South Korea’s Agricultural Trade Dilemma: Open Markets or Protectionism? Beyond the China-South Korea Free Trade Agreement

Chen, Ying

doi:10.1007/978-981-13-3038-4_4

Ying Chen³

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Abstract

The China-South Korea Free Trade Agreement (FTA) was signed in June 2015, and entered into force in December of the same year. The FTA features wide coverage. It also presents a high degree of openness in market access. However, whilst South Korea sees economic globalisation and trade liberalisations as desirable goals, it maintains a high level of protection over agriculture in that major agricultural products are either completely excluded from tariff elimination or subject to minimal tariff reduction. This is not something that is specifically targeted at agreements with China. Indeed, South Korea has a long tradition of protectionism and treating agricultural trade differently because of deep concerns about domestic food security and preserving the livelihoods of rural workers/domestic farmers. Given these restraints, whether or not it will grant foreign competitors greater access to its domestic markets for agricultural products, or continue to maintain protectionist policies is questionable. This paper uses the China-South Korea FTA to analyse South Korea’s decades-old agricultural trade dilemma of subscribing to open markets or adhering to protectionism, and further identifies potential strategies to resolve the conflict between the emerging global trend and national interests. It concludes that in the future South Korea will eventually need to open its domestic markets. Open markets will not ruin South Korea’s agricultural and rural economy. Instead, they will bring more opportunities and dynamic gains to South Korea and help it use its resources in the most efficient way.

