Free trade account australia korea

In preliminary briefings, stakeholders were supportive of the outcomes. Australia has similarly made commitments to Korea, binding our existing regulatory arrangements, while retaining adequate protections for interests such as prudential requirements. The Financial Services Chapter contains similar obligations to the Cross-Border Trade in Services Chapter and the Investment Chapter, with additional provisions that reflect the importance of regulation of the financial sector to ensure the integrity and stability of the financial system.

The Financial Services Chapter contains provisions locking in much broader commitments from Korea on Australian cross-border financial services suppliers and for off-shore processing of financial information and data than has been previously available to Australian service suppliers in Korea. Film and television producers: KAFTA will enable Australian film and television producers, in collaboration with Korean partners, to access for the first time Korean government incentives to develop audiovisual content that will count as local content in both countries.

This is a significant new opportunity for Australian producers given the size and competency of the Korean audiovisual sector and the extent to which the Korean government promotes local content. It will encourage creative collaborations on screen projects of the quality and scale to compete in the international marketplace and facilitate the wider distribution of screen products to markets. Impact on Australian investors in Korea These investments are concentrated in Koreas financial and infrastructure sectors.

KAFTA will provide an opportunity to broaden and deepen Australian investment in Korea by improving market access and protections for Australian investors. Korea has agreed to further open its economy to Australian investors through the progressive raising of foreign equity caps in certain sectors and removing restrictions on investment in sectors previously closed to Australian investors, including the telecommunications sector; legal services and accounting and taxation agency services.

The key obligations of the Investment Chapter - which operate on a reciprocal basis - include non-discrimination, most favoured nation treatment, performance requirements and obligations on senior management and boards of directors. Under KAFTA, investments of all forms are protected and Australian investors, unless specifically exempted, are to be treated no less favourably that Korean investors in the establishment or acquisition, operation and sale of their investments in Korea.

KAFTA also provides enhanced protections for Australian investors in Korea, with measures to ensure transparency, equitable treatment and security for investments. KAFTA protects Australian investors from discriminatory or arbitrary expropriation and nationalisation. Impact on Korean investors in Australia The provisions and protections in the Investment Chapter apply equally to Korean investors in Australia. Implications of investor-state dispute settlement provisions To succeed in an ISDS claim, an investor must establish that the host government has breached an investment obligation.

A claim could only potentially succeed if none of the relevant carve-outs and safeguards included in the agreement to protect legitimate regulation were found to apply.

Substantive carve-outs and safeguards have been included for key public policy concerns including public welfare, health, culture and the environment. Foreign investment screening decisions are also carved-out from the scope of the ISDS mechanism. Procedural safeguards to deter frivolous claims and contain costs are also included.

Movement of natural persons The Movement of Natural Persons Chapter provides for coverage of temporary entry of service suppliers and investors. Australia has made a commitment not to apply labour market testing.

The Migration Act provides that labour market testing may only be applied if not inconsistent with Australia's international trade obligations. In order to Customs Amendment Korea-Australia Free Trade Agreement Implementation Bill Page 17 implement Australias undertaking not to impose labour market testing on Korean nationals, a determination needs to be made by the Immigration Minister under regulatory arrangements. As this chapter locks in existing arrangements, no significant change is expected in the number of skilled workers entering Australia.

This will provide greater certainty and market access opportunities for Australian companies in Koreas government procurement market, broadly equivalent to those Korea provides other countries in its bilateral agreements.

Australias commitments go no further than existing free trade agreement commitments. The chapter also sets out rules and procedures which are consistent with existing Australian government procurement frameworks, requiring no domestic change. The chapter contains a number of specific obligations on the protection of IP rights, including patents, trademarks and copyright.

In relation to the digital environment, it contains measures to protect copyright rights management information, effective technological protection measures, and limitations on service provider liability. It also sets out obligations for government use of legitimate software, and for the protection of encrypted programme carrying satellite signals. The provisions on the enforcement of intellectual property provide for presumptions to facilitate proceedings as well as clarifying civil and administrative procedures and remedies to ensure judicial authorities have appropriate authority to deal expeditiously with infringement cases.

