Speech by Ambassador Sam Gerovich
‘Australia and Korea Economic and Trade Relations’
Australian Chamber of Commerce in Korea (AustCham)
Breakfast Forum
Grand Hyatt Hotel
15 May 2009, 7:30 am
Introduction
Thank you Sean (Rodrigues), Chairman of the Chamber; Board members; distinguished guests; ladies and gentlemen. I am delighted to be here, and thank you for your introduction and very warm welcome. With your indulgence, I will provide a brief overview of the Australia-Korea relationship from my perspective, and then will be happy to take any questions you might have.
Last month we had the privilege of having the Minister for Resources, Energy and Tourism, Mr Ferguson, to officially launch the new Australian Chamber of Commerce in Korea. The launch was, I know, the culmination of a great deal of hard work by members of the Australian business community here in Korea. I congratulate the chairman and the board, and the entire membership, for embarking on this new journey as an independent Australian Chamber, committed to furthering Australia’s substantial business interests in Korea.
Indeed, this was a timely move as Australia and Korea enter a new era of partnership with the decision by our two governments to launch FTA negotiations. Korea’s trade minister, Mr Kim Jong-hoon, will go to Melbourne next week where he and his Australian counterpart, Mr Crean, will ‘kick-off’ the formal negotiations (Mr Crean incidentally, will also host Trade Minister Kim at a uniquely Australian cultural event – a Collingwood football match at the MCG - which is probably fitting).
But as we embark on this process, I look forward to AustCham’s continuing strong involvement, support and advocacy. Indeed, the FTA is intended primarily to serve and enhance the commercial interests of the business community – all of you here and your Korean counterparts who trade and invest in Australia. Clearly the government cannot take forward the negotiations without your input, knowledge of the market and its barriers, and advocacy with your Korean partners. We do not operate in a vacuum, and take a hard-nosed approach to pursuing Australian interests in these negotiations.
Ultimately, the foundation of the bilateral relationship is the business community – particularly those of you who work here in Korea. I and my staff at the embassy, and the trade negotiators in Canberra, look forward to working closely with you as we collectively work to strengthen the business links between Australia and Korea.
But first let me say something about myself and why my posting to Korea is a highlight in my career.
Many would probably regard me as a Northeast Asian specialist judging from the range of positions and overseas postings I’ve had throughout my career. And while Korea has similarities to other countries in which I have served over the past 38 years, I am far from being a Korea expert and am very conscious about how much more I have to learn about this country.
I have spent almost my entire career working on Northeast Asian issues. I’ve had over 25 years of postings in the Greater China region and Japan – including some 11 years in Beijing, 4 in Shanghai, 4 in Taipei, 3 in Hong Kong and 5 1/2 in Japan. But Korea has been absent in this journey, until now - a real gap. My posting in Korea is therefore very significant; it is a country in which I’ve always had a strong interest. And with my assignment here, it completes the East Asian mosaic in my life and professional career.
I am very excited at the prospect of spending the next few years here - as you know, this is a very dynamic and exciting country. I look forward to getting to know you, through AustCham and its events, and also drawing on your knowledge and experience. Perhaps towards the end of my time in Korea, I might be able to make some claims – albeit probably weak ones - about being a true Northeast Asian expert!
Over the past two months, I have come to appreciate the importance of Korea, both to Australia and to the world, stemming not only from its geography – sandwiched between the great powers of Japan and China – but also from its tumultuous history, its people and its vision for the future.
A long history of defence relations
Of course, as you would all be aware, Australia’s modern relations with Korea stem from the earliest days of the Korean War. Before that there were a few missionaries active in Korea from the 1880s and into Korea’s colonial period under the Japanese. And there was some trade - like now, based mostly on natural resources. But it was very small, and Korea was a country about which most Australians would have known almost nothing.
Since arriving in Korea, I have been struck at how many times Koreans have commented on, and expressed appreciation for, the contribution of the 18,000 or so Australian soldiers, sailors and airmen who came to Korea to fight in their defence all those years ago. Almost 300 of our young men remain here, resting in the soil of this country.
Many of the most senior Koreans I have met remember very well the Australian meteor jets that used to scream overhead on their way to battle, and the distinctive uniforms worn by our soldiers. They really do genuinely appreciate, and remember, the contribution that Australia and Australians made to their country and the protection of their freedom. I have found a very significant pool of goodwill in this country towards us.
