Tony Pasin (Barker, Liberal Party) Share this | Hansard source

I rise to speak on the Customs Amendment (Korea-Australia Free Trade Agreement Implementation) Bill 2014.

I welcome this agreement with our friends in South Korea, because I believe that free trade is a force for good not only in my electorate of Barker but for the nation. Total Australian investment in Korea in 2012 was valued at $10.4 billion with Korean investment in Australia valued at $12 billion. The Abbott coalition government's swift conclusion of historic agreements with Korea and Japan since then sends a strong signal that Australia is open for business. With one in five Australian jobs linked to trade, these agreements are good for the economy, good for growth and good for job creation. The Korea-Australia Free Trade Agreement, or KAFTA, as it has been referred to, was signed on the 8 April in Seoul for the Minister for Trade and Investment, the Hon. Andrew Robb, and his Korean counterpart, Minister for Trade and Industry Energy, Minister Yoong Sang-jik.

The Korean gross domestic product is $1.22 trillion, with growth last year of 2.8 per cent. Korea has a population of over 50 million people and Australia's trade with Korea is already worth in excess of $32 billion. Korea is one of Australia's most important trading partners—our third-largest export market, our fourth-largest trading partner and a growing investment partner. Currently Australia faces tariff and non-tariff barriers and restrictions in Korea. Korea's average tariff on imports is 16.8 per cent, with an average tariff on agricultural goods of 53.6 per cent, with tariff peaks of over—could you believe it?—500 per cent.

This legislation amends the Customs Act 1901 to implement Australia's obligations under chapter 3 of the Korean-Australian free trade agreement. The agreement contains simplified trade facility of rules-of-origin and related documentary requirements. Goods imported into Australia that meet the rules of origin implemented through this bill will be entitled to claim preferential tariff treatment in accordance with the agreement. The Korea free trade agreement is a comprehensive agreement that substantially liberates trade with South Korea and creates significant new commercial opportunities for Australian businesses.

South Korea is Australia's fourth-largest trading partner and the implementation of this agreement will significantly boost Australia's position in this major market, where competitors like the United States, the European Union and the Association of Southeast Asian Nations are already benefitting from preferential access. KAFTA is expected to be worth $5 billion in additional income to Australia between 2015 and 2030, and to provide an annual boost to the Australian economy of approximately $650 million after 15 years in operation.

In its first year of operation it is expected to create 1,700 jobs and 84 per cent of Australia's current exports by value will enter Korea duty free. Agricultural exports are expected to increase by 73 per cent and manufacturing by 53 per cent by 2030 as a result of this historic agreement.

The benefits to Barker of concluding a free trade agreement with South Korea are numerous and diverse and principally directed towards our agricultural and manufacturing sectors. Currently Australian exporters face high barriers, with Korea imposing an average tariff, as I have said, of 53.6 per cent on agricultural imports and prohibitive tariffs on some products of up to 550 per cent. Under the agreement, inter alia, Korea will agree to eliminate beef tariffs over 15 years; wheat, wine and some horticulture tariffs immediately; and most dairy tariffs over three to 20 years, with immediate duty-free increased quotas for cheese, butter and infant formula.

The agreement is expected to provide new market openings for Australian service providers in education and financial services. These services currently face a range of restrictions, including with respect to commercial presence, cross-border supply and licensing requirements. Under the agreement, Korea will permit new Australian access in these sectors, providing outcomes equivalent to those in its free trade agreements with the US and the EU.

The agreement also includes an agreement on intellectual property. KAFTA will ensure Australian innovators and Australian creative industries receive high levels of protection in Korea broadly, equivalent to protections provided here in Australia. There is an agreement on government procurement. For Australia, this will provide, subject to agreed exceptions, national treatment for Australian goods, services and suppliers in the Korean market for government procurement above agreed value thresholds. KAFTA contains provisions that safeguard electronic commerce, prevent the imposition of customs duties on electronic transmissions and maintain best practice regulations in this field.

Business and industry have welcomed the proposed free trade agreement with Korea because the agreement provides benefits and opportunities on a number of levels. Apart from the obvious direct benefit of reduced tariffs and increased market access, they have identified competitive advantage, protection of existing markets and the positioning to take advantage of future negotiating opportunities as positive outcomes.

Reduced tariffs and increased market access will provide an immediate boost to trade. For example, the dairy industry expects to increase its exports to the value of $7.6 billion in the first year of operation of the KAFTA, and there will be continual growth thereafter. The dairy farm manufacturing export industry is currently worth $13 billion a year to the Australian economy, and Korea is the 10th largest market for dairy. If KAFTA is introduced before the end of the calendar year 2014—of course, that is our intention—and the beef industry can take advantage of a double tariff reduction, Meat and Livestock Australia estimate that the red meat industry will benefit the tune of $408 million over the next 15 years. For the Australian Agricultural Company, for whom the Korean market is currently worth $35 million, the expected reduction in the tariff differential between Australia and their major competitor, the United States, from eight per cent to 5.34 per cent represents a significant increase in trade value.

