On December 12th, 2014, the Korea-Australia Free Trade Agreement (KAFTA) came into force.
The benefits of this FTA will be pronounced, making it easier for Koreans and Australians to do business, and injecting new growth into our economies. The KAFTA is one of the most complementary of its kind in the region, and is significant in three key areas. Firstly, it creates momentum for continued expansion of trade between the two nations; secondly, it enhances the stability of imports of energy and other resources; and finally, it promotes recovery and further growth of bilateral market share.
There are several advantages of the Free Trade Agreement. On entry into force of KAFTA, 84 per cent of Australia’s exports (by value) to Korea will enter duty free, rising to 99.8 per cent on full implementation of the Agreement. Australia will remove its remaining tariffs on Korean goods on entry into force or over several years, and for agriculture, Korea will eliminate tariffs immediately on entry into force for raw sugar, wheat, wine, and some horticulture. Tariffs of up to 550 per cent on most other agricultural products will be eliminated within short time frames.
Further, 88 per cent of Australia’s manufactures, resources and energy exports will enter Korea duty free on entry into force of KAFTA, with all remaining tariffs phased out within ten years. KAFTA will provide Australian services exporters with the best treatment Korea has agreed with any trading partner, on par with its agreements with the United States and Europe.
Australian law firms, accounting firms, telecommunications providers, financial services providers, and other professional services will all enjoy greater market access, as will their Korean counterparts through the raising of foreign equity caps and removing restrictions on investment in sectors previously closed to Australian investors in Korea. Improvements in opportunities and protections for Australian investors and investments in Korea and will help attract direct investment from Korea into Australia. Australia will raise the screening threshold for Korean investments in non-sensitive sectors from $248 million to $1,078 million.
Finally, Korea will eliminate its 40 per cent tariff on beef progressively over 15 years, which will help to level the playing field for Australian beef exporters.
The KAFTA is expected to result in increased two-way investment, with investment outcomes up to the level of only a few other Australian FTA partners such as the United States. Korea’s current account surplus continues to grow to new heights and Korean investors will look subsequently for greater opportunities to invest their surplus savings overseas. The improved Australian Foreign Investment Review Board threshold treatment within KAFTA will encourage Korean investment in Australian projects. Initiatives such as the Asia Region Funds Passport, which Australia and Korea are signatories of, will further improve the bilateral investment climate via its provision of a multilaterally agreed framework to facilitate the cross border marketing of managed funds across the Asia region.
Source : http://www.dfat.gov.au/fta/kafta/guides/outcomes-at-a-glance.html
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