At this point, please allow me to thank all members of the AustCham community who were able to attend the Ga-pyeong and ANZAC Day memorial services last month.
ANZAC Day and Ga-pyeong Day were particularly moving experiences for me. The latter was the first time I had participated in a memorial service to mark this key battle of the Korean War.
It was very meaningful to stand at the Australian Memorial at Ga-pyeong – alongside the New Zealand Memorial -overlooking the valley where so many young Australians lost their lives in the defence of this country to which I am now Ambassador. I was also greatly moved by the opportunity a few weeks ago to meet our veterans, to travel with them to the United Nations Cemetery in Busan and to hear their personal accounts of the war.
For many of them, it was their first visit back to Korea in nearly sixty years and they were all struck by the genuine warmth of the reception they received from the Korean people. But they were also astounded by the staggering changes that had occurred here, and of the determination and success of the Koreans in building the prosperous economy we see today from the utter poverty and devastation of the war. They felt and saw that their sacrifices had made a difference. To this day, a strong bond exists between our two countries based on these sacrifices.
Australia’s participation in the Korean War has truly been vindicated by the strength of the relationship that has since grown between our two countries. Australia and Korea established full diplomatic relations in 1961. Since then, Australia and Korea have become important economic, political and strategic partners who share common values and interests.
Not only did our soldiers make an important contribution, but so too have our business people - you. This is not often sufficiently acknowledged. Australia and Korea have witnessed growing trade and investment over recent decades, driven by our complementary economic structures, providing enormous benefits to both our countries and peoples.
As has been the case with Japan since the 1950s and 60s and more recently with China, our natural resources trade with Korea since the 1960s and 70s has helped fuel the phenomenal economic growth and prosperity of this country.
Of course, Australia’s strengths in mineral and energy resources have been an excellent match for Korea’s heavy industrialization and mass production capabilities.
Indeed, Australia and Korea share a trade relationship that is one of the most complementary in the world. Australia has long provided much of the inputs that Korea uses to manufacture its high-end products such as Samsung and LG flat-screen TVs and Hyundai cars. Korea then sells these products onto world markets.
LG and Samsung are now household brands in Australia. Korean cars are common on Australian roads. Hyundai-Kia has a seven percent, and growing, share of Australia’s motor vehicle market, positioning it as the fourth-largest player in the Australian industry.
Apart from the city-states of Hong Kong and Singapore, Australia is the largest per capita consumer of Korean exports in the world. Total two-way trade in goods last year reached around A$23 billion. Korea is Australia’s fourth-largest trading partner and our third-largest merchandise export market.
And this is off a population base much lower than Australia’s other bigger trading partners.
The two-way trading relationship has undoubtedly been a huge success and achievement. For this, we should also remember the pioneers of the Australian business community – and their Korean business partners - who worked in the early years, enduring their own challenges and hardships, to build this trade and these links.
As members of AustCham, you are the inheritors of - but also contributors to - this legacy, on which the past, present and future of the overall bilateral relationship is based.
Growing bilateral investment
As you would know, Australia’s largest commodity exports are coal, iron ore and, of surprise to most people, crude oil. Australia is by far the number one supplier of coal and iron ore to Korea. Korea also imports significant quantities of uranium and various other natural resources.
But our LNG exports to Korea remain surprisingly low - less than 2 per cent of Korea’s total - even though Australia has been a large, long-standing, reliable and cost-competitive supplier to other countries in the region like Japan and China.
This is an area of exports I am very keen to see grow, working in support of Australian companies. And I see strong grounds for optimism, given Korea’s pressing demand for LNG and the Korean Government’s focus on energy security.
I am also keen to continue to work with MLA to protect Australia’s beef market share. MLA has been doing an excellent job so far in maintaining Australia’s share despite the re-introduction of US beef. We are alert to the potential competitive challenges that ratification of the US and other FTAs Korea has negotiated or is negotiating, pose for Australia’s exports, including for Australian wine and other agricultural exports.
Other areas in which we believe there are good prospects in Korea include collaboration in R&D based on Australian scientific strengths and Korean industrial capabilities, as well as emerging commercial opportunities in green growth, environment and new and renewable energy technologies as we move forward to address the challenges of climate change.
