John Key’s visit to Seoul this week takes him to a country which is rebounding quickly and confidently from the economic malaise of the last year:  Korea’s economy is back into growth mode with 4 percent growth expected this year and 5 percent next year.  Emerging from the rubble of the disastrous conflict that engulfed the peninsula 60 years ago this year, the Korean people have built an economy of remarkable depth and resilience.  Korea is already New Zealand’s seventh largest trading partner and the economic relationship is primed for further development, building on Korea’s strengths in innovation, high tech manufacturing and its increasing focus on green technologies.  As leader of the G20 group, Korea is also playing an increasing global leadership role which befits the size of its economy, the fourth largest in Asia.

The Prime Minister’s first visit to Korea is focused on promoting the relationship across the board.  But when he sits down with President Lee Myung Bak today (Monday 5 July) both leaders will also have some hard talking to do about the free trade negotiation which they started just over a year ago.  After four rounds of negotiations some good progress has been made but the negotiation is running into some predictable problems around agriculture.    New Zealand which supplies less than 3 percent of Korea’s food imports can hardly be regarded as a significant threat to Korea’s farmers.  We do not produce rice and do not export fresh milk.  Our growing seasons for horticulture are complimentary.  Moreover Korea has already concluded agreements with Chile, the United States and now the European Union which expand market access from those countries in kiwifruit, beef and dairy products and risk putting our products at a competitive disadvantage in the Korean market.  New Zealanders on the other hand are at liberty to buy increasing numbers of Korean-made cars and consumer goods.  Today Hyundai, Samsung and LG are as well known here as the big Japanese, American or European manufacturing brands and that is as it should be.

But this FTA negotiation is about more than traditional exports and imports.   The economic recovery has resumed the process of regional economic integration which was temporarily stalled by the financial crisis.   New models of business co-operation are emerging with a greater focus on services and investment.  New Zealand and Korean companies are looking to get closer to consumers and to find new ways of partnering with local companies. Both governments want to use the FTA not just to reduce market access barriers but to make it easier to do business, reduce costs and drive new investment in both directions.  Both will have an eye on the bigger picture of region-wide trade liberalisation.  New Zealand sees the nascent Trans Pacific Partnership (TPP) as a model for a future Free Trade Area of the Asia Pacific.  Korea is anxious to conclude its giant FTA with the United States – KORUS – which has been blocked in the Congress but which Presidents Obama and Lee have agreed to look at again.

These developments are the background which the Prime Minister’s visit takes place.  On Tuesday 6 July he will address the 2nd Korea NZ Business Roundtable which brings together an influential group of sixty Korean and New Zealand business leaders. Organised by the NZ International Business Forum (NZIBF) and the Korean International Trade Association (KITA) the Roundtable last met in June 2009 at the time the first round of FTA negotiations took place.  Under the theme “Innovation, growth, opportunity” this year’s Roundtable will be looking at how the economic recovery is driving changes in business practices.  It will also consider several case studies of successful new business co-operation between New Zealand and Korea in the area of information technology, health sciences and clean technology.  These sectors are the new frontier of business co-operation between the two countries.

The Roundtable aims to motivate business leaders in both countries to become advocates of the relationship.  A study showed that an FTA could produce accumulated gains to real GDP over 2007-2030 of US$5.9 billion and US$4.5 billion for Korea and New Zealand respectively.  A relationship once founded on security and development has been transformed over the last sixty years into an innovative partnership based on the fundamental complementarity of the two economies.

[1] Stephen Jacobi is Executive Director of the NZ International Business Forum (www.nzibf.co.nz)