KORUS FTA having negative impact on South Korean agriculture

Posted on : 2017-12-12 17:14 KST Modified on : 2019-10-19 20:29 KST
Critics are calling for US tariff concessions during amendments over the agreement
US beef is displayed for sale at a Costco store
US beef is displayed for sale at a Costco store

In proposed amendments for the South Korea-US Free Trade Agreement (known as the KORUS FTA), Seoul has declared the agricultural sector off limits and has announced that it will exclude it from the negotiations. But with damage to South Korea’s agro-livestock industry increasing over the five years since the KORUS-FTA took effect, some critics say that South Korea ought to be asking the US to adjust the tariff concessions in this sector.

The most recent import figures for US imports in the agro-livestock sector show that, since imports of beef resumed completely in June 2008, following the mad cow scare, they have increased by 82.7%, from a yearly average of 66,000 tons between 2007 and 2011 to a yearly average of 126,000 tons between 2012 and 2016. Pork imports have increased by 23% over the same period, while the US import volume across the entire agro-livestock sector (including chicken, milk powder and cheese) increased by 19.4%. In terms of the value of imports, the rate of increase is 57.8%.

The increase in imports of US products is also having an increasingly negative impact on South Korean farmers. The number of cattle farmers fell 36.1%, from 157,000 in 2011 to 85,000 in 2016. The number of pork farmers and dairy farmers decreased over the same period, by 1,773 (32.8%) and 714 (16.1%), respectively. In terms of the self-sufficiency rate, which measures domestic production as a percentage of domestic consumption, beef was down from 48.1% in 2012 to 39.0% in 2016, while pork fell from 78.2% to 72.7%.

The damage to the overall agricultural sector during the five years since the KORUS FTA took effect has been “broad and deep” across nearly all products, regardless of the availability of US imports or changes in the import volume. Because agro-livestock products, unlike industrial goods, are intended to be eaten, an increase in the imports of one product has an effect on other products as well and hurts overall agro-livestock production and consumption. And as each farm switches to products that are less vulnerable to American imports, surplus production arises in these products as well, leading to a cascade of falling prices and other kinds of damage.

“This is the case even now, but during the next five or 10 years as tariffs are completely phased out in beef and other sensitive agro-livestock products, South Korean farms will become the proverbial frog in the boiling water,” said Cho Seok-jin, director of the Dairy Policy Institute. By the very nature of agro-livestock products, the sector will suffer damage that grows exponentially as more time passes since the agreement took effect, Cho said.

“The farming sector is determined by the taste and preferences of consumers every bit as much as by product quality and price competitiveness. If consumers get used [to US products], domestic farmers will suffer irrevocable harm. Even though tariffs on agricultural products will be rolled back over a long period of 10 or 15 years, if domestic farmers are already suffering