Australia Korea Business Council36th Joint Meeting

Andrew Bragg Director of Policy & Global Markets

Financial Services Council2 October 2015

From the sheep’s back…• Early 1900s:

•Economy - Agricultural production 61%, manufacturing 21% and mining 18%•Wheat and wool made up more than 2/3 of Australia’s exports• In 1901, 14% of Australians were employed in agriculture•Australia’s largest trading partners were the UK and USA •The Australian Wheat Board

• In 1915 the Commonwealth Government set up a wheat pooling scheme to assist wheat growers and to ensure appropriate management of this vital foodstuff during World War I. It was administered by an Australian Wheat Board. The first AWB ceased operations in 1921.

•The second Australian Wheat Board was established in the 1930s as a government agency to regulate the wheat market following the Great Depression. It held a monopoly on wheat exporting for the next 60 years.

•Australian Wool Bodies:•State and regional based associations of auction buyers date back to the 1890s, with the first

national representative body established in 1946. •The national body took the name of Australian Council of Wool Exporters in 1986.

To the services economy

• 2015:•70% of GDP in services •80% of Australian jobs

• Just 17% of exports are in services – which include for example:•Tourism•Education •Business services including accounting and legal services•Transport •Financial services

•1.5% of total exports are in financial services

Tariffs? What are tariffs?

•Source: CFMEU Twitter handle

KAFTA and financial services

Commitment KAFTA

Non discrimination against Australian providers

Yes. Accord foreign investment by financial institutions and investors, and some insurance and banking services, equal treatment to domestic investment and services. MFN. More favourable treatment subsequently given to a non-party, must be accorded to financial investment and services between parties of the FTA.

Market access (investment)

Yes. General prohibition on controls that limit access to the market by foreign financial institutions and investors (restrictions on the number, type or value of services and investment). Rights for offices and affiliates to perform certain functions in the foreign market (eg: data processing)

Market access (trade in services)

Yes. Certain insurance and banking services can be provided without the need to establish a commercial presence in the foreign market. Portfolio management services and investment advice for investment funds can be provided in the other party, subject to some limitations.

An FTA is just the end of the beginning

• Implementation or bust!

• Tariffs and bounties are not the primary barrier to services access

• Market access for services relies on regulatory access, abolition of beyond the boarder barriers and cultural change

• Implementation is therefore based on intangible legal arrangements

• In financial services under KAFTA, this will involve the Korean and Australian securities regulators agreeing or creating:

•A framework for mutual recognition• Issuing class order relief •Creating a regulatory guide for financial services licensees

Next steps in implementing KAFTA

• Services implementation must be on the agenda for KAFTA financial services committee meetings

• ASIC and its Korean counterpart must be engaged in this process

• New ideas to improve services implementation:

•There should be periodic reporting to Parliament on implementation to maximise accountability on the government and DFAT

•This reporting could be questioned as part of Senate Estimates processes

•ASIC could also publish details of FTA implementation of FTA implementation commitments in its annual report

THANK YOU

abragg@fsc.org.au