The chapter also includes special requirements related to border measures which ensure that Customs, or the relevant competent authority, is able to deal appropriately with suspected infringing goods and also ensure that the interests of the importer are protected. KAFTA includes commitments to ensure that trade and investment liberalisation achieved across the FTA is not undermined by anti-competitive practices.

Australia and Korea have committed to: The Competition Policy Chapter also provides a framework for competition authorities in Korea and Australia to cooperate and coordinate their enforcement practices.

This will aid Australian business in harnessing the efficiencies of electronic commerce, while ensuring the protection of online consumers. Labour and the environment Some stakeholder submissions expressed concern that KAFTA should not undermine human rights, labour rights and environmental protection or erode the Governments ability to regulate in the public interest in these areas. The right of both Australia and Korea to determine and enforce domestic labour and environmental protection and priorities is not undermined by KAFTA.

The agreement is consistent with existing international commitments and does not prevent Australia from meeting any of its international labour or environmental obligations. An ad-hoc committee can be established in the event of concerns about implementation of the Labour and Environment chapters.

These chapters are not subject to dispute settlement or ISDS. Impacts on small business Australian small businesses will benefit from cheaper inputs and consumers also will benefit from the increased choice of goods and services that flow from a reduction in trade and investment barriers. The impact of KAFTA on Australian consumers is likely to be positive, providing greater availability of Korean products at more competitive prices. Impact on government revenue The removal of tariffs on merchandise imports will lead to reductions in tariff revenue, and thereby affect the governments fiscal position.

This figure does not include the unmodelled, second-round effects on government revenue from increased economic activity, which are expected to be positive. State and Territory Governments During negotiations, State and Territory Governments raised issues of interest to industries residing in their respective states, their regulatory responsibilities and the administrative implications of KAFTA.

There are no additional impacts on State and Territory Governments beyond those discussed in other sections of this impact statement. Australian trade regulations Most of Australias substantive obligations in KAFTA will be subject to this mechanism, except those found in the chapters concerning technical barriers to trade, sanitary and phytosanitary measures, competition policy, labour and the environment and some aspects of movement of natural persons.

KAFTA will support an already significant, complementary and growing economic relationship with Korea and would contribute to boosting bilateral trade and investment links. Independent economic modelling9 predicts that after 15 years of KAFTAs operation, Australian exports to Korea would be 25 per cent higher than they otherwise would have been as tariffs and other barriers on Australian exports to Korea are removed.

Exports of agricultural goods to Korea would be 73 per cent higher than otherwise, contributing to a total five per cent increase in Australias total agricultural exports to all markets.

Mining exports to Korea would be 17 per cent higher and manufacturing exports would be 53 per cent higher. Agricultural products that would see the largest increases in exports to Korea by include bovine meat products per cent increase ; horticulture per cent ; and dairy products per cent.

Other products in mining and manufacturing would also increase: Agriculture would be particularly disadvantaged: Korean imports of Australian agricultural goods would decline by 29 per cent by Mining and manufacturing exports would decline by one and seven per cent respectively. KAFTA will also create new services export opportunities to Korea through the removal of Korean barriers in services sectors of commercial interest to Australian services providers including in financial services, legal services, accounting services, telecommunications services, education services and other professional services.

KAFTA is consistent with Australias trade policy objectives as it is a comprehensive, high-quality trade agreement that complements multilateral and regional trade liberalisation. Stakeholder views were actively encouraged and considered throughout negotiations on KAFTA, including through an initial call for public submissions in December to seek views on the expected economic, regional, social, cultural, regulatory and environmental impacts of a free trade agreement with Korea.

This was sent by email to over addressees, by letter to over 50 key stakeholders, as well as advertised in the media and on DFATs website. A diverse range of sectors participated in consultations, including agriculture, education, manufacturing, telecommunications, mining and energy, and financial institutions.

Most submissions supported an FTA with Korea. Other industries identified sensitivity toward Australian imports of Korean goods, most particularly in the manufacturing sector. Australian agricultural industry bodies including the National Farmers Federation, Meat and Livestock Australia, the Horticultural Market Access Committee, the Australian Dairy Industry Council, and the Australian Wine and Brandy Association and individual producers strongly pushed for a comprehensive agriculture outcome so as to allow Australian agricultural exporters to remain on competitive terms with Chile for horticulture and wine , ASEAN countries for sugar , the EU for dairy and wine and with the US for beef, sheep and goat meat, dairy, barley, molasses and other sugar, and some root crops, such as potatoes.

