Friday 16 May 2008
Rt Hon Helen Clark
New Zealand-Korea Business Breakfast
Friday 16 May 2008
It is a pleasure for me to be addressing you this morning on the New Zealand-Korea economic relationship.
My thanks go to the Korean Chamber of Commerce and Industry (KCCI) and the Australia-New Zealand Chamber of Commerce in Korea (ANZCCK) for their generous hosting of this morning’s function.
I have had the privilege of visiting Korea on six occasions, and this is my fourth visit as Prime Minister. New Zealand’s relationship with Korea is a high priority for my government.
We see Korea as a close strategic partner for New Zealand in the Asia Pacific. Our country’s connections here date back to the Korean War, when thousands of New Zealanders volunteered to serve in our military deployment to Korea.
Over the decades as Korea has grown and developed to become one of the world’s largest economies, it has become a very significant trade partner for New Zealand.
And as Korea made its transition to democracy, we have been able to work together on many issues from a shared value base.
We live in a dynamic and fast changing region, in which we are both active participants. There has been increasing recognition in both New Zealand and Korea of the need to work more closely together for the mutual advantage of both countries.
My meeting later this morning with President Lee Myung-bak provides a welcome opportunity early in his term of office to discuss how we take our bilateral relationship forward and work together in our region.
New Zealand is an outward looking nation, keen to develop the best market access it can for its goods and services exports. Our own market is already very open by any standard to the exports of others.
This year we celebrate 25 years of our Closer Economic Relationship with Australia. We have also negotiated FTAs with Singapore and Thailand, and a four way deal with Singapore, Brunei, and Chile.
We are currently negotiating an FTA with the Gulf Co-operation Council; have a had a number of rounds of talks with Malaysia and Hong Kong in the past; and are studying the potential with India.
Our negotiations together with Australia for a free trade area with ASEAN are ongoing and well advanced.
But perhaps the agreement which will be of greatest interest to you is our FTA with China, signed during my visit to Beijing around five weeks ago.
This is the first FTA which China has signed with a developed economy. It was therefore important that the FTA set a high standard and be comprehensive.
Under the agreement, all tariffs on China’s exports to New Zealand will be eliminated by 2016, and by 2019, 96 per cent of New Zealand’s exports to China will be tariff-free. But tariff elimination begins when the agreement comes into force, which is expected to be on 1 October. On that date 35 per cent of New Zealand’s current exports to China will be tariff free.
The agreement also has a most favoured nation provision for services. That means that each country will receive the benefit of any more favourable treatment negotiated in future FTAs with third countries.
As well there are binding side agreements providing for dialogue and co-operation on labour and the environment.
This FTA has been greeted enthusiastically by New Zealand’s business community. The largest delegation of government officials, business, and media ever to leave New Zealand was with me in Beijing for the signing.
The New Zealand agreement with China, and the increasing number of FTA negotiations in which Korea is engaged, draw sharply into focus the need for a comprehensive trade agreement between our two countries, so that we can protect and advance our highly-valued and longstanding partnership.
We do not want to see our close Korean business partners put at a disadvantage in the New Zealand market. Similarly we would be concerned if New Zealand businesses were disadvantaged by Korea’s trade agreements with others.
For more than a year now New Zealand and Korea have been actively exploring the possibility of a Free Trade Agreement.
Private researchers in our two countries have jointly produced a detailed report on the likely results of an FTA, which has been recently considered by a roundtable of our officials.
The joint study identified clear benefits to both countries from an FTA. It found that it would boost our trading relationship, increase both countries’ GDP, improve our global competitiveness, and strengthen our overall relationship.
Over the period to 2030, the accumulated gains to real GDP were estimated to be US$5.9 billion for Korea and US$4.5 billion for New Zealand.
The study also found that an FTA should be relatively straightforward to achieve. We have two of the most complementary economies in the Asia-Pacific, and we have compatible negotiating approaches.
How to move forward from this study will obviously be an important part of my discussions with President Lee Myung-bak today.
My government hopes that before too much longer formal negotiations for an FTA can be launched. Conclusion of an FTA will be increasingly important in keeping momentum in our economic relationship, given the momentum each of us is generating in our economic relationships with others.
And that momentum of course has spillover effects for all aspects of our relationship – excitement in areas as important as trade and investment lifts the profile of each country in the other to the mutual benefit of both.
