Embargoed Until Delivery

An Address By

Hon Lockwood Smith PhD
Minister for International Trade
Minister of Tourism

Korea / New Zealand Relations: An Insight Into The Future

Korea New Zealand Business Council & Canterbury Employers’ Chamber of Commerce

CHRISTCHURCH

1215 hours
16 November 1999

Thank you for your invitation to speak today.

I’m very pleased to have this opportunity to talk about where our trade and economic relations with Korea stand at the moment, and how I see the relationship developing following the APEC meetings and the state visit by President Kim Dae-jung.

The last few months have marked a real high point in New Zealand’s relations with Korea.

The President’s visit was the first by a Korean head of state for 31 years.

And our Prime Minister’s state visit to Korea in July has also helped to raise our profile with Koreans.

Both visits highlighted the continuing importance of Korea to this country.

Korea is our fifth largest export destination, and as last year’s economic crisis demonstrated, some sectors have a large stake in that market.

Fortunately Korea has been able to shake off the crisis more rapidly than other countries that were directly hit.

Growth this year is expected to be in the 7-8% range. Korea has rebuilt its foreign reserves, and is already paying back its IMF loans.

And it’s no secret as to why this is the case - decisive action by the Korean government in the financial sector has played a major role in this outcome.

During President Kim’s visit, our Prime Minister Jenny Shipley paid tribute to those reforms, as well as to the President’s long and determined advocacy of human rights and democracy.

But as Trade Minister, it would be remiss of me to pass over the reforming role of my counterpart, Korea’s Trade Minister Han Duck-soo.

Clearly the Korean government still has work to do in areas like corporate reform.

But the result of Korean policies can already be seen in New Zealand’s improving export statistics.

After falling around 50% in the first half of last year, our exports to Korea have climbed back to over $900 million, close to what they were prior to the crisis.

But trade in goods is only half the story.

We still have work to do to revitalise tourist, student and migrant flows in a market of long-term importance to us.

Much depends on the industries concerned developing long-term strategies to tap particular sectors of the market.

Another factor in Korea’s speedy recovery has been its ability to access open markets and foreign investment.

It’s worth noting that Korean exports to New Zealand have risen steadily over the last 18 months, as Korea has taken advantage of currency movements and falling tariffs.

It is a reminder of how both countries can benefit from liberal trade and investment rules.

That theme of course drives our work together in APEC and the WTO, and as chair of APEC this year New Zealand has valued Korea’s contribution to the process.

At a lunch hosted by the Korea/New Zealand Business Council, President Kim rightly noted that a common experience of reform has broadened the scope for New Zealand and Korea to work together in international forums.

For example, other APEC members in Auckland welcomed President Kim’s proposal for APEC economies to meet next year and review the lessons of the economic crisis.

I am also pleased to note that throughout 1999, Korea consistently supported our initiative on strengthening markets, which includes economic and corporate governance.

APEC’s work in these areas is not abstract.

It brings concrete benefits to New Zealand firms doing business in APEC economies including Korea.

A good example is the initiative to reduce the costs of customs procedures through a paperless clearance system.

Take also the APEC leaders’ strong expression of support in Auckland for a new WTO Round.

A reduction in tariffs through a new Round would help stimulate trade with Korea, where our goods still face duties averaging 10%, or around $90 million a year.

APEC is also continuing to press for progress on a “early harvest” of tariff cuts in sectors like fisheries and forestry that alone could cut the tariff bill into Korea substantially.

The APEC Food System proposal, which the leaders endorsed, provides a concept for addressing the sort of agricultural trade issues we encounter in our bilateral relationship.

The Food System would see freer trade in food coupled with moves to strengthen weak agricultural sectors.

I hope that Korea will see this as a useful framework to handle sensitive food and agriculture issues.

Moving on to the President’s state visit, I’m pleased to say that there was useful progress on the bilateral front in areas such as aviation and quarantine access.

On aviation, the leaders have for the first time explicitly set “open skies” as a goal in the relationship.

Aviation links between New Zealand and Korea are a vital element in trade, tourism, education and people-to-people ties.

Currently Air New Zealand has withdrawn from the route, leaving Korean Air as the sole carrier.

In this situation, under current restrictive agreements, we could face constraints in direct air services that could in turn limit our ability to tap the Korean market.

As a result of the President’s visit our air services negotiators have been tasked with making improvements to the current air services agreement which should eventually lead to full liberalisation through a bilateral “open skies” approach.

On the quarantine access front, I’m pleased to note that Korea has agreed to expedite our request for access for peaches and nectarines.