Some members of the industry expressed concern that KAFTA would impose additional pressure on local automotive manufacturing. Some stakeholders called for a FTA to improve reciprocal access for Australian automotive products into Korea if Australia were to remove its tariffs on Korean imports. Pointing to the potential for greater collaboration through the automotive components trade between Australia and Korea, other stakeholders expressed support for a FTA.

Automotive parts companies were mainly concerned that the FTA not undermine the ongoing viability of the Australian passenger vehicle industry.

KAFTA largely meets these concerns by providing for a phase-out of Australias tariffs for motor vehicles and automotive parts over three to five years, while securing immediate entry into force elimination of Koreas eight per cent tariffs on motor vehicles and automotive parts. Among other manufacturing industries, stakeholders noted a range of competitive pressures, including the strong Australian dollar and high domestic cost structures, had led to reduced activity and volumes in Australian manufacturing.

Removal of Australias remaining five per cent tariff on most manufactured imports would increase that pressure. Stakeholders called for a gradual phasing out of the tariff, rather than an immediate elimination on entry into force, in order to avoid significant short-term disruption to the domestic manufacturing sector.

Stakeholders in the textiles, clothing and footwear sector were concerned to receive reciprocal treatment in any FTA with Korea. KAFTA addresses these concerns by providing phase- out of tariffs on most carpet lines, with the five per cent tariff to be removed in five equal annual instalments beginning in year four of the agreement i.

Korea will eliminate its 10 per cent tariff on carpets on entry into force. The plastics and footwear industries were concerned that Australia not eliminate its tariffs without reciprocity from the Korean side, and these concerns have been addressed.

Australias tariffs on sensitive footwear and plastics lines will be phased out over five years for sensitive footwear and from three to five years for sensitive plastic lines. Korea will eliminate tariffs on all footwear lines with the exception of a single line on entry into force, while tariffs on the majority of plastic lines will be eliminated on entry into force, with a limited number phased-out over three to five years.

Other products excluded from KAFTA include abalone, Korean citrus, ginger, apples, pears, walnuts, onions, capsicums, capsicum, garlic, chestnuts and certain wood products. However, Korea is not a significant market for Australias exports of these products. Respondents signalled strong interest in removing barriers to Australian services in the Korean market, including restrictions on commercial presence and licensing requirements.

Cooperation on professional services could also be improved. Some submissions warned that an FTA should not undermine the ability of the Australian Government to regulate on public health and welfare issues. In addition to receiving written submissions, DFAT undertook consultations in Seoul, Canberra and State and Territory capitals with both industry and civil society. DFAT held six-monthly stakeholders meetings involving peak associations; conducted sectoral roundtables; regularly briefed the Australia-Korea Business Council; and provided input for community cabinet meetings.

Public forums, open to individuals and groups, were held in capital cities, with invitations sent to key stakeholders. DFAT held a large number of meetings and discussions with affected organisations and companies, and provided regular updates on negotiations on its website. States and Territories State and Territory departments were contacted and invited to make public submissions at the outset of negotiations.

In September the then Trade Minister wrote to State and Territory leaders seeking endorsement of Australias initial services and investment offer, reflecting the responsibilities State and Territory Governments have for regulation of services and investment activities, prior to exchanging offers with Korea.

State and Territory Governments subsequently advised that they supported the initial offer subject to continuing consultations on KAFTA. State and Territory Governments and Ministers were also consulted via correspondence, Officials Groups meetings including the Standing Committee on Treaties and teleconferences.