For the horticultural industry, KAFTA is particularly welcomed, as the industry has faced higher tariff barriers in the Korean market. Australian potato growers, such as Mark Pye in my electorate of Barker, already hold a 37 per cent market share of the Korean potato import market, worth $11 million to $12 million annually, with an existing 27 per cent tariff. That tariff can reach 304 per cent if the above quota tariff clicks into force. With tariffs due to drop to zero with the implementation of KAFTA, the market is expected to double.

Australian nuts are an expanding horticultural sector, not just nationally but particularly in Barker. I speak here of almond production but also the burgeoning industry of macadamias in my electorate. The 30 per cent tariff on Australian macadamia nuts, for example, will be reduced to zero over five years, and exports are expected to grow from 175 tonnes with an annual value of $3 million to approximately 2,000 tonnes with an annual estimated value of over $40 million.

The wine industry too is enthusiastic about the opportunities presented by the Korea-Australia Free Trade Agreement. The 15-per-cent tariff on Australian wine will reduce to zero on entry into force. In 2013, the industry held approximately four per cent by volume of the Korean market, but expects that market share to increase to 15 per cent over the next two to three years against global competitors. Of course, Barker is the electorate that by area represents the largest wine-grape-growing areas of the country. That industry in particular is under increased pressure as the volume of wine being produced ever increases and we need to seek fresh markets at all opportunities. The Korea-Australia Free Trade Agreement is a step most significantly in the right direction.

However, it is the competitive advantage that the KAFTA presents that provides significant potential for many Australian industries. The Winemakers Federation of Australia believes that exports to Korea have been steadily decreasing since 2007, largely because of the Korean free trade agreements with the US and the EU, as well as with Chile. The wine industry sees the Korean market as a major growth opportunity and the KAFTA will enable the industry to compete, again, on a level playing field.

The Australian Nut Industry Council states that Australian growers have sold almost no almonds to Korea since the Korea-US FTA came into effect in March 2000, reducing the US tariff to zero. The entry into force of KAFTA will reduce the tariff for Australian almonds from eight per cent to zero, putting Australian industry back on an equal footing with the US industry. The Korean market imports 20,000 tonnes of almonds annually, worth $160 million.

Korea is Australia's third-biggest export market for Australian beef, worth a staggering $788 million last year alone. Elimination of Korea's 40 per cent tariff on beef will occur in 15 equal stages. Korea will eliminate its 18 per cent tariff on bovine offal and its 72- per-cent tariff on processed beef products over 15 years.

Australia exports $317 million worth of wheat to Korea annually. Under the KAFTA, Korea will eliminate its 1.8 per cent tariff on wheat from Australia. A tariff of eight per cent on wheat gluten will also be eliminated.

Australian dairy exports to Korea were worth $87 million in 2013, despite very high tariffs. The industry will benefit from immediate duty-free quotas for key exports and the elimination of tariffs by up to 89 per cent on most dairy products.

There are key KAFTA outcomes that cheese, Australia's main dairy export, will enjoy: liberalised trading, including an immediate duty-free quota of 4,630 tonnes growing at three per cent compound per annum;. progressive elimination of a 36 per cent tariff over periods ranging from 13 years for cheddar cheese; immediate duty-free quota of 113 tonnes for butter; elimination of eight per cent tariff on dairy spreads; infant formula will receive an immediate duty-free quota of 470 tonnes; and tariffs on a range of other dairy products such as milk, cream, ice cream and yoghurt will be eliminated over a period ranging between three and 20 years. Korea will also eliminate its out-of-quota tariff of 269 per cent for malt and 513 per cent for malting barley over 15 years.

For some of Korea's more sensitive horticultural products seasonal tariffs will be eliminated during Australia's exporting months: for potatoes, tariffs of up to 304 per cent, as I have previously indicated; for table grapes, tariffs of 45 per cent will halve to 24 per cent on entry into force and will be eliminated over five years for the months of December to April; oranges, of course, from the Riverland—Australia's premier citrus growing region is in the northern part of my electorate—will see tariffs of 50 per cent fall to 30 per cent on entry into force and be eliminated over seven years for the period from April to September each year; with mandarins, the high tariff of 144 per cent will be eliminated over 18 years during the months of April and September each year; and tariffs of between eight and 30 per cent on rapeseed oil, or canola, will be eliminated over a period of five to 17 years. It should be noted that Korea imports rapeseed oil to the value of $36 million from Australia, or at least it did so in 2013.

Korea will eliminate, on the agreement's entry into force, its three per cent tariff on cottonseed. Australia's exports were worth $36 million in 2013. Korea is also set to eliminate its 22.5 per cent tariff on all sheep and goat meat over 10 years. Tariffs on key pork exports of between 22.5 and 25 per cent will be eliminated over a period of between five and 15 years. Key seafood products such as rock lobster, fished predominantly from the Southern Ocean in my electorate of Barker, will enter duty free after three years.

As you can see, Australia, and regional Australia in particular, is an enormous beneficiary from this agreement. The areas I have listed are all key industries in my electorate, and a reduction in trade barriers will lead inevitably, and thankfully, to their expansion. The expansion of these industries necessarily means an expansion of jobs, the creation of jobs, in my electorate. I am unapologetic in my support for government initiatives that encourage business and industry to create and sustain jobs. I commend this bill and this agreement to the House.

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