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.
KAFTA achieved a three-stage relaxing of the provisioning of legal services by Australian law firms. Australian legal firms will be able to:
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;
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.
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.
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.
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.
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).