Australia, Korea Expected to Make FTA Official by Year’s End

The cost of South Korean-built small vehicles is set to drop in Australia as a result of a new free-trade agreement between the two countries.

The FTA was reached last December after four years of intense negotiations, and Australian Trade Minister Andrew Robb now has released the 1,800-page document. He says in a statement he anticipates the agreement coming into force near the end of 2014 and he's confident the South Korean and Australian parliaments will support it.

Small South Korean vehicles, already among the lowest-priced in the country, will see a 5% import tariff removed as soon as the deal takes effect.

Under the agreement settled in December, the tariffs on large models will be phased out over three years so that their total removal coincides with the end of Australian automotive production.

Ford announced last May that it will end local manufacturing in 2016. GM Holden in December set 2017 for its departure and Toyota followed suit this month, also with a 2017 deadline.

Robb tells the Australian Broadcasting Corp. the FTA offers hope to some local parts makers that will be struggling to survive after vehicle manufacturing ends.

He says A$130 million ($117.4 million) worth of gearboxes were sold in the last year to South Korea along with A$50 million ($45.1 million) worth of engines.

“Now there's an 8% tariff,” he says. “That will go immediately when this (agreement) takes effect.”

Also ending will be tariffs on priority products, including liquefied natural gas, titanium dioxide and unwrought aluminum.

Robb says the Australian and South Korean governments will sign the deal shortly and it will take effect when both parties complete their parliamentary processes.

Prime Minister Tony Abbott, now presiding over the demise of the Australian auto manufacturing industry, says in a statement building stronger trading relationships in Asia is a key part of his plan to build a strong, prosperous economy.