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Notes

1.
China FTA Network (2015) China-Korea Free Trade Agreement officially signed. http://fta.mofcom.gov.cn/enarticle/enkorea/enkoreanews/201506/21935_1.html. Accessed 17 Jul 2017.
2.
Ibid.
3.
PWCCustoms (2015) Improving market access under the China-Korea and China-Australia Free Trade Agreements: China customs and trade alert. http://www.pwccustoms.com/en/recent-developments/assets/cn-trade-alert-improve-mkt-access-cnkr-cnau-fta-en.pdf. Accessed 18 Jul 2017.
4.
Ibid.
5.
Im JB (2014) Impacts of Korea-China FTA on the Korean agriculture http://ap.fftc.agnet.org/ap_db.php?id=353&print=1. Accessed 17 Jul 2017.
6.
Beghin JC, Bureau JC, Park SJ (2003) Food security and agricultural protection in South Korea. Amer J Agril Econ 85(3): 618–619.
7.
Shanghai Agriculture (2014) China-South Korea agricultural trade: the increase and the relevant factors. http://e-nw.shac.gov.cn/scjg/scfx/jckdt/201510/t20151010_1585744.html. Accessed 19 Jul 2017.
8.
Kim HK (2016) Impact of the Sino-Korea Free Trade Agreement on China’s agricultural industry. Journal of Economics and Sustainable Development 7(10): 83.
9.
Ibid.
10.
Ibid.
11.
Moon HP (2011) Korea-China agricultural trade: competitiveness and trade barriers. http://www.krei.re.kr/web/eng/research-reports?p_p_id=EXT_BBS&p_p_lifecycle=0&p_p_state=normal&p_p_mode=view&p_p_col_id=column-1&p_p_col_count=1&_EXT_BBS_struts_action=%2Fext%2Fbbs%2Fview_message&_EXT_BBS_sCategory=&_EXT_BBS_sKeyType=&_EXT_BBS_sKeyword=&_EXT_BBS_curPage=34&_EXT_BBS_messageId=385884. Accessed 17 Jul 2017. Noting that in the agricultural sector, it is a clear one-way trade from China to South Korea.
12.
Shanghai Agriculture (2014) supra note 7.
13.
Liu YZ, Li T, and Deng MC (2015) The establishment of China-Korea Free Trade Zone and its impact on agricultural trade. World Agriculture (436): 110.
14.
Kim, supra note 8.
15.
Im, supra note 5. Noting that these 64% of agricultural products are considered less sensitive, which includes tropical fruits and most processed foods.
16.
Schott JJ, Jung EJ, Cimino-Isaacs C (2015) An assessment of the Korea-China Free Trade Agreement: Peterson Institute for International Economics policy brief. https://piie.com/publications/pb/pb15-24.pdf. Accessed 20 Jul 2017. Noting that the highly sensitive list in the China-South Korea FTA covers 581 tariff lines.
17.
See Appendix 2-A-1 for the TRQs that South Korea is allowed to apply to agricultural goods imported from China. China-South Korea Free Trade Agreement (2015) http://fta.mofcom.gov.cn/korea/annex/xdzw_en.pdf. Accessed 21 Jul 2017.
18.
Ibid.
19.
Ibid., Chapter 7 is about safeguard measures.
20.
American Farm Bureau Federation Economic Analysis Team (2014) Implications of a South Korea-U.S. Free Trade Agreement on U.S. agriculture. http://www.uskoreacouncil.org/wp-content/uploads/2014/12/AFBKORUSFTAReport.pdf. Accessed 22 Jul 2017.
21.
Ibid.
22.
UN Data (2017) Republic of Korea. http://data.un.org/CountryProfile.aspx?crName=Republic%20of%20Korea. Accessed 22 Jul 2017.
23.
Ibid.
24.
Aggarwal SN, Aggarwal VK (2015) Competitive framing: agricultural protection and trade liberalisation in the Korea-US FTA negotiations. Ewha Journal of Social Sciences 31(2): 23–24. See also Beghin, Bureau, Park, supra note 6, at 619. Noting that “Korea has […] openly pursued food self-sufficiency as the desirable way to achieve the stated objection of FS”.
25.
Schott, Jung, Cimino-Isaacs, supra note 16, at 6.
26.
Seung KM (2016) Can South Korean agriculture survive free trade? http://www.asiasentinel.com/econ-business/south-korea-agriculture-free-trade/. Accessed 25 Aug 2017.
27.
Kwon Y (2014) South Korea’s free trade dilemma. http://thediplomat.com/2014/07/south-koreas-free-trade-dilemma/. Accessed 25 Aug 2017.
28.
Aggarwal, Aggarwal, supra note 24, at 16.
29.
Jeong IJ, Martini R (2008) OECD report: evaluation of agricultural policy reforms in Korea, at 7. https://www.oecd.org/tad/agricultural-policies/40383978.pdf. Accessed 27 Aug 2017.
30.
Aggarwal, Aggarwal, supra note 24, at 12.
31.
Food and Agricultural Organisation (2014) South Korea increases direct subsidies to rice farmers. http://www.fao.org/giews/food-prices/food-policies/detail/en/c/246137/. Accessed 28 Aug 2017.
32.
Kim YB (2007) Is agricultural protectionism an inviolable area? http://www.koreafocus.or.kr/design2/layout/content_print.asp?group_id=101537. Accessed 28 Aug 2017.