Federal Government agencies and Ministers have been consulted via bilateral meetings, correspondence and inter-departmental committee meetings. Stakeholders were updated via bulletins following each round of negotiations. Commonwealth Government agencies Commonwealth Government departments were consulted extensively throughout the negotiations and representatives from relevant departments attended negotiations in Australia and Korea. Page 22 Customs Amendment Korea-Australia Free Trade Agreement Implementation Bill deliver commercially meaningful market access gains that will benefit Australian agriculture, resources, energy and manufacturing exporters, service providers, consumers and investors; secure Australian exporters competitive position in Korea against other countries suppliers that are enjoying preferential treatment under Koreas existing bilateral FTAs and against competitors from countries that are currently negotiating their own FTAs with Korea; deliver faster and deeper market access gains than are possible through multilateral WTO or any regional negotiations; be consistent with WTO requirements for free trade agreements; complement Australias efforts to seek additional trade liberalisation from Korea through the WTO and regional mechanisms; and only impose adjustment costs that would be outweighed by the overall economic gains to the Australian economy.

It should be noted that: However, these represent about 0. Following the conclusion of negotiations in December , the text of KAFTA will be translated and undergo legal verification before it is signed. Both English and Korean versions will be official versions of the agreement. Upon signature, the full text of the agreement will be made publicly available.

Once domestic processes are completed, including amendments to relevant legislation and regulatory changes, Australia and Korea will exchange diplomatic notes advising that the ratification process has been completed by both Parties.

Both Parties are aiming for entry into force before the end of At time of writing, Australian officials were consulting with Korean counterparts on when the text would be made available publicly. However, the FTA provides mechanisms for unilateral termination by either party and review through the joint FTA institutional provisions. The entry into force of KAFTA is expected to result in a small reduction in ongoing business compliance costs for Australian exporters to Korea.

The reduction arises from the possibility that some businesses that previously sought and obtained non-preferential certificates of origin COOs may now be able to self-certify the origin of their goods.

There is a significant level of uncertainty regarding the number and composition of COOs issued in respect of Australian exports into Korea. Accordingly, the estimates of the compliance costs under the status quo - as well as the likely incremental changes - are largely assumption driven and should be interpreted as such.

However, based on the available data, it is possible to gain an appreciation of the order of magnitude of these changes. Certificates of Origin 3.

Preferential certificates account for around 10 per cent of all certificates issued. Preferential certificates are generally issued in respect of countries with whom Australia has an FTA, but which do not allow for self-declaration. Korea is Australias third largest export destination, with the share of Australian exports going to Korea rising to eight per cent in However, under the status-quo, it is expected that demand for Australian exports would be relatively less relative to Koreas other trading partners, and that figure could be expected to decline over time.

The cost of a certificate depends on the level of complexity - relatively simple or ,,wholly obtained goods such as primary products, agricultural exports or resources attract lower fees than complex or composite manufactured goods which may require more complex cost of manufacture calculations.

It is estimated that around 70 per cent of Australian goods exported to Korea are ,,wholly obtained goods. The ongoing administrative costs incurred by a business in preparing the documentation to obtain a COO are likely to be relatively low. As noted above, the bulk of Australian exports to Korea are ,,wholly obtained goods. Further, while new businesses may expend considerable time applying for certification for their initial consignment, as a matter of practice this information is re-submitted for subsequent certifications.

In addition, much of the information required would be collected for other purposes. The administrative time burden for each application is therefore estimated to be modest. Similarly, the records related to certificate of origin are required to be kept for five years for most foreign customs agencies. However, businesses are required under Australian Tax Law to retain these records for seven years. The incremental compliance burden associated with record keeping for COOs is therefore assessed as nil.

COOs are required for Australian exports to Korea for a range of purposes in addition to tariff compliance. For example, overseas customs agencies may require COOs for the purpose of calculating import quotas. Alternatively, foreign banks may require COOs in order to provide letters of credit.

However, each business will have to consider for themselves, as a commercial decision, whether the benefits of obtaining a COO is outweighed by the costs administrative and otherwise. To the extent that this reduction occurs, those businesses will save the direct costs of certification by industry bodies; together with the administrative costs.

Overview of the Bill The Bill amends the Customs Act to introduce new rules of origin for goods that are imported into Australia from Korea to give effect to the Agreement. Human rights implication Right to privacy The Bill will impose record keeping obligations on exporters of goods to Korea who claim the goods are Australian originating for the purpose of obtaining a preferential tariff treatment in Korea.

