Services
Under the KAFTA, Australia achieved most favoured nation status for the export of services to Korea. This brings Australia on par with the US and Europe. A relaxing of rules on foreign export services firms is an important step in the continued opening up of Korea to the global economy, and presents a great opportunity for Australian service providers to grow their business with one of our largest trading partners.
Legal services
KAFTA achieved a three-stage relaxing of the provisioning of legal services by Australian law firms. Australian legal firms will be able to:
- establish representative offices in Korea (from 12 December 2014)
- enter into cooperative agreements with Korean law firms (from 12 December 2016)
- joint venture law firms may be established (from 2019)
- Australian lawyers will be able to advise on Australian and public international law matters as foreign legal consultants in Korea with Australian legal credentials.
Financial services
Australian financial services providers can work in Korea on a “cross-border” basis, and are not required to maintain a full commercial presence for investment advice and portfolio management of investment funds. Korean regulators are now required to allow Australian institutions to transfer data into and out of Korean territory, and licencing restrictions have also been lessened.
Australian financial service providers may now;
- establish or acquire institutions in South Korea
- choose whether to establish as a branch or a subsidiary; and
- choose whether or not to locate processing and administrative functions in Korea, their head office or overseas affiliates.
KAFTA establishes a “negative list” regime, which presumes a financial service is allowed unless specifically prohibited, and commits Korea to allow new financial services it would permit its own financial institutions to provide.
Accountancy Services
Australian accountants who hold CPA or CA qualifications are able to provide accountancy consultancy services relating to Australian or international tax or accounting law through offices in Korea, and by December 2019 are able to work and invest in Korean tax or accounting operations.
Other services
- Telecommunications providers are able to fully own facilities based telecommunications service suppliers and operate public telecom services.
- Education providers have been guaranteed access to the Korean market
- Environmental service providers have been guaranteed access to the Korean market, (including waste management, waste water treatment, etc.)
- The Australian Film and TV industry will work closer with their counterparts to achieve wider distribution in Korea.
- Engineers have been guaranteed access to the Korean market and received enhanced professional recognition.
Source: DFAT
Goods
KAFTA has achieved significant improvements in bi-directional tariff reduction on goods between Australia and Korea. By 2033, 99.7% of Australian exports will be tariff free, and by 2021, 100% of Korean exports will be tariff free. To help some market segments adjust to this new regulatory framework, certain tariffs will be eliminated progressively, including on some motor vehicles and parts, steel, chemicals, plastics and textiles, and clothing and footwear products.
Agriculture is a big winner from the signing of KAFTA. Korea has little land available for farming and therefore imports most of its food. The following is a selection of categories of goods that have experienced a tariff reduction.
- Beef
- Sugar
- Dairy
- Oilseeds
- Meat
- Seafood
- Wine
- Horticulture
Resource commodities (energy and mineral products) and simply-transformed manufactures (comprising mainly unwrought metals such as aluminium and copper) accounted for nearly three-quarters of the value of Australia’s exports to Korea in 2014-15.
Crude petroleum
- $1.9 billion exported to Korea in 2014-15.
- 3% tariff to be removed by 2018.
Natural Gas
- $1 billion exported to Korea in 2014-15.
- 3% tariff was eliminated immediately upon entry into force.
Unwrought Aluminium and Titanium Oxide
- $767 million and $62 million respectively.
- 1-6.5% tariffs eliminated immediately upon entry into force.
Automotive Parts
- Korea is Australia’s largest destination for gear boxes and engine parts.
- Worth $37 million in 2014-15.
- 8% tariff eliminated immediately upon entry into force.
Sea Salt
- Worth $87 million in 2014-15.
- 1% tariff eliminated immediately upon entry into force.
Source: DFAT
Please check the DFAT factsheet for more information.
Total Korean investment in Australia in 2014-15 was valued at $22.89 billion. KAFTA enables an increased flow of Korean investment by raising the screening threshold at which Korean investments in non-sensitive sectors are considered by the Foreign Investment Review Board from $252 million to $1 094 million, consistent with the best nation status afforded to the US and New Zealand.
KAFTA provides enhanced protections and certainty for Australian investors in Korea (and equally for Korean investors in Australia) with provisions to ensure non-discrimination, and protection and security for investments. Furthermore, state-level commitments can be enforced directly by Australian investors (and equally by Korean investors) through an investor-State dispute settlement mechanism (ISDS).
Source: DFAT