33.
Ibid.
34.
Under the WTO, South Korea has successfully negotiated a number of flexibilities to deal with sensitive products such as rice. South Korea is allowed to provide a number of agricultural subsidies. See Beghin, Bureau, Park, supra note 6, at 621. For details regarding South Korea’s various subsidies, see Im JB (2013) Korea’s countermeasures on agricultural trade liberalisation. http://ap.fftc.agnet.org/ap_db.php?id=53. Accessed 28 Jul 2017.
35.
Kim, supra note 32.
36.
Aggarwal, Aggarwal, supra note 24, at 7.
37.
Ibid.
38.
Kim, supra note 32.
39.
Aggarwal, Aggarwal, supra note 24, at 15.
40.
Data is from OECD Data. See OECD Data (2017) Inflation (CPI), food, annual growth rate (%), 2011–2016. https://data.oecd.org/price/inflation-cpi.htm. Accessed 29 Aug 2017.
41.
Beghin, Bureau, Park, supra note 6, at 619.
42.
Kim, supra note 32.
43.
Beghin, Bureau, Park, supra note 6, at 618.
44.
Burm LL (1990) South Korea’s rural development dilemma: trade pressures and agricultural sector adjustment. Asian Survey 30 (7): 711. Explaining that the challenge results from “the coexistence of uncompetitive national agricultures within a liberalised global trading regime”.
45.
Ibid.
46.
Kim, supra note 32. Kim argues that the South Korean government “tends to be motivated more by the some clamorous interest groups than by the welfare of the entire nation.” Noting that political groups are primarily responsible for maintaining protectionist policies in the agricultural sector.
47.
Kong QJ (2014) China in the WTO and beyond: China’s approach to international institutions. Tul. L. Rev. 88: 959, 963.
48.
Aggarwal, Aggarwal, supra note 24, at 7.
49.
Ibid., at 16. Noting that “[b]y 1990, Korea had 10 million farmers. However, 20 years later in 2010, there were only 3 million”.
50.
American Farm Bureau Federation Economic Analysis Team, supra note 20, at 4.
51.
Ibid., at 5.
52.
Ibid.
53.
BBC News (2017) South Korea complains to WTO about China over THAAD. http://www.bbc.com/news/business-39324536. Accessed 8 Aug 2017.
54.
Yang QH (2017) BBC News China’s THAAD revenge: how South Korea faces the challenges. http://www.bbc.com/zhongwen/simp/world-39265043. Accessed 8 Aug 2017.
55.
Korea Customs Service (2017) FTA trend in Korea. http://www.customs.go.kr/kcshome/main/content/ContentView.do?contentId=CONTENT_ID_000002320&layoutMenuNo=23225. Accessed 22 Aug 2017.
56.
International Monetary Fund (2018) World economic outlook database—South Korea. https://www.imf.org/external/pubs/ft/weo/2017/02/weodata/index.aspx. Accessed 26 Feb 2018. See also Workman D (2018) South Korea’s top 10 exports. http://www.worldstopexports.com/south-koreas-top-10-exports/. Accessed 26 Feb 2018.
57.
South Korea has trade relations with the US, the EU, and Australia in the agricultural sector, allowing the imports of cereals, meat products and dairy products from the US, pork, chocolate, beer, and dairy products from the EU, and beef, wheat, sugar, dairy products, wine, and seafood from Australia, respectively. For more details, see Zhuang RN, Mattson JW, Koo WW (2007) Implications of the U.S.-Korea Free Trade Agreement for agriculture and other sectors of the economy. http://ageconsearch.umn.edu/bitstream/7636/1/aer619.pdf. At 5. Accessed 19 Sept 2017. See also European Commission (2017) Agri-food trade statistical factsheet: European Union–South Korea. https://ec.europa.eu/agriculture/sites/agriculture/files/trade-analysis/statistics/outside-eu/countries/agrifood-south-korea_en.pdf. Accessed 19 Sept 2017. See also Australian Government Department of Foreign Affairs and Trade (2017) Australia and Korea FTA (KFTA)—key outcomes. http://dfat.gov.au/trade/agreements/kafta/Documents/fact-sheet-key-outcomes.pdf. Accessed 19 Sept 2017.
58.
Jensen A (2012) Danish Embassy in Santiago fact sheet–agro industry and food technology in Chile, world food power with economic growth in a healthy business environment. http://chile.um.dk/~/media/Chile/Final%20Fact%20sheet%20%20Agro%20Industry%20%20Food%20Technology.pdf. Accessed 20 Aug 2017. Noting that Chile’s major agricultural exports include fruits, wine, beef, pork, poultry, and dairy product. However, according to the South Korea-Chile FTA, only kiwi, grape, pork, and wine had seen tariff elimination by 2014.
59.
