New Zealand and South Korea.

South Korea is currently New Zealand’s fifth-largest trading partner, with two-way trade of around $3.3 billion in 2012.

South Korea has signed 10 FTAs covering more than 40 nations around the world since it signed its first with Chile in 2005. New Zealand, too, has FTAs with at least nine nations, including one with Korea’s No. 1 trade partner, China.

Key echoed complaints by New Zealand corporations doing business here of unequal tariffs. He said New Zealand businesses paid $195 million in tariffs on $1.5 billion in exports and South Korean firms were charged only $5 million on its $1.8 billion in exports.

New Zealand businesses want a free trade deal because the deals already inked by competing countries with South Korea put them at a competitive disadvantage. So, there is not only a possibility of trade diversion but the disadvantage faced by New Zealand companies could result in a permanent loss of market share in South Korea.

Exports of New Zealand beef were hurt by South Korea’s FTA with the United States, while kiwi fruit exports were hit by Chile’s falling tariffs. Exports of New Zealand wine could also be adversely affected if FTA talks are further delayed.

Key described concluding the trade talks as “urgent” and that inking a deal with South Korea would be worth “billions of dollars.”

There appears to be a disconnect, however, on what the sticking point is in the talks between New Zealand and South Korea.

Rice is the most sensitive area for South Korea, according to the New Zealand prime minister.

But sources here do not agree with that assessment. New Zealand exports of beef, pork and dairy products are making a free trade deal hard to swallow for Korean agricultural producers, according to sources here close to the talks.

More than 20 percent of New Zealand’s $1.3 billion in exports to South Korea ― some $260 million ― consist of such agriculture products as pork, beef and dairy, according to the sources involved in the process of negotiations. Domestic suppliers are adamant that reduced tariffs on these New Zealand farm products would be detrimental to their bottom line.

Key was effusively optimistic on the future of trade talks after his meeting with President Park on July 26, going so far as to say that a deal could be finalized by the end of the year.

“I have to say that on balance, and as a result of the trip and the remarks the president has made to me, I am better than 50-50 we will get there. You have got to think it as 65-35,” he said.

After the meeting, Park said that “hopefully a wise approach and creative solutions can be employed in order to strike a balance between the national interests of the two nations.”

While her comments left room for doubt on the timing of the talks, Park was clear that she hoped they would be considered in the future.

By Philip Iglauer (ephilip2011@heraldcop.com)

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