Strangely, bilateral investment levels between Australia and Korea have not been strong, but this is beginning to change. Significant examples of Korean investment in Australia include Korea Zinc’s investment in a zinc refinery in Queensland and POSCO’s investment in iron ore mines in Western Australia. SK Energy, POSCO and Korea Resources Corporation also all have taken equity in coal, iron ore and uranium mines in various states in Australia. As of June last year, there were over 20 Korean companies involved in around 25 mining projects in Australia.
I think there must be many more opportunities, outside the traditional energy and resources areas. There is no reason, for example, why Korean companies should not be looking at investing in Australia’s other primary industries like agriculture, to supply Korean and other markets.
Australian companies also enjoy a growing presence in Korea. The Macquarie Group is of course a well-known and successful investor in Korea, with a large and diverse investment portfolio in sectors such as finance, infrastructure and real estate. The Busan Aquarium is one of the biggest Australian investments in that city, in the growing tourism and leisure market in Korea. We have also been helping Australian companies explore opportunities in marinas and other so-called ‘well-being’ areas.
You all, in various ways, make an important contribution to the overall picture. I am always surprised and impressed at the inventiveness and capacity of our business community to seek out and pursue new opportunities. In whatever areas you work, if I or my staff can be of assistance, we stand ready to do whatever we can to help.
People-to-people links
Complementing the fundamentally important trade and investment relationship are strong people-to-people links. The connections and understanding we build through studying, visiting, working and living in each other’s country are vital to deepening and broadening our relationship.
One good sign of this is that Korea is now Australia’s number one source of working holiday-makers. I was delighted to see more than 35,000 Korean student enrolments in Australia last year. This makes Korea our third most important international student source-country after China and India. Despite the economic downturn, student enrolments from Korea are holding up well.
Some 120,000 people of Korean descent have also chosen to live in Australia and a growing number of Australians are living here in Korea. In addition to those who have migrated permanently, Australia has a large number of short-term visitors and tourists from Korea - over 200,000 last year although this number, not surprisingly, has fallen given current economic difficulties.
I’m sure you’ll agree that travelling, working and studying overseas broadens our horizons and exposes us to new ideas and ways of thinking. I have also found that most Koreans who have visited or studied in Australia come back with a very favourable impression, helping top-up that deep pool of goodwill in this country towards Australia.
This is one of the many reasons we, as an embassy, value highly the strong people-to-people links that have developed between Australia and Korea. We look forward to continuing to help build on this goodwill in other areas, to deepen our political, economic and other relations.
Australia-Korea Free Trade Agreement
While the Australia-Korea economic relationship has continued to mature and our trade relationship has become highly sophisticated, I believe there is still great potential for expansion, not only through intensifying established trade but also in creating new opportunities for exporters and investors from both countries. In this regard, for Australia and Korea, a free trade agreement was simply the next logical step.
Concluding an FTA with Korea is among Australia’s highest trade policy priorities. My Ministers have set this as one of my most important performance indicators.
As you know, President Lee and Prime Minister Rudd agreed in March to launch negotiations on a FTA ‘as soon as possible’. As I said earlier, formal negotiations will start next week. Korean officials are talking of finalising negotiations within a year. I think it might take a little longer than that but I am confident that we can move ahead quickly. There is certainly the political will on both sides.
An FTA is a win-win prospect for both countries. A joint non-government study in 2007 that looked at the feasibility of a free trade agreement between Australia and Korea concluded that an FTA would boost Korea’s GDP by around US$30 billion in the period to 2020, and Australia’s by US$23 billion.
The report clearly showed that we could enhance our bilateral trade and investment relationship through a high-quality, comprehensive agreement. That is our objective.
In an FTA, Korean industrial goods will enjoy improved market access with more than 70 per cent currently facing tariffs in Australia. For instance, cars and household goods face tariffs of 10 and 5 per cent, respectively. Although tariffs on Australian raw materials are relatively low, an FTA would still save key Korean companies like POSCO and potentially, KOGAS, millions of dollars on essential energy and resources imports from Australia.
An FTA could facilitate expansion of Korea’s growing investments in Australia. The energy sector, agriculture and service industries are examples of potential investment opportunities for Korea and Australia. Enhanced access and opportunities in these areas would also improve Korea’s energy and food security.
We are very conscious of the sensitivities in both countries. There are always sensitivities. Korea’s agricultural sector for example, has been a major impediment in Korea’s previous and ongoing FTA negotiations. Many Koreans believe that an FTA with Australia would pose a threat to and undermine the Korean agricultural sector. This is simply not true.
