Kiwifruit industry embraces KFTA

Kiwifruit being loaded at the Port of Tauranga for export.

The Korea Free Trade Agreement (KFTA) finalised last week after six years of bilateral negotiations will level the playing field for kiwifruit exporters, say industry experts.

The key outcome will be the elimination over the next five years of the tariff disparities that have advantaged Chilean exporters.

Chile has been on a zero tariff for the past couple of years under its own FTA, whereas New Zealand exporters have been living with a 45 per cent tariff, which last year alone cost exporters $20 million out of the $44 million kiwifruit exported to South Korea.

Removing the tariff was the equivalent of putting $8500 in the pockets of the average kiwifruit grower every year, said Tauranga MP Simon Bridges.

"The New Zealand-Korea Free Trade Agreement will be a real boost to an industry that is now focused on the future and getting on with the job," said Mr Bridges.

Zespri chief executive Lain Jager said the result was hugely satisfying and would enable the industry to focus on building sales in the South Korean market, which would benefit both New Zealand and South Korean growers, as well as South Korean consumers.

"With volumes of our new SunGold variety increasing to over 50 million trays by 2018, this gives us a strong platform to build sales in this market."

South Korea is a very important market to Zespri, but the absence of an FTA and uncertainty around the investment environment had held back development until now, said Mr Jager.

Zespri government relations manager Nick Kirton said the KFTA was expected to come into effect by about the middle of next year, once approved by the parliaments in both countries. The 45 per cent rate will come down on a reducing sliding scale over five years once the agreement comes into force.

Zespri's general manager, grower and government relations, Simon Limmer, said the agreement would level the playing field in South Korea, which was also beginning to be targeted by European exporters.

"We've invested a lot of time and resource into South Korea over many years and played a large part in establishing the category," he said.

Zespri licences about 100 hectares of Gold variety grown domestically, in part to facilitate 12-month supply to the market and also because it helped to cement relationships with local growers and market channels.

"Korean growers enjoy the Zespri system in terms of stable return and technical support," said Mr Limmer.

"The local grower community has been supportive of reducing our tariff and strengthening our position in the market, because they have seen the instability the tariff disparity has created."

South Korea
• New Zealand's sixth-largest export destination for goods and services and eighth-largest import source of goods and services, with total two-way trade of $4 billion in the year ending June 2014.
• Bilateral trade is broadly balanced, but currently New Zealand exporters pay $229 million a year in tariff duties.
• The Korea Free Trade Agreement was expected to save New Zealand exporters an estimated $65 million in duties in the first year alone.