South Korea and New Zealand have sealed a free trade agreement, as the Asian exporting powerhouse continues its aggressive international trade policy.
The New Zealand-South Korea Free Trade Agreement is the 13th to have been signed by Seoul, and will remove tariffs on 98% of New Zealand’s exports to Korea over time, with 100% of all Korean products to be tariff-free by 2022.
It’s anticipated that Korea’s famed automotive and electronics sectors stand to benefit the most, while New Zealand officials expect to see its densely populated counterpart increase its uptake of agricultural products.
New Zealand Trade Minister Tim Groser said in Seoul: “Particular success stories include the removal of wine tariffs of 15% on entry into force, and the removal of 45% tariffs on kiwi fruit effectively five years after entry into force.”
South Korea is one of the most active players in free trade negotiations, with agreements signed and operational with the US, Turkey, Singapore, Peru, the EU, Chile, India, the Apac and Asean blocs. Signed but yet to take effect are deals with Australia, Canada and Colombia, while negotiations are underway with Japan, the GCC, Indonesia, Mexico and Vietnam.
Figures in Seoul this week welcomed the New Zealand deal and credited the Korean government for its proactive trade policy.
“I remember five or six years ago there were not many kiwi fruits on the Korean market, and those that were here were expensive. The cost has come down and will continue to do so. In general, people here are supportive of the Korean government’s free trade agreements, it shows that Korea is becoming more developed,” Joon Kim, the managing partner of Squire Patton Boggs’ Seoul office, tells GTR.
A report released in January 2015 showed that exporters in Hong Kong felt that their government should be negotiating agreements with more relevant trading nations. Thus far, it has signed deals with China, Chile and the four-country European Free Trade Area (made up of Iceland, Liechtenstein, Norway and Switzerland). China aside, none of these could be considered economic powerhouses.
This is not an accusation that could be levelled at the Korean government, which has pursued agreements with a group of countries that are rich in natural resources, or which are large-scale offtakers of automobiles and electronic goods – or in the case of Australia, for instance, both.
That said, the Korean market is still a tough one to penetrate, particularly for those involved in professional services and finance. The legal and insurance markets are still closed, domestically. Only the state-owned but privately-run Seoul Guarantee Insurance Company (SGIC) can offer trade credit insurance, while only K-Sure is permitted to offer export credit insurance.
It means international insurers in Korea have to set up as brokers, and take business from SGIC as a reinsurer. The government recently signalled its intention to open the export credit insurance market, which has led to a hiring spree among the international insurers operating in Seoul.
Andy Ryoo, Euler Hermes country manager for South Korea, tells GTR that he has started building his team up in anticipation, but that he never expects the insurance market to be fully open, saying that Korean consumers and companies generally prefer to use local brands when it comes to their insurance – a theory which he says can be extrapolated for the banking sector too.
With such a spate of free trade agreements having been signed over the past few years, however, it surely won’t be long before the multinational lobby is banging on Park Geun-Hye’s door, demanding that these markets are liberalised.