The Australia-Korea Economic Relationship and Prospects for an FTA
Since the 1960s, trade opportunities based on complementary economies have driven the Australia-Korea economic relationship. Australia exported raw materials, principally minerals and energy, which Korea processed and subsequently sold on domestic and international markets. In return, Australia purchased increasing volumes of Korean manufactures, initially textiles, clothing and footwear and later automobiles. With the onset of the financial and economic crisis in Korea during 1997-98, trade and investment opportunities were severely constrained. However, in the wake of the crisis, and the rapid recovery of the Korean economy underpinned by corporate and financial sector reforms, trade and investment opportunities in traditional areas have re-emerged as well as in new areas. Australia's rapid economic growth has also increased demand for the sorts of consumer products produced by Korea. It is, therefore, opportune to consider the benefits, and obstacles, to the establishment of an Australia-Korea Free Trade Agreement. The paper analyses trends in Australia's trade and investment with Korea. New areas for trade are also highlighted as well as prospects for an FTA between the two countries. In doing so it: reviews the Australia-Korea bilateral trade relationship; reviews the nature and extent of foreign direct investment between Australia and Korea; reviews trade and investment prospects and opportunities between the two countries; analyses the prospects for a Korea-Australia Free Trade Agreement (KAFTA); reviews the potential economic effects from a KAFTA; and identifies key policy implications.
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