Last week we looked at the definition of a free trade agreement (FTA), and the PM’s recent FTA negotiations with South Korea, Japan and China. Currently, the FTA deals have been sealed with South Korea and Japan, and China is pretty close. These three economies together represent over 50 per cent of our exports so access to them through FTAs will be crucial for us if we plan on being a player in the Asian century. To give you an idea of what an FTA looks like, this week’s blog examines the actual nuts-and-bolts of our recently-signed FTAs with South Korea and Japan.
South Korea FTA at a glance
Overall, 99.8 per cent of Aussie exports to South Korea will become free of any duty, taxes, quotas etc and we’ll return the favour. Specific highlights for us include the elimination of most duties and quotas on dairy products and the 40 per cent tariff on Aussie beef. Australian accountants and law firms will be able to establish South Korean offices and invest in South Korean firms, and an Aussie telco will be allowed to own a South Korean telco. Importantly for our diggers and drillers, all duties on resource and energy exports will be removed.
Japanese FTA at a glance
Japan is important to the Australian economy because it’s responsible for 11 per cent of our total trade. Our economies are highly complementary: Japan is good at high-quality finished goods but has little in the way of natural resources, which is our strength. This FTA, a mere seven years in the making, cut the duty of all Japanese electrical goods such as TVs, fridges, dishwashers, stereos, vacuum cleaners etc by five per cent, which will save the average family hundreds of dollars per year. Our existing five per cent tariff on Japanese cars will also be axed, dropping their cost by an average of $1500. Japan has returned the favour by lifting tariffs on our beer, lamb, wool, cotton and dairy products. No longer the land of the rising sum.