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According to Yonhap News,
(SEOUL = Yonhap News) The free trade pact with Australia will fuel exports of South Korean-made goods and make it easier to import natural resources, the local business community said Tuesday.
South Korea and Australia signed a bilateral free trade agreement (FTA) Tuesday after nearly five years of negotiations, a deal that both sides believe will result in mutual benefits from greater trade.
The Korea International Trade Association (KITA) said that the scrapping of tariffs on South Korean exports to Australia in the next five years will allow local companies to make inroads into the vast market.
On average, Australia slaps 5 percent tariffs on goods imported from South Korea.
The international traders association added that South Korean companies will be able to import Australian resources more cheaply, which can improve their competitiveness in the global arena. Cheaper import prices can also be useful in controlling consumer prices at home.
KITA said that in particular, the move by Ford, GM and Toyota to halt local production in Australia in the coming years opens new opportunities for South Korean carmakers. Consumer trends in Australia are moving away from large cars to compacts and sport utility vehicles, which can be exploited by local producers.
Under the pact, Canberra would eliminate import duties on small and medium-size cars and small trucks, with other tariffs to come down in two years' time. A 5 percent cut in tariffs translates into 4.8 percent dip in overall prices for vehicles.
As of last year, South Korea was the No. 4 exporter of cars to Australia, with 135,551 units sold worth US$2.13 billion. The car market in Australia stands at around 1 million vehicles per annum, with the country importing 70 percent of cars from abroad.
In addition, demand for car parts, steel products, machinery and lighting equipment could go up once tariffs come down, according to KITA.
The association said Seoul must move quickly to capitalize on the pact by ratifying it as soon as possible.
"Australia is conducting FTA talks with Japan and China, which makes it imperative for South Korea to take advantage of the present situation so its companies can occupy the high ground in trade vis-a-vis these rivals," said Jung Hye-sun, a researcher at KITA's Institute for International Trade.
This view was echoed by other industry organizations like the Korea Automobile Manufacturers Association that pointed out that the country must do everything possible to assist companies expand market presence in Australia, which does not have FTAs with rivals such as the European Union.
The state-run Korea Trade-Investment Promotion Agency (KOTRA) said it sees 15 items made by small and medium enterprises that are well positioned to benefit from the open trade pact.
Fiber optic cables, power lines, lead storage batteries, filters for vacuum cleaners, aluminum materials, nuts and bolts and polyvinyl chloride floor materials may find a good market in Australia, it said, as well as polystyrene, surface active agents, car bumpers, cotton products, cosmetics and industrial ceramic containers.
Car parts sales may also benefit once tariffs are reduced, it said, citing a poll carried out on 93 Australian buyers who handle automotive products that showed 75 percent saying they are considering purchasing South Korean goods.
"Even before the FTA, there has been a steady increase in demand for industrial goods that will get a further boost now," said Choi Hyun-pil, the head of the agency's advanced market team.
He said sales of certain polystyrene products have surged in the triple-digit range.
"With the signing of the trade pact, there is a need to do more to heighten consumer awareness in Australia for South Korean products," he said.
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Source: Yonhap News (April. 7, 2014)