The current economic situation in the Asia-Pacific region can be characterised as dynamic and strong. Global trade development, rising population, increased purchase power, the involvement of international stakeholders, and changing consumer trends are viewed as positive factors that support the Asia-Pacific trade market and financial conditions (Abidin et al., 2021). At the same time, uncertainties, declining productivity growth, an aging population, and new challenges such as the COVID-19 global pandemic can impede the development of the business environment in the region (Sohn, 2019). The purpose of this paper is to critically discuss the contemporary threats and opportunities to enterprise and trade between the Commonwealth of Australia and Northeast Asia, namely the Republic of Korea (ROK).
Both countries analysed within this essay are marked by exceptional economic performance despite the ongoing challenges. According to Rajaguru et al. (2021), the Australian economy is fiscally sustainable, and “the primary surplus remains unaffected by increasing levels of public debt” (p. 297). In turn, as reported by Kim (2020), “Korea’s national debt has increased over the years, the 40% debt-to-GDP ratio was maintained until 2019” (p. 942). Overall, Australia and South Korea share a strong joint relationship and mutual regional strategic interests. On December 12, 2014, the ROK and Australia established the Korea–Australia Free Trade Agreement (KAFTA) (“Korea-Australia Free Trade Agreement,” n.d.). As reported by Crump and Moon (2017), the agreement not only had critical implications for both parties involved but also “influenced trade negotiations with Canada, China, India, and Japan” (p. 101). Hence, in the context of the economic relationship between Australia and South Korea, contemporary threats and opportunities affecting enterprise and trade in both countries must be analysed. It is suggested that the ROK plays a pivotal role in the East Asian economic integration and implies significant security interest to Australia due to the regional geopolitical risks.
Economic Relationship between Australia and South Korea
To begin with, the Australia-South Korea economic relationship needs to be discussed and analysed from different viewpoints. The ROK is Australia’s major trading partner, accounting for A$41.3 billion and ranking fourth after China, Japan, and the United States (“Republic of Korea country brief,” n.d., para. 38). Since the first recorded contact between Korea and Australia in 1889, the relationship between the nations has strengthened due to political, economic, social, and cultural factors (“Republic of Korea country brief,” n.d.). At the same time, the country’s geopolitical situation involves significant risks implying adverse effects on international trade and relationships in case of a military conflict outbreak in the region. Hence, the ROK and the Commonwealth of Australia have a mutual security interest in North Asia to maintain economic security and prosperity.
From the historical perspective, the ROK’s economic power was significantly affected as a result of the Korean War. Nonetheless, the country has experienced stable growth since the 1960s, facilitated by the United States investment, which has led to its transition into an internationally leading economy and a highly-industrialised state. The Republic of Korea, along with Australia, was among the few OECD countries that did not fall into recession as a result of the global financial crisis in 2009 (“Republic of Korea country brief,” n.d.). Currently, South Korea represents 4.5% of Australia’s total international trade (“Republic of Korea country brief,” n.d., para. 38). Goods and services exported to the ROK include primarily coal, iron ore, liquefied natural gas, beef, food products, cars, computers, refined petroleum, as well as education and travel services (“KAFTA outcomes at a glance,” n.d.). Korea’s location between Australia’s major trading partners, such as Japan and China, implies the notable role of international trade for both parties’ economic wellbeing.
In addition, Australia and South Korea are characterised by similar backgrounds. According to Jiang et al. (2017), both nations are competitive market-based democracies and middle powers with a common strategic outlook, while both governments are marked by transparency and accountability. Furthermore, Australia and the Republic of Korea are known as strong United States allies promoting international economic orders and associated with a rules-based approach. Therefore, all factors considered the growing and diversifying South Korea-Australia relationship has a particular strategic value not only for both parties but also for the Asia-Pacific region and international economy.
Korea-Australia Free Trade Agreement (KAFTA)
The Korea-Australia free trade agreement (KAFTA) is of particular importance to both trading partners. It has substantially liberalised trade between the ROK and Australia, providing the latter with improved access to the strategically important Korean market. As reported on the Australian Government’s website page, “KAFTA outcomes at a glance” (n.d.), the agreement enables over 99% of “Australia’s goods exports to Korea … to enter duty-free or with preferential access” (para. 3). Entry tariffs for wheat, raw sugar, horticulture, and bottled wine were eliminated by the ROK, while a number of other agricultural products will join the list in the nearest future (“KAFTA outcomes at a glance,” n.d.). Furthermore, KAFTA provides duty-free access to 88% of Australia’s resources, manufactures, and energy exports, as well as liberalised entry for the service industry, including finance, legal, telecommunications, and accountancy services. As can be seen, the Korea-Australia free trade agreement involves numerous growth opportunities for various industries that were previously discriminated against or restricted.
KAFTA has strategic importance in enhancing the Australian businesses’ competitive position in South Korea. Upon the full implementation of the agreement, tariffs on most of the country’s exports will be eliminated (Quansah & Ahn, 2017). Furthermore, investments are promoted forth both parties involved, as noted in the investment commitments of KAFTA (Lee & Cha, 2021). Overall, the free trade agreement has raised opportunities for Australian suppliers of agricultural products, as well as legal, accounting, financial, educational, and telecommunications services. Although KAFTA implies disadvantageous trade relations for South Korea, political factors and security are largely in action. The ROK remains one of the leading export markets of the Commonwealth of Australia, and strengthen economic ties can provide reliable support for both parties in the regional and international contexts.
Threats and Opportunities Affecting Enterprise and Trade between Australia and South Korea
Given the current economic relationship between Australia and South Korea, both threats and opportunities affecting enterprise and trade are involved. With regard to opportunities, the Korea-Australia free trade agreement involves extended benefits for Australian business owners in different industries, ranging from farmers to manufacturers and service providers. The agreement secures the competitive position of the Commonwealth of Australia in the ROK’s market, providing numerous opportunities to Australian businesses.
At the same time, the imbalance of the Korea-Australia free trade agreement favours Australia while raising particular concerns in South Korea. As reported by Crump and Moon (2017), both partners have expressed disagreement over the uneven trade problem, showing different approaches and standpoints in addressing this critical issue. At the same time, Northeast Asia remains under constant risk of a sudden worsening of its financial conditions (Lee et al., 2020). In particular, the geopolitical threats pose a significant concern for the republic and imply the need for South Korea to develop and strengthen its relationship with its allies. Australia shares similar concerns and security interests in the Asia-Pacific region, which suggests its critical role in maintaining a prosperous economic situation in the area (Jiang et al., 2017). The unfolding crisis on the Korean peninsula emphasises the need for strengthening the Australia-Korea relationship through partnership and free trade.
Another significant threat affecting enterprise and KAFTA outcomes is the ongoing COID-19 global pandemic. It continues to affects countries and businesses across various industries. However, the free trade agreement provides an opportunity for facilitating trade between the two parties. In particular, it implies higher economic growth and generates additional job opportunities for Australians (Lee et al., 2020). By reducing the investment barriers, KAFTA enables a sooner recovery from the pandemic’s adverse impact for both South Korea and Australia. Among other critical risks involved in enterprise and trade between Australia and South Korea, it is necessary to mention cyberattacks and cybersecurity breaches affecting businesses globally.
To conclude, the economic relationship between Australia and South Korea has strategic importance for the Asia-Pacific region and involves both threats and opportunities affecting enterprise and trade. The Korea-Australia free trade agreement resulted in lowered tariffs between the two parties and strengthened trade relations. Overall, the Republic of Korea plays a pivotal role in the East Asian economic integration while implying significant security interest to the Commonwealth of Australia due to the regional geopolitical risks.
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