NEW NEGOTIATOR UPDATES ON FTA TALKS

C O N F I D E N T I A L SECTION 01 OF 02 CANBERRA 000571 NOFORN SIPDIS STATE PLEASE PASS TO USTR/WEISEL,BISBEE STATE PLEASE PASS USDA DEPARTMENT FOR E, EEB, EAP, EAP/EP, EAP/ANP, EAP/K E.O. 12958: DECL: 06/18/2019 TAGS: ETRD ECON PREL CH KS JP AS SUBJECT: NEW NEGOTIATOR UPDATES ON FTA TALKS REF: CANBERRA 470 Classified By: Economic Counselor Edgard Kagan for reasons 1.4 (b/d). ¶1. (C/NF) SUMMARY: Australia's lead negotiator is optimistic about the prospects for rapid progress on an FTA with the ROK following the completion of the first round of discussions in May. Agriculture will be the biggest sticking point, but each country's agreement with the United States provides a good template. ROK President Lee Myung-bak's March visit has galvanized PM Rudd's interest in an FTA, which could probably be negotiated in the coming 12 months if political will holds up on both sides. Japanese officials are following the Australia-ROK FTA discussions closely and appear concerned about the longer-term implications of Korea improving its ability to compete with higher-end Japanese products in developed economies. Australia's FTA discussions with China have made little progress, in part because Beijing believes that Canberra wants a deal for the sake of having a deal. The Australians recognize that they must work hard to convince China that a "low-quality" FTA is not politically viable in Australia. End Summary. PROGRESS WITH THE REPUBLIC OF KOREA ¶2. (C/NF) Econcouns and Econ Intern met June 12 with Ambassador Jan Adams, newly appointed Head of DFAT's China, Korea and Japan FTA task forces. Adams said that following ROK President Lee Myung-bak's March visit, PM Kevin Rudd is focused on trade negotiations with the ROK as a key part of a broader effort to step up the relationship with Korea. Scott Dewar, Rudd's Foreign Policy Advisor who covers Asian issues, told us June 13 that the PM believes that improving relations with Korea is a major objective for the coming year. Trade Minister Simon Crean and ROK Trade Minister Kim Jong-hoon opened the first round of FTA discussions May 18. Following this first round, GOA lead negotiator Jan Adams remains optimistic that an agreement could be signed in the next 12 months (reftel) but foresees tough negotiations in agriculture and automobiles. Beef is a major concern for both sides but each country,s FTA with the United States could provide a basis for negotiation. Australia wants dairy access in ROK and will not negotiate on sanitary and phytosanitary issues. Adams expects ROK will have high ambitions for auto negotiations but realizes auto interest groups are strong and could limit market access in Australia. ¶3. (U) The ROK is Australia's 6th largest two-way trading partner and 4th largest export market. Australia exported A$18.468 billion (US$14.77) to ROK in 2008 mainly in crude petroleum, coal, iron ore and beef. Australia imported A$6.439 (US$5.15) billion primarily in passenger motor vehicles, telecom equipment, refined petroleum and electronics. JAPANESE INTEREST ¶4. (C/NF) Adams said Japan is monitoring the progress of the Australia-ROK FTA closely. The Japanese seem concerned that FTAs will give Korean exporters a competitive advantage over Japanese exporters in Australia and other developed economies. Japan is Australia's second largest trading Qeconomies. Japan is Australia's second largest trading partner. Negotiations for an Australia-Japan FTA started April 2007, but are stalled; agriculture remains the major, but not only, sticking point. PROGRESS WITH CHINA ¶5. (C/NF) Australia's FTA talks with China have made little progress since they began in 2005. Adams and other GOA trade officials believe Beijing is not eager to make concessions on agriculture and services, since they believe the Australians want this agreement more than China does. The GOA at all levels is trying to convince China that a non-comprehensive agreement is politically unacceptable to Australia. This week Trade Minister Simon Crean said that Australia was not prepared to move to the next stage of negotiations until CANBERRA 00000571 002 OF 002 there is a "new political signal" from Beijing that it is willing to negotiate. Bio Note ¶6. (SBU) Jan Adams was previously the Australian Ambassador for the Environment (2005-2009) and Head of Trade at the Australian Embassy in Washington (1999-2004). She was involved in the negotiation of the Australia-U.S. FTA, which she says is particularly useful in terms of discussions with Korea. Clune