United States Department of Agriculture Foreign Agricultural Service (2014) India’s agricultural exports climb to record high. https://www.fas.usda.gov/data/india-s-agricultural-exports-climb-record-high. Accessed 8 Aug 2017 Noting that “India has become a very important player on the global market, especially for rice, cotton, sugar, and beef (buffalo).” “India has also become a sizeable exporter of soybean meal, guar gum, corn, and wheat, as well as a diverse range of other products”.
60.
United Nations (2012) Mexico’s agricultural development: perspectives and outlook. http://unctad.org/en/PublicationsLibrary/ditctncd2012d2_en.pdf. p 8. Accessed 8 Aug 2017. Noting that Mexico is the major supplier of vegetables and fruits for the US.
61.
Daley E (2010) South America: the world leader in beef exports. Beef Issues Quarterly (online). http://www.beefissuesquarterly.com/beefissuesquarterly.aspx?id=4094. Accessed 9 Aug 2017. Noting that Brazil, Argentina and Uruguay are “major players in the global beef market”.
62.
Lee HS, Duffey KJ, Popkin BM (2012) South Korea’s entry to the global food economy: shifts in consumption of food between 1998 and 2009. Asia Pac J Clin Nutr 21(4): 618–629.
63.
Ibid.
64.
Ibid.
65.
Kim, supra note 32.
66.
Savada AM, Shaw W (1997) South Korea: a country study. Diane Publishing, US, p 84. Noting that “Park Chung Hee government launched the Saemaul Undong (New Community Movement) as a rural reconstruction and self-help movement to improve economic conditions in the villages, close the wide gap in income between rural and urban areas, and stem urban migration.” See also Bedeski R (2002) The transformation of South Korea: reform and reconstitution in the sixth Republic under Roh Tae Woo, 1987–1992. Routledge, UK, p 24.
67.
Jeong, Martini, supra note 29, at 27. Noting that a series of government support programs were provided to strengthen the agricultural sector and rural development.
68.
Ibid., at 7.
69.
Ibid., at 28. Noting that priorities have been placed on rural development, agricultural competitiveness, the quality of life in rural areas, and environment.
70.
Song JH (2007) Perspectives on agricultural development in the Republic of Korea: lessons and challenges. http://www.fao.org/docrep/009/ag089e/AG089E03.htm. Accessed 18 Aug 2017.
71.
Jeong, Martini, supra note 29, at 28. Noting that “[f]armers over 65 years of age who were willing to sell or rent their land to full time farmers for a period of more than five years” were eligible to receive a payment.
72.
Ibid. Noting that as part of the rice deal under the WTO, a direct payment support mechanism, including both fixed payment and variable payment, was made to rice farmers.
73.
Ibid.
74.
Ibid., at 29.
75.
Ibid., at 30.
76.
WTO Agreement on Agriculture (15 Apr 1994) 1867 U.N.T.S. 410. Art. 6 is about domestic support commitments.
77.
For more details regarding Amber Box and Blue Box measures, see World Trade Organisation (2017) Domestic support: Amber, Blue and Green Boxes.https://www.wto.org/english/tratop_e/agric_e/negs_bkgrnd13_boxes_e.htm. Accessed 18 Aug 2017. See also Chen Y (2014) Trade, food security, and human rights. Routledge, UK pp 91–93 “Amber Box measures include those domestic support programs that are directly related to production and price. These measures are considered to be highly trade-distortive.” As for Blue Box measures, they are subsidies tied to programmes that restrict agricultural production. They are less likely to artificially depress market prices. Therefore, they are considered to be less trade-distorting.
78.
Agreement on Agriculture, supra note 76, Annex 2.
79.
Ibid.
80.
Seung supra note 26.
81.
Ibid.
82.
OECD (2017) OECD review of agricultural policies: Israel. In: Agricultural Policies and Support. OECD. http://www.oecd.org/tad/agricultural-policies/oecdreviewofagriculturalpoliciesisrael.htm. Accessed 20 Aug 2017.
83.
Leichman AK (2012) 12 top ways Israel feeds the world. https://www.israel21c.org/the-top-12-ways-israel-feeds-the-world/. Accessed 20 Aug 2017.
84.
Ibid.
85.
Ibid.
86.
Ibid.
87.
Ibid.
88.
Seung, supra note 26.
89.
Jeong, Martini, supra note 29, at 32.
90.
Ibid.
91.
Cho GR (2011) South Korean strategy for agricultural technology transfer to developing countries: case of rural development administration. https://asiafoundation.org/resources/pdfs/ChoGyoungRaeStrategyforTechnologyTransfertoDC7thver.pdf. Accessed 25 Aug 2017.
92.
Jeong, Martini, supra note 29 at 31.
93.
Ibid.
94.
