Korean goods will become cheaper in AustraliaKorea’s free trade agreements (FTAs) with Australia and Canada will take effect next year, which will cause prices to drop on items from frozen beef and wine to expensive winter jackets.
It will also boost the price competitiveness of Korean-made home appliances and auto parts in both of the new trading partners.
After the Korea-Australia FTA went into effect Friday, the Canadian government issued a final approval on Saturday for the Korean-Canada FTA to be effective on Jan. 1.
Industry insiders have lobbied the government to make both FTAs operational before the end of the year to accelerate price reduction by cutting tariffs twice - when the deal goes into effect and when the new year begins.
“Agreeing on the FTA as early as possible gives Korea an opportunity to preoccupy the Australian market, which will certainly help Korean products become more price-attractive to consumers there,” the Institute of International Trade at Korea International Trade Organization said in a recent report.
The Korea-Australia FTA became the nation’s 10th effective trade deal on Friday, which means tariffs on imported goods will be reduced twice in less than a month.
Korea spent about $410 million last year on tariffs to Australia. The new FTA immediately eliminated tariffs worth about $370 million, and will get rid of import taxes of about $16 million on Jan. 1.
Local trade experts say this will make of Korean-made products like cars, auto parts, machinery, tires and electronics in Australia as attractive to buyers there as similar products from Japan and China.
Korean-made home appliances such as televisions and refrigerators, which take up 12.2 to 23 percent of the Australian market, will be cheaper after the tariffs are eliminated.
However, the KITA warned that the first three months of next year will be a crucial period for Korean exporters because Japan will also benefit from the double tariff reduction in April.
“The Japan-Australian FTA is also likely to take in effect by late March and will enjoy double tariff reductions, first on the day it takes effect and the second reduction on April 1 - the day the Japanese fiscal year begins,” wrote Myung Jin-ho, a research fellow at the institute. “So, Korea needs to make a quick but close examination of its competitive products and prepare.”
Korea’s 11th FTA with Canada missed the deadline to take advantage of the double tariff cut. However, the government said Korea still has the more attractive prices than its Asian competitors because the Korea-Canada agreement is the first deal that Canada has made with an Asian nation.
Starting Jan. 1, Korean-made auto parts like gear boxes and clutches, televisions, refrigerators and vacuum cleaners, which have a 5 to 8 percent tariff, will become cheaper. The 6.1 percent tariff on automobiles, Korea’s largest export item to Canada, will be gradually reduced starting next year.
Meanwhile, Korean consumers will have access to cheaper products from Australia. The deal will lead to cheaper wine, cherries, flour and salmon from the country.
BY KIM JI-YOON [email@example.com]
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