This will include a requirement for that person to produce those records when asked by an authorised officer. An authorised officer may disclose these records to a Korean customs official for the purpose of verifying a preferential tariff in Korea. The record keeping requirements reflect the terms of the Agreement and will allow Australia to verify the origin of goods for which preferential tariff treatment is claimed in Korea.

This may include the collection and disclosure of personal information for limited purposes. Although the Bill will engage the right to privacy where it involves the collection and disclosure of personal information, this collection and disclosure is for the limited purpose of verifying a claim made by a person for preferential tariff treatment.

Verification of the eligibility for preferential treatment is required under the Agreement and the possible collection and disclosure of personal information here is justified and reasonable. Further, the collection and disclosure of personal information is protected under Australian law and the existing protections will not be altered in any way by the Bill. Conclusion The Bill is compatible with human rights. Clause 2 - Commencement 2.

Subclause 1 provides that each provision of this Act specified in column 1 of the table in that subclause commences, or is taken to have commenced, on the day or at the time specified in column 2 of the table.

This subclause also provides that any other statement in column 2 of the table has effect according to its terms. Item 1 of the table provides that sections 1 to 3 and anything in this Act not elsewhere covered by the table will commence on the day on which the Act receives the Royal Assent.

Item 2 of the table provides that Schedule 1 either commences on 1 December or on the day on which the Agreement done at Korea on 8 April comes into force for Australia, whichever is later. However, Parts 1 and 2 do not commence at all if the event mentioned in paragraph b does not occur.

This item also provides that the Minister for Immigration and Border Protection must announce by notice in the Gazette the day on which the Agreement comes into force for Australia. Subclause 2 provides that column 3 of the table contains additional information that is not part of the Act. Clause 3 - Schedule s 7. This clause is the formal enabling provision for the Schedule to the Bill, providing that each Act specified in a Schedule is amended in accordance with the applicable items of the Schedule.

In this Bill, the Customs Act is being amended. The clause also provides that the other items of the Schedule have effect according to their terms. This is a standard enabling clause for transitional, savings and application items in amending legislation. New Division 1J is headed Korean originating goods and sets out the rules for determining whether goods are Korean originating goods and therefore eligible for a preferential rate of customs duty under the Customs Tariff Act.

These rules are being inserted to give effect to the Agreement, in particular Chapter 3 of the Agreement. New Division 1J contains six subdivisions which are set out below. Subdivision A - Preliminary Subdivision A contains a simplified outline of Division 1J and contains the interpretation provision for that Division.

Section ZMA Simplified outline New section ZMB Interpretation Australian originating goods being goods that are Australian originating goods under a law of Korea that implements the Agreement. Certificate of Origin a certificate that is in force and that complies with the requirements of paragraph 2 of Article 3.

Convention means the International Convention on the Harmonized Commodity Description and Coding System done at Brussels on 14 June , as in force from time to time. In most cases it will be the transaction value but there are other valuation methods if this value cannot be ascertained.

Harmonized System means the Harmonized Commodity Description and Coding System as in force from time to time that is established by or under the Convention. The Harmonized System HS is the worldwide classification system that has been adopted by all countries that are members of the World Customs Organization. The HS organises goods according to the degree of manufacture, and assigns classification numbers to all goods. It is arranged into 96 chapters with each chapter being divided into headings, subheadings, and tariff classifications.

Under the HS, the chapter, heading 4 digits , and subheading numbers 6 digits for all good are adopted by countries using the HS. The Australian Customs Tariff uses an additional two digits for national classification to create 8 digit tariff items. Interpretation Rules which means the General Rules as in force from time to time for the Interpretation of the HS provided for by the Convention.

Korea means the Republic of Korea. Korean originating goods which means goods that, under this Division, are Korean originating goods. Non-originating materials are goods that are not originating materials because they do not satisfy the requirements of Division 1J in their own right.

For example, where frozen crumbed fish fillets are made in Korea from fish caught in Korea, coated with herbs and spices imported from Thailand, the fish would be originating materials and the herbs and spices would be non-originating materials. Page 30 Customs Amendment Korea-Australia Free Trade Agreement Implementation Bill originating materials means Korean originating goods that are used in the production of other goods; or Australian originating goods that are used in the production of other goods; or indirect materials.