Ibid. Noting that “[i]n 2002, the Farmland Act was revised to allow farmland to be owned by agricultural corporations under the conditions that investment by farmers represented at least half of the total investment, the representative of the corporation is a farmer and more than half of the executive board are farmers”.
95.
Ibid.
96.
Ibid., at 32.
97.
Seung, supra note 26. Noting that it is difficult for South Korea to compete on price. Instead, Min suggests a breakthrough through differentiation.
98.
Windham JS (2007) Putting your money where your mouth is: preserve food subsidies, social responsibility & America’s 2007 Farm Bill, Environs Envtl. L. & Pol’y J. 31(1): 4 & 26. Noting that “[s]tudies show that consumers are concerned about health and nutrition, taste, food safety, and the environment”.
99.
Ibid., at 31.
100.
World Travel and Tourism Council (2015) Travel and tourism economic impact 2015: South Korea, https://www.wttc.org/-/media/files/reports/economic%20impact%20research/countries%202015/southkorea2015.pdf. at 1. Accessed 21 Aug 2017.
101.
Jeong, Martini, supra note 29, at 34.
102.
Ibid.
103.
Ibid., at 20. Noting that it is an industry that is not well developed in South Korea.
104.
Ibid., at 8.
105.
Ibid. Noting that the development of rural infrastructure increases the desirability of rural areas and the opportunities for off-farm work.
106.
Ibid., at 37.
107.
Ibid. Noting that “[t]he Green Tour Villages was introduced in 2002”.
108.
Muller AR (2011) South Korea’s global food ambitions: rural farming and land grabs. https://www.farmlandgrab.org/post/view/18325-south-koreas-global-food-ambitions-rural-farming-and-land-grabs. Accessed 29 Aug 2017. Noting that China, Japan, United Arab Emirates, and Saudi Arabia have been pursuing overseas farmland acquisitions since 2008. See also Australian Government Rural Industries Research and Development Corporation Department of Agriculture, Fisheries, and Forestry (2011) Foreign investment and Australian agriculture. https://rirdc.infoservices.com.au/downloads/11-173 at 2. Accessed 29 Aug 2017. Noting that Europe and North America, the Gulf States and some Asian countries have also “shown increased interest in investing in Australian agriculture seeking to expand their activities by securing sources of supply”.
109.
Australian Government Rural Industries Research and Development Corporation Department of Agriculture, Fisheries, and Forestry, supra note 108, at 7.
110.
For more details regarding foreign farmland acquisitions in Australia, see Australian Government Rural Industries Research and Development Corporation Department of Agriculture, Fisheries, and Forestry, supra note 108.
111.
Muller, supra note 108.
112.
Jones R (2016) Korea’s economy: finding a new momentum. http://oecdobserver.org/news/fullstory.php/aid/5649/Korea_s_economy:_Finding_a_new_momentum.html. Accessed 28 Aug 2017.
113.
Australian Government Rural Industries Research and Development Corporation Department of Agriculture, Fisheries, and Forestry, supra note 108, at 3.
114.
Ibid., at 7. Noting that lack of investment has, in the past, been identified as “a fundamental cause of low productivity and stagnant agricultural production in developing countries”.
115.
Robertson B, Pinstrup-Andersen P (2010) Global land acquisition: neo-colonialism or development opportunity? Food Security 2(3): 275–276.
116.
Australian Government Rural Industries Research and Development Corporation Department of Agriculture, Fisheries, and Forestry, supra note 108, at 4.
117.
Ibid.
118.
For more details, see Robertson, Pinstrup-Andersen, supra note 115, at 271–283.
119.
Muller, supra note 108.
120.
Robertson, Pinstrup-Andersen, supra note 115, at 275–283.

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Ying Chen

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University of New England, Armidale, NSW, Australia
Lillian Corbin
University of New England, Armidale, NSW, Australia
Mark Perry

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Chen, Y. (2019). South Korea’s Agricultural Trade Dilemma: Open Markets or Protectionism? Beyond the China-South Korea Free Trade Agreement. In: Corbin, L., Perry, M. (eds) Free Trade Agreements. Springer, Singapore. https://doi.org/10.1007/978-981-13-3038-4_4

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DOI: https://doi.org/10.1007/978-981-13-3038-4_4
Published: 30 October 2018
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