Two days ago in Tokyo, Prime Minister Fukuda and I agreed that a study will be done on the potential of an FTA between New Zealand and Japan. This too has created considerable interest in our business community and media, as Japan is our third largest market, but one in which our agricultural exports have faced particular barriers.
New Zealand is placing a very strong emphasis on completing a network of FTAs in North Asia. It is vital for us that Korea becomes part of that network.
Annual Korea-New Zealand two way trade has been growing at about eight per cent per annum over the past decade, and now stands at around US$2 billion. This country is our sixth biggest trade partner. It is a greatly valued market for both our goods and services.
While forestry is still New Zealand’s largest commodity export to Korea, food and beverage exports account for close to forty per cent of our goods exports here.
Given the limited land area of New Zealand and our already exceptionally high agricultural productivity, New Zealand is unlikely in future to produce a great deal more of its traditional products from the land than it does now. Thus we are looking for partnerships with other producers and distributors, as well as positioning our own products well up the value chain.
We are drawing increasingly on our scientific expertise to develop and market functional foods which are promoted for their health benefits, and also to develop nutriceutical, pharmaceutical, and other applications from our primary sectors.
I believe that there are real opportunities for collaboration with Korean farmers, who could gain from New Zealand’s primary sector expertise. That can been seen already on Jeju Island where orchardists are producing highly valuable kiwifruit through a partnership with Zespri, the New Zealand kiwifruit marketing company.
In any FTA negotiation with New Zealand, there will be sensitivities in Korea around agriculture. We are aware of those issues and are actively considering creative ways of addressing those concerns. New Zealand of course does not produce rice – which removes that as a significant issue.
Our agriculture sector does have a proven track record of establishing strategic international relationships. Our farmers are business people, and they understand the value of collaboration.
Another issue to be taken into account by food importing countries in the 21st Century is the importance of securing safe and reliable food supplies.
The world’s food supplies are under considerable pressure from growing populations, including the growing middle classes in emerging economies. Increasingly erratic climatic conditions such as those which led to prolonged drought in Australia have also exacerbated supply problems.
This could be another factor for Korea to consider as it weighs up when to enter negotiations for an FTA with New Zealand, which has a well deserved reputation as a high quality food supplier.
Demonstrating the sustainability credentials of our farms and orchards, vineyards, forests and aquaculture to those who buy our products is important to New Zealand. It’s also important to our tourism.
Increasingly first world consumers of goods and services are making ethical judgements about what they purchase – and environmental integrity is central to those judgements.
It should also be noted that New Zealand has dynamic ICT sectors, with good opportunities for exports into niches of Koreas high tech economy. A number of our ICT companies are already successfully doing business here, and I believe this will become an increasingly significant part of our export profile.
There are areas where New Zealand and Korea could work together to develop sustainable practices. We have identified mutual research strengths in “energy and climate” and in “environmental research”, where we are looking to fund joint research projects, under a programme which has already led to several highly successful and commercially viable projects. We also have established links in sectors which are becoming increasingly important for sustainability, such as forestry investment.
It also makes sense for Korea and New Zealand to remain in close contact as we develop our respective energy strategies. We work together in the International Energy Agency, and through the energy working groups of the East Asia Summit and APEC.
Korea is the world’s tenth largest energy consumer, and currently relies on foreign supplies to meet 96 per cent of its demand. Recently Hyundai subsidiary Hysco has invested in petroleum exploration of the coast of New Zealand. This is bringing considerable technical capabilities to New Zealand.
New Zealand is fortunate to have natural resources, including oil, petroleum and gas, and this presents further opportunities for Korean companies, We welcome and encourage an increased Korean presence in our open investment environment.
Increasingly New Zealand is focused on building its trade and economic ties with Asia.
Our government is encouraging New Zealanders and New Zealand businesses to become “Asia literate; to think more about Asia; and to put more effort into getting to know Asia.
We are expanding the network of New Zealand Trade and Enterprise and its investment arm into Asia.
All this bodes well for our future economic relationship with Korea, an old friend with whom there is enormous scope to do more.
Conclusion of an FTA between us could help us reach the full potential of our relationship. I hope our hosts today from KCC and ANZCCK will help us reach that objective.