Australian agricultural goods take up less than 20 per cent of our exports to Korea and 95 per cent of them are non-sensitive. For example, beef, the single-largest agricultural import from Australia, competes primarily with other imported beef. Koreans will buy home-grown Hanwoo beef, regardless of an FTA. Australian beef competes against other imported beef.
Rice is always raised as a particularly sensitive area for Korea. Australia’s rice production, even in a good year, makes up less than 0.3 per cent of global production. Korea grows around 90 times more rice than Australia. Despite already having a small Minimum Market Access entitlement under WTO auspices to export rice to Korea, Australia has been unable to fulfil this annual entitlement. We do not represent a threat to Korean rice farmers.
Australia simply hopes to compete in a growing Korean agriculture goods market - but not to hurt Korean farmers. In fact, we believe there are opportunities for more investment and closer technical and other cooperation between Australians and Koreans to enhance the efficiency of Korea’s agricultural production.
Australia has successfully negotiated FTAs that cover sensitive sectors including agriculture, with mutually beneficial outcomes, with Thailand, the United States and ASEAN. We hope to do the same with Korea in the very near future. Korea will find us a tough but flexible and sensitive negotiating partner. Our ultimate aim in the negotiations will be to expand trade into new areas, into things like services and investment, while protecting our existing exports.
Australia’s and Korea’s decision to launch FTA negotiations carries global significance. Amidst the ongoing economic crisis, it is a powerful signal of the need for governments around the world to remain committed to trade and economic liberalisation. At the G20 summit in London, Australia and Korea, with a common voice, called for a clear, strong commitment by all governments to free market principles and the rejection of protectionism. Both countries also emphasised the importance of a successful conclusion to the WTO Doha Development Agenda.
High-level Exchanges
I’d now like to make a few comments about Australia-Korea political relations. 2009 will continue the pace of high-level exchanges we have seen since the inauguration of new governments in Canberra and Seoul in late 2007.
Korean Foreign Minister Yu Myung-hwan visited Perth in January this year for talks with Australian Foreign Minister Stephen Smith. Mr Smith visited Seoul in April last year and I know he is keen to return to Korea later this year. Mr Crean too, is anxious to visit Korea again soon. I already mentioned Mr Ferguson’s visit, just a few weeks ago. Many other Australian ministers and senior officials are planning on coming here. We will certainly be busy!
President Lee’s visit to Sydney and Canberra in March was a new benchmark for the bilateral relationship, building on the progress made in talks between him and Prime Minister Rudd when the latter visited Seoul last August.
I was honoured very early in my term to have the opportunity to accompany President Lee on his visit to Australia, and to witness the strong friendship and personal bond that has developed between our two leaders. Our leaders are very like-minded, highlighting the common values and interests Australia and Korea share in the region and globally, as active, middle-sized powers. Both leaders recognise and have stressed the need to capitalise on the great potential for growth in our relationship, across all areas of endeavour.
In addition to the agreement to start FTA negotiations, they issued a joint statement on security cooperation, which recognises our shared interest in enhancing cooperation to address regional and global security concerns, including transnational crime, money-laundering, counter-terrorism and counter-proliferation.
The joint security statement demonstrated the commitment of both countries to deepening the political relationship to match the strong complementarity of our economic and trade relations.
Before I conclude, I should briefly mention North Korea and Mongolia. As you would be aware, I will also be accredited as Ambassador to both of those countries. I intend to visit Pyongyang to present my credentials in the week beginning 8 June. I will do the same in Mongolia some time after the presidential elections that will be held there later this month (24 May). For the latter country, I am also keen to support the further development of Australian commercial and other interests. If any AustCham members are interested, I would be happy to have you join me when I go to Ulan Bataar.
I have come to Korea at a very exciting time in Australia-Korea relations. I am very grateful to my old friend and predecessor, Peter Rowe, for his work in helping bring us to this stage. I have a clear agenda ahead, and expect to be fully-engaged building on the firm foundation that has been left for me. Of course, it will not all be smooth sailing and there will be many challenges. With the FTA negotiations just ahead, I expect this will also be a busy and exciting time for AustCham and its members. As I said before, we – the embassy and government – cannot achieve as much as we hope to without your close support and engagement.
I therefore look forward to working very closely with the Chamber and all of its members – Australians, Koreans and others alike. I couldn’t have a better job. And the very generous welcome my wife and I have received since arriving in Korea, including from AustCham members, has been terrific. For that, thank you all very much.