Conflicting industrial and agrarian interests in the South Korean parliament could push the final ratification of the Korea-Australia free trade pact to sometime next year, sources close to policymakers in Seoul said Tuesday.
The free trade agreement known as KAFTA was signed by South Korean and Australian authorities on April 8. Parliaments of both nations must ratify the treaty for it to come into force. Australia has completed its domestic process.
But South Korean lawmakers are struggling to pass the deal in Seoul’s National Assembly, with KAFTA expected to pose widely different consequences to farmers and big conglomerates such as the Hyundai Motor Co. and steelmaker POSCO.
KAFTA will widely benefit South Korean exporters, experts say. The 5 percent tariff on South Korean sedans sold in Australia, for example, will be be cut immediately, while other related tariffs will gradually be dropped within three years. Most Korean exports to Australia are industrial goods.
The free trade deal, however, is expected to pose significant risks to South Korean farmers, with cheaper Australian agriculture imports becoming even cheaper with the tariff cuts.
Livestock and dairy farmers here have been especially vocal in their opposition to the agreement. They conducted a 15-day hunger strike in front of the national legislature in Seoul before ending their protest on Nov. 6 on the condition that lawmakers would consider their requests to increase public subsidies to them if KAFTA is ratified.
Currently, lawmakers from the governing Saenuri Party and the main opposition New Politics Alliance for Democracy are conducting negotiations on the quantum of subsidies with South Korean government officials. The Saenuri Party largely sides with industrial interests while the NPAD is known to sympathize with agrarian lobbies.
At the center of this debate is the interest rate imposed on government loans to farmers.
Several of the government’s borrowing plans for farmers have a 3 percent interest rate. Livestock and dairy farmers have asked officials to lower the figure to somewhere in the “1 percent range.”
Saenuri Rep. Joo Ho-young on Tuesday expressed a willingness to lower the rates, but opposition lawmakers are yet to reply to the offer.
Farmers, however, appear to be adamant on their 1 percent demand.
“We have not ruled out resuming our hunger strike or even bringing our cattle to the National Assembly, should lawmakers default on their promises,” said Lee Gang-heoun, a spokesman for the four dairy and livestock farmers’ associations that are protesting.
Industrial lobby groups, on the other hand, have been pushing lawmakers to ratify the FTA before the year’s end.
If KAFTA is ratified by year-end, two stages of tariff cuts will take effect within weeks. The first round of tariff cuts will take force on the day KAFTA is ratified, while another cut takes place every subsequent New Year.
Calls have intensified in recent weeks as a delay in the ratification is likely to disadvantage South Korean exporters competing with their Japanese counterparts in the Australian market. Tokyo’s free trade deal with Canberra could come into force sometime early next year.
Australian beef exporters competing with Americans in the Korean market are also eager to see the deal passed within 2014 for similar reasons.
Australian livestock farmers selling beef in Korea have been suffering from a tariff deficit of 5.3 percent against their U.S. competitors since the Korea-U.S. Free Trade Agreement took effect in March 2012.
If KAFTA’s ratification is pushed to sometime next year, the deficit will grow to 8 percent since American producers will automatically enjoy a tariff cut on Jan. 1.
The recently agreed-upon free trade deal between South Korea and China could also delay KAFTA’s ratification.
Opposition lawmakers and farmers’ associations have vehemently criticized the accord with Beijing, charging that it threatens the livelihoods of domestic farmers.
“The opposition could condition their agreement to ratify KAFTA on the creation of a special committee on the FTA with China in the parliament,” said an opposition official who participated in the Korea-U.S. free trade agreement negotiations in the South Korean parliament.
koreaherald@heraldcorp.com