This follows on from access for cherries, agreed earlier this year, which was good news for New Zealand’s stonefruit exporters.

But the backlog of access requests currently before the Korean authorities is still of major concern to us, and we have conveyed that concern to the President.

Korea itself is trying to boost its agricultural exports, and recently sought - and gained - quarantine access for Korean pears to New Zealand.

I was fortunate to sample the product during APEC, and they’re good.

Our approval of access for the pears is a reminder that quarantine access is important for both countries, and that greater efforts are needed to ensure that access procedures do not become barriers to trade.

During President Kim’s visit, both leaders called for a strengthened dialogue between our agencies working in this area, and I’m hopeful that this will be realised soon.

On the future, there are are obvious complementarities in the Korea-New Zealand trade and economic relationship arising from our advantages in primary products and Korean strengths in manufacturing.

But it is a fact that New Zealand’s exports to Korea remain heavily concentrated in unprocessed commodities, while gains from trade increasingly favour manufactured and knowledge-based products.

That is why we were delighted to find that both sides are looking at ways to improve the business and technology side of the relationship.

The New Zealand government has announced the “Bright Futures” project designed to promote knowledge-based, hi-tech businesses.

There are direct complementarities here with President Kim's efforts to promote a knowledge-based economy as the basis for Korea's future growth.

During the President’s visit, there were a number of initiatives to give New Zealand/Korea relations a bigger science and hi-tech component, including:

 moves to develop contacts between science organisations;
 proposals for stronger linkages between SMEs; and
 a joint statement on e-commerce.

These are areas where I hope New Zealand can become more active in Korea.

I would be interested in the Business Council’s views of how this can be achieved.

There are implications for governments too, particularly the need to remove barriers which have tended to confine our trade with Korea to commodities at the expense of manufactured goods.

Obviously though, in the future, a Free Trade Agreement with Korea has got to be the ultimate goal for both economies.

As you may know, there were several developments in the FTA area around the time of the APEC meeting.

First, announced the negotiation of an FTA between New Zealand and Singapore. These negotiations, which are now well advanced, were all about providing a catalyst to free trade developments in the region.
I’m sometimes criticised for being too optimistic, but the results of the New Zealand / Singapore agreement have surpassed even my expectations.
Within a couple of days, we had agreement to study an FTA proposal with Chile, and then a day later, a decision to expand this study to include investigation of a three way agreement between New Zealand, Singapore and Chile.
President Clinton then publicly expressed interest in P5, the proposal to develop a state-of-the-art FTA involving the US, Chile, Singapore, Australia and New Zealand, linking the Americas, the Pacific and Asia together.
I’ve recently been in Washington discussing this study with key figures in the US Administration, and they’re taking it seriously.
There are concerns within the Administration, but they also recognise the strategic reasons for entering a P5 type arrangement.
Obviously, I’m working hard to advance progress on this proposal, which would have an enormous catalytic effect as we head into the next WTO negotiating round.
Of less prominence, but equal importance, was the announcement that Korea and Chile will negotiate an FTA.

This actually represents a sea-change in Korean policy, because until recently it had focussed solely on multilateral trade liberalisation through the WTO.

Of course, we welcome Korea into the group of APEC nations that see FTAs as a means to complement and support liberalisation in the regional and multilateral context.

Since Korea announced this change last year, we have had some useful discussions on FTA issues with Korean agencies, including about our experience of adjustment under CER.

I would emphasise that we are not expecting Korea to be looking for other negotiating partners at this stage.

But the process of sharing views on FTA issues to continue, in the form of a joint study by research institutes in both countries on ways to deepen bilateral economic linkages between New Zealand and Korea, as was agreed during the President’s visit.

This study will help to enhance understanding of the economic interaction between New Zealand and Korea, and will clarify some of the issues that could arise if in the longer term there appears to be prospects for a freer trading arrangement between us.

In closing, let me emphasise that the Korea relationship goes well beyond trade.

Our ties with Korea arose of course from a shared experience of the Korean war, the 50th anniversary of which will be commemorated next year.

Increasingly, our links with Korea are broad and multifaceted, bringing in areas like sister city ties and cooperation on international issues.

Through education, tourism and migration, we now have an opportunity to build a wider constituency of Koreans who have links with New Zealand.

We must also expand New Zealanders’ understanding of Korea, and build an appreciation among decision-makers of the scope to develop the relationship.

I’m pleased to say that President’s visit delivered outcomes in these areas, such as the commencement of regular parliamentary visits and strengthening links between foundations involved in international exchanges.

I know I can also count on your continued support for our efforts to create a deeper relationship with a key Asia-Pacific partner.

Thank you.

ENDS

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