AUSTRALIA OPTIMISTIC ENTERING KOREAN FTA TALKS

C O N F I D E N T I A L CANBERRA 000470 NOFORN STATE PLEASE PASS USTR/WEISEL, BISBEE E.O. 12958: DECL: 05/18/2019 TAGS: ETRD AS KS SUBJECT: AUSTRALIA OPTIMISTIC ENTERING KOREAN FTA TALKS Classified By: Acting econcouns W Albright, 1.4 b and d ¶1. (C) Summary: Australia's lead negotiator is optimistic going into the first round of talks for an FTA with Korea. She expects agriculture and services to be the toughest areas to resolve. No deadlines, but DFAT has an internal goal of concluding this before the expected dates for Australia's next election, i.e. by about September 2010. End summary. STARTING WITH OPTIMISM ¶2. (C/NF) Jan Adams, former climate change negotiator and now the new head of the China, Japan, and Korea FTA Task Forces at the Department of Foreign Affairs and Trade (DFAT),told econoff that she is "excited and optimistic" going into the first round of formal talks in Melbourne this week on an Australia-Korea FTA. She said she didn't think that the ROKG hope that this could be concluded in 12 months was quite achievable. Without setting deadlines, Adams said the unofficial target for the GOA was to finish talks before the next general election in Australia, which most observers expect to take place around September-November 2010. Adams' optimism is based on Korea's track record. The Koreans have concluded several FTAs, and as Adams said have a demonstrated ability to negotiate, agree to, and ratify trade deals. Importantly, Korea has been able to decide on and make concessions and to build an overall package - unlike Japan or China, who Adams said are "not in that mental space" yet, especially on agriculture. Adams noted the Koreans were slow to join the FTA game, and were now trying to catch up. They are "very organized, serious, and optimistic" that a deal can be concluded quickly. In the end, Adams expected Australia and Korea will be able to conclude a real, commercially meaningful deal relatively quickly. ¶3. (C) But Adams is realistic. She expects negotiations to be tough, and the Koreans to be well prepared. She recognizes that their domestic politics will be difficult on the issues that Australia will pursue. On agriculture, Australia will want openings on beef, raw sugar, wheat, processed dairy, wine (Adams noted there are some in Korea trying to promote and protect a nascent domestic wine industry) and rice, although Australia is not currently exporting rice due to drought. The first round this week will begin with discussion of some easier areas - for ;example, discussing text for some chapters. Adams noted that both Australia and Korea have agreed to FTAs with the US and Singapore, which gives them some common starting ground, although they will not necessarily stick to this in their agreement. WHAT THEY WANT ¶4. (C) In addition to agriculture, Australian industry wants the GOA to push hard for better access in financial services, education (Korea is the third largest source for foreign students in Australia),and services more broadly. Although Australian manufacturing exports to Korea are limited, the GOA wants progress on processed foods and autos (GM subsidiary Holden exports some cars to Korea, largely intra-GM trade to Hyundai). Adams was not sure how government procurement would go (Australia is not party to the WTO government procurement agreement),and was not sure whether intellectual property would be a problem. ¶5. (C) Per Adams, the Koreans wanted to include industrial tariffs, even though Australia's MFN tariffs are already very low. She believes the Koreans will seek something on the administration of Australia's anti-dumping laws. Energy, resource, and food security are going to be a big topic. The Koreans are trying to assess how an FTA can help assure access to such products from Australia. The Japanese sought something similar in their early rounds of talks; the GOA has stuck to the line that all are welcome to buy Australian products at market prices. However, Adams said they may be willing to put in language on cooperation if this would make it easier for the Koreans to sell the FTA to their domestic audience. Although they have not raised it yet, Adams said she believes the Koreans may want a deal similar to that the US received raising thresholds for investment that require Australia governmental review. ¶6. (C/NF) Comment: Australia's track record on FTAs is strong. Like the US, an FTA signed by Australia can be expected to be a "real" FTA, covering substantially all trade. Australia's insistence on this is part of the reason for the significant delays in their FTA talks with China and Japan, both stalled although Australia cannot for political reasons abandon them. Australia's business community is positive about a Korea FTA. Korea is Australia's fourth largest export market (exports in FY2007-08 were A$16 billion/US$12 billion),and Australia's tenth largest source of imports (A$6 billion/US$4.5 billion). As is true for Japan and China, Korea is largely a consumer of primary products from Australia, and it exports to Australia are largely manufactured items. End comment. CLUNE