NZ needs to secure trade deal with Korea as exporters face getting squeezed out due to others' FTAs, Key says

By Alex Tarrant

New Zealand needs to secure a free trade agreement (FTA) with Korea, as companies here face getting squeezed out by those in countries which do have FTAs with Korea, Prime Minister John Key says.

But it may be some time before Kiwi exporters get the same treatment as their American and European counterparts, as Korean politicians face elections in April, the strong Korean farming lobby throws its weight at the government, and as protest erupts over the recently signed FTA with the US.

New Zealand may also have to negotiate around a potential South Korean desire to include an investor-state dispute resolution (ISDR) provision in any FTA, effectively allowing private companies to sue governments for policy changes through an international tribunal, although the Koreans themselves are looking at renegotiating an ISDR provision they just signed up to with the US.

South Korea has just signed a free trade agreement with the United States, amid national protest over the inclusion of an ISDR provision. It has been reported that dozens of Korean judges are among those who have raised concerns about the ISDR provision, and President Lee Myung-bak has even offered to renegotiate the US FTA to appease those concerns.

The Australian government has refused to sign any future FTA that includes investor state resolution provisions. Australian Trade Minister Craig Emerson reiterated that earlier this month when asked about progress on the Trans Pacific Partnership FTA, which New Zealand is part of, and which the US is keen to join:

"We do not and will not support investor state dispute settlement provisions. That is one of the issues that non-government organisations have expressed concerns about, and that's the assurance that we're giving. What we will do is we'll pursue the negotiations for the Trans-Pacific Partnership in good faith, and make our decisions on that based on Australia's national interest," Emerson told reporters on March 5.

Tobacco maker Philip Morris is currently seeking compensation from the Australian government under Australia's bilateral investment treaty with Hong Kong, after the government passed a law requiring plain packaging on Australian cigarette packets 

The NZ Herald reported this morning that talks between Australia and South Korea on an FTA between those two countries had hit an impasse over a South Korean desire to include an ISDR provision in the agreement.

A spokeswoman for New Zealand Trade Minister Tim Groser told interest.co.nz that the issue of an investor state dispute resolution provision was still under discussion in the context of New Zealand's FTA negotiations with Korea.

"New Zealand’s general position is to approach the issue of investor state dispute cautiously in each of its negotiations. Where we have sought investor state dispute clauses, we have insisted on clear and transparent provisions that help to mitigate the risks of being involved in a dispute," the spokeswoman said.

'We need an FTA with them'

In an interview aired on RadioLive this morning, Prime Minister John Key said negotiations between New Zealand and Korea would resume again after a two-year hiatus as Korea pursued its European and US agreements.

Key is currently in Korea for a nuclear security summit, although the trip will also include bilateral discussions about trade issues.

“Quite frankly if we don’t get an FTA [with Korea], our big companies are going to be priced out of this market because they’re facing competition from other countries where they’re not paying a tariff now because of their FTAs. For Fonterra and Zespri and [others], this is not only a big market, but one they could lose a grip on if we can’t secure them an FTA," Key said.

The Korean farmer lobby was very intense when they signed the US FTA.

"Interestingly enough, we’re seasonally different from Korea, so we don’t compete on that front,” Key said.

“The big areas that they worry about – rice, and grain-fed beef – well, we produce no rice and very limited grain-fed beef. So in a lot of ways we should be able to de-tox those arguments, but the farmer lobby’s strong, and it got quite a lot of compensation when they signed the US FTA,” he said.

“Having said that, the counter-side is they worry a lot about food inflation over here [in Korea], they know New Zealand’s food standards are really high, and a lot of our products are used in ingredients in other foods that they eat. There’s a balance of benefits on both sides – for Korea and New Zealand.”

“It took six years to get the US-Korean FTA done – 'KORUS'. It’s a slow process. But we need it to happen so we’re going to keep pushing,” Key said.