Chile's free trade deal with South Korea what NZ hankers for

By SIMON COLLINS

Chile has won a free trade deal with South Korea while New Zealand efforts to achieve a similar deal have made no progress.

After almost three years of talks, Chile and Korea announced at the weekend that they had agreed on immediate duty-free access to Korea for Chilean wool, animal feed, tomatoes and paste.

Sheepmeat and globe artichokes will become duty-free in five years, fruit juices, canned peaches and peas will follow in seven years, and dried fruits, peaches, pork and sardines in 10 years.

In return, Korea will get immediate duty-free access to Chile for cars, cellphones, computers, textiles, plastics, Machinery and other products that make up two-thirds of Korean exports.

Although the deal excludes Chilean apples, pears and rice, it was hailed in Seoul as a breakthrough because it is South Korea's first free trade agreement. Korea will now seek a similar treaty with Japan.

But a joint study of a possible Korea-New Zealand deal, announced at the Apec summit in Auckland three years ago, has so far come to nothing.

The Institute of Economic Research delivered a 106-page report on the proposal 18 months ago, concluding that a free trade deal could boost New Zealand exports by more than $100 million a year.

But a counterpart study by the Korean Institute of International Economic Policy has never been published, and officials in Seoul this month made it clear that New Zealand is way down in the Korean priorities.

"I don't hear much about that," said one official in an informal briefing.

Chu Jeonghwa, of the Korea Chamber of Commerce and Industry, said: "Koreans do not think of New Zealand seriously for a free trade agreement. Exports to New Zealand are too small, therefore they think it's not the issue."

Ambassador David Taylor said a senior economic adviser to President Kim Dae Jung mentioned New Zealand recently in a list of possible future trade deals.

But Taylor said agriculture was the key obstacle. South Korea levies duties of more than 40 per cent on beef, fruit and dairy products to protect the country's farmers, and it says that despite this it is still only 30 per cent self-sufficient in food.

"Korea cut their support for agriculture last year," Taylor said.

"But Korea has traditionally been an agricultural nation. People feel a very strong attachment to the land and they are very proud of their cuisine, which depends on Korean ingredients."

A chaebol (conglomerate) leader who chairs both the Korea-Chile and Korea-NZ business councils, Harry Cho, said even the Chilean deal took much longer than expected.

"In the beginning we thought it would be a very easy one because there was very little conflict. The two economies are complementary," he said. "But it turned out tough."

This month, Cho created an executive committee of the Korea-NZ Business Council, giving it an ongoing existence for the first time in between the joint annual meetings of the two countries.

He told the first executive meeting on October 12 that he hoped Prime Minister Helen Clark might visit Korea around the time of the next bilateral meeting in Seoul next May, after Korea's presidential elections this December.

"We will have a new Administration. If she can come with the NZ delegation, that would be terrific," he said.



New Zealand exports to South Korea rose by 5.2 per cent in the year to June, to $1.46 billion, slightly more slowly than the booming 6.3 per cent growth in Korea's economy.

Although raw logs, hides and skins and aluminium still dominate trade, there have been growing sales of dairy products, honey, meat, fish, horticultural products and wine.

Zespri's Korea manager, Kim Hee Jung, said she had boosted kiwifruit sales from 800,000 trays in 1998 to 2.3 million trays, worth $33 million, this year - despite a 47 per cent import duty.

"I still believe we can grow much bigger than this. We can be as big as Japan - 13 million trays," she said.

"Fruit consumption per capita is much less than New Zealand - only 67kg, or 30 to 40 per cent of Taiwanese consumption."

Harry Song, an Auckland University graduate now with Hyundai's home shopping television channel, runs promotions for NZ kiwifruit, honey, sheepskin blankets, Rotorua mudpack cosmetics, deer products and travel. But he is frustrated at the limited range of New Zealand products available.

"I had a New Zealand and Australian products fair in August. Out of 26 items, only five were from New Zealand and 21 from Australia," he said.

The Australian products included socks, jerseys, underwear, jewellery, cosmetics and bee products propolis and royal jelly.



Trade commissioner David Ferguson said several NZ wines were now selling in Korea but no NZ beer was available.

"People like foreign brands so we are very keen to get some New Zealand beers in here," he said.

"With wine and beer there is going to be a real opportunity in the next 12 months."