Conflicting industrial and agrarian interests in the South Korean parliament could push the final ratification of the Korea-Australia free trade pact to sometime next year, sources close to policymakers in Seoul said on Tuesday.
The free trade agreement known as KAFTA was signed by South Korean and Australian authorities on April 8. Parliaments of both nations must approve the treaty for it to come into force. Australia has completed its domestic process.
But South Korean lawmakers are struggling to pass the deal in Seoul’s National Assembly, with KAFTA expected to pose opposite consequences to farmers and big-name conglomerates such as the Hyundai Motor Co. and steelmaker POSCO.
According to experts, KAFTA will advantage South Korean exporters in Australia. The 5 percent tariff on South Korean sedans sold in Australia, for example, will be cut immediately, while other related tariffs will gradually be dropped within three years.
The free trade deal, however, is expected to pose risks toward South Korean farmers, with cheaper Australian agriculture imports becoming even cheaper with the tariff cuts.
Livestock and dairy farmers here have been especially vocal in their opposition to KAFTA. They conducted a 15-day hunger strike in front of the national legislature in Seoul before ending their protest on Nov. 6 on the condition that lawmakers would consider their requests to increase public subsidies to them if KAFTA is ratified.
Currently, lawmakers from the governing Saenuri Party, which largely sides with industrial interests, and the main opposition New Politics Alliance for Democracy, which sympathizes with farmers, are conducting negotiations on the subsidies with South Korean government officials.
At the center of this debate is the interest rate imposed on government loans to farmers.
The government’s multiple borrowing plans for farmers have a 3 percent interest rate. Livestock and dairy farmers have asked officials to lower the figure to somewhere in the “1 percent range.”
Saenuri Rep. Joo Ho-young on Tuesday expressed a willingness to lower the rates. Opposition lawmakers have yet to reply to Joo’s offer.
Farmers, however, appear to be adamant on their 1 percent demand.
“We have not ruled out resuming our hunger strike or even bringing our cattle to the National Assembly, should lawmakers default on their promises,” said Lee Gang-heoun, a spokesman for the four dairy and livestock farmers’ associations that are in protest.
Industrial lobby groups empathetic to the corporate sector, on the other hand, have been pushing lawmakers to ratify KAFTA before the year’s end.
If KAFTA is ratified by year-end, two tariff cuts will take effect within weeks. The first round of tariff cuts take force on the day KAFTA is ratified, while another cut takes place every subsequent New Year.
Calls have intensified in recent weeks as a delay in the ratification is likely to disadvantage South Korean exporters competing with their Japanese counterparts in the Australian market. Tokyo is expected to ratify a free trade deal with Canberra sometime early next year.
Australian beef exporters competing with Americans in the Korean market are also eager to see the deal pass within 2014 for similar reasons.
Australian livestock farmers selling beef in Korea have been suffering from a tariff deficit of 5.3 percent against their U.S. competitors since the Korea-U.S. Free Trade Agreement took effect in March 2012.
If KAFTA’s ratification is pushed to sometime next year, that deficit will grow to 8 percent as American producers will automatically enjoy a tariff cut on Jan. 1.
By Jeong Hunny (hj257@heraldcorp.com)