In some circumstances, in order to determine whether goods that are imported into Australia are Korean originating goods, and therefore eligible for a preferential rate of customs duty, it may be necessary to have regard to the goods from which the final goods are produced see Subdivisions C and D. Originating materials are those goods that are used to produce other goods and that are also Korean originating goods, which means that in their own right they satisfy the requirements of new Division 1J; or are Australian originating goods under a law of Korea that implements the Agreement; or indirect materials as defined above.

This definition is taken from Articles 3 and 4 of the United Nations Convention on Laws of the Sea which provides as follows: Every State has the right to establish the breadth of its territorial sea up to a limit not exceeding 12 nautical miles, measured from baselines determined in accordance with this Convention.

The outer limit of the territorial sea is the line every point of which is at a distance from the nearest point of the baseline equal to the breadth of the territorial sea. The regulations may prescribe different regional value content rules for different kinds of goods.

New subsection ZMB 2 provides that the regional value content of goods for the purposes of Division 1J is to be worked out in accordance with the regulations. Customs Amendment Korea-Australia Free Trade Agreement Implementation Bill Page 31 New subsection ZMB 3 provides that the value of goods for the purposes of Division 1J is to be worked out in accordance with the regulations and that the regulations may prescribe different valuation rules for different kinds of goods. The value of goods is relevant, for example, in determining whether goods satisfy the de minimis requirement in Article 3.

The value of goods is to be distinguished from the customs value of goods which is to be worked out under section of the Customs Act. New subsection ZMB 4 provides that in specifying tariff classifications for the purposes of Division 1J the regulations may refer to the HS. The product specific rules in Annex 3-A of the Agreement refer to the tariff classifications of the HS.

Subsection 4 3A provides that reference in the Customs Act to the tariff classification of goods is a reference to Schedule 3 of the Customs Tariff Act, which is not the case in new Division 1J. New subsection ZMB 6 provides that despite subsection 14 2 of the Legislative Instruments Act , regulations made for the purposes of Division 1J may apply, adopt or incorporate, with or without modification, any matter contained in a instrument or other writing as in force or existing from time to time.

New subsection ZMB 6 is included to avoid any criticism on the basis of an inappropriate delegation of legislative power in the situation where an instrument or other writing is applied, adopted or incorporated. This provision will enable the Customs Korean Rules of Origin Regulations to refer to the general accounting principles of Korea for the purposes of the regional value content calculations.

Subdivision B sets out the rules in relation to goods that are wholly obtained in Korea or in Korea and Australia. New subsection ZMC 1 provides that goods are Korean originating goods if they are wholly obtained in Korea or in Korea and Australia; and either the importer of the goods has, at the time for working out the rate of import duty on the goods, a Certificate of Origin or a copy of one for the goods; or Australia has waived the requirement for a Certificate of Origin for the goods.

New subsection ZMC 2 provides that goods are wholly obtained in Korea or in Korea and Australia if, and only if, the goods are: Subdivision C sets out the rule in relation to goods that are produced entirely in the territory of Korea from originating materials only under section ZMD. Such goods are Korean originating goods where the importer of the goods has, at the time for working out the rate of import duty on the goods, a Certificate of Origin, or a copy of one, for the goods; or Australia has waived the requirement for a Certificate of Origin for the goods.

Subdivision D sets out the rules for determining whether goods that are produced entirely in Korea, or entirely in Korea and Australia, from non-originating materials only, or from non-originating materials and originating materials are Korean originating goods.

New subsection ZME 1 provides that goods are Korean originating goods if: The table in Schedule 1 to the Korean Regulations will incorporate the product specific rules relating to change in tariff classification, regional value content and other rules for the purpose of determining whether goods are Korean originating goods.

Column 1 of this table will set out the tariff classifications, column 2 will set out the description of the goods and column 3 will set out the product specific rules. New subsection ZME 2 refers to the first of the requirements that may be specified in Schedule 1 to the Korean Regulations. It provides that the regulations may specify that each non-originating material used in the production of the goods is required to satisfy a specified change in tariff classification.

New subsection ZME 3 provides that the regulations may also specify when a non-originating material used in the production of the goods is taken to satisfy the change in tariff classification. Regulations made under these heads of power would include provisions to give effect to the accumulation provision contained in Article 3. The concept of the change in tariff classification only applies to non-originating materials.

Goods that have been sourced from outside Korea or Australia and that are used in the production of other goods are non-originating materials. The KAFTA promotes a range of cooperation and collaboration activities between Australia and Korea that may lead to other investments of this nature, and these include:.

Australia's agricultural sector appears likely to reap significant benefits from the KAFTA, as a range of tariffs will be reduced or eliminated. These changes will be particularly helpful in assisting Australian producers to compete in the Korean market against producers from the United States who already enjoy reduced tariffs under the Korea-United States Free Trade Agreement. The table below provides a snapshot of the tariff changes for some of Australia's key agricultural commodities:.

Although the KAFTA has significant benefits for Australia's agricultural sector, there remain areas for further development.

For example, tariffs over the export of Australian dairy products to Korea are to be phased out over a period of 13 to 25 years. Media reports from Australia suggest that the Australian dairy industry would prefer for these tariff reductions to be accelerated to strengthen its trade position in the Korean dairy market. These services include the provision and transfer of financial information, investment advice and portfolio management services.

Australian accounting and legal service providers will also be provided with improved access to the Korean market, being permitted to establish representative offices in Korea for the provision of international services. Within a period of five years, Australian accountants will have the right to work and invest in Korean tax or accounting corporations, while Australian law firms will be permitted to enter into joint ventures with Korean law firms.

Korea's key exports to Australia include motor vehicles and components, household appliances, industrial goods, petrochemical products and heavy construction equipment. Tariffs imposed mostly at 5 per cent on these commodities will be eliminated with an immediate effect upon the date on which the KAFTA takes effect, or, at the latest, within a period of 10 years from the effective date. Motor vehicles represent Korea's most valuable export to Australia and represented The automobile products that will enjoy immediate tariff elimination include small-sized and medium-sized gasoline vehicles and tyres.

This will make Korean exports more competitive, particularly against exports of motor vehicles from Thailand, which already enjoy a zero tariff rating under the Australia-Thailand Free Trade Agreement. Sales of electronic goods are an important part of Korea's exports to Australia. Once the KAFTA takes effect, tariffs on most Korean household appliances including TVs, refrigerators and washing machines will be eliminated, with an immediate effect in Australia.

Tariffs on most heavy construction equipment, steel and petrochemical products will also be removed immediately, with tariffs on certain steel and petrochemical products to be abolished progressively during the implementation period.

It is worth noting that Korea's export of refined oil products such as gasoline and diesel to Australia, which constituted 32 per cent of Korea's total exports to Australia in , was tariff-free even before the execution of the KAFTA. In contrast to the manufacturing sector, the local agricultural industry in Korea is expected to suffer. Similar to its approach taken under the free trade agreement with the United States or the European Union, Korea will eliminate its tariffs only on Korean tariffs on the remaining The Korean Government plans to reduce the negative impacts of the KAFTA on its domestic agricultural market by creating an agricultural safeguard mechanism and imposing seasonal tariffs on certain agricultural products.

The KAFTA contains a number of provisions to promote bilateral investment, which are generally observed in recent free trade agreements. These provisions provide assurance and comfort to Korean and Australian investors, which should result in increased cross-border investment between the two countries. Australian investors in Korea, or Korean investors in Australia, may be able to pursue an action against the host country to enforce the host country's obligations under the KAFTA.

Chapter 11 sets out the procedure for the resolution of such investor-state disputes. Accordingly, Korean and Australian investors who invest in Australia or Korea respectively may wish to consider structuring their investment to incorporate the Chapter 11 dispute resolution process.

For more detailed analysis of Chapter 11, please see Allens Focus: A key feature of the KAFTA is the removal of a number of barriers to trade across a wide range of sectors. The KAFTA is expected to lead to increased trade and investment between Korea and Australia by ensuring that such trade and investment can be conducted in an efficient manner that is internationally competitive.