John Key

By Kate Chapman of NZPA

Seoul, Korea July 4 NZPA - Prime Minister John Key arrived in South Korea this morning determined to reignite stalled free trade negotiations with the East Asian nation.

Negotiations for a free trade agreement (FTA) with Korea started when President Lee Myung-bak visited New Zealand last year.

Talks have since largely stalled because of Korean fears over New Zealand's agriculture sector.

Mr Key said talks had gone as far as they could without political intervention from the top.

"Agriculture's been the sticking point."

The fear over agriculture by Korean officials was not played out in reality, Mr Key said.

New Zealand would not be competing with domestic producers but with European Union, United States and Australian exports.

Those countries were negotiating their own FTAs with Korea.

"The reality for us is if they do complete a deal, and we don't, we're in a relatively worse position," Mr Key told NZPA.

He said he would raise the issue with Mr Lee when they meet tomorrow.

Mr Key arrived in Seoul today and was given a red carpet welcome.

Korea was New Zealand's second largest market, worth about $2.6 billion in two-way trade annually.

It is the second-largest source of foreign students, after China, and seventh-largest source of tourists.

Korea suffered only mildly during the global recession and will host the G20 summit later this year.

Mr Key said Korea had a strong and vibrant economy led by big international companies such as LG, Samsung and Hyundai.

There was a Korean company looking at providing trains to KiwiRail and a telecommunications company looking to do a deal in New Zealand, he said.

Last year New Zealand companies paid $195 million in tariffs on exports to Korea. Korean companies selling in New Zealand paid just $5m.

"If we could complete an FTA...there would be at least a $200m boost to the New Zealand economy, plus we'd open up the market for further expansion.

"So essentially there's quite a lot at stake here," Mr Key said.

National MP Melissa Lee, who is travelling with Mr Key to Korea, said she would be breaking the disillusion that New Zealand products would compete with domestically produced goods in Korea.

"That's the focus -- to actually impress upon them that we're actually not competing with Korea, we're competing with other countries who export to Korea."

The Korean community in New Zealand was looking forward to an FTA and was disappointed talks had not progressed, she told NZPA.

She said having Mr Key there to offer political pressure was good.

Trade would be top of the agenda on Mr Key's three-day visit to Korea but he will also visit the demilitarised zone (DMZ) this afternoon and discuss security issues.

The DMZ serves as the border between North and South Korea. It is two kilometres wide and heavily fortified on either side.

New Zealand has a history of supporting South Korea dating back to the Korean War, in which 45 New Zealanders were killed.

New Zealand has two defence force personnel working for a United Nations mission in the DMZ.

Recently, New Zealand condemned North Korea for the torpedoing of the Cheonan naval vessel in which 46 sailors died.

The matter is before the United Nations Security Council.

Mr Key said he would be encouraging South Korea to resume the so-called Six Party talks aimed at denuclearising the Korean Peninsula.

"We try and agitate, with our friends and partners to see a return to the Six Party talks, primarily the major player there which is the Chinese."

There was little New Zealand could do other than express concern over the situation, Mr Key said.

New Zealand would continue to offer an objective view of the situation on the Korean Peninsula, Mr Key said.

"But, from what we have seen so far, the concerns are mainly on the North Korean side."

Mr Key will also visit China and Vietnam as part of his 10-day trip.

(Kate Chapman travelled to Korea with the help of funding from the Asia New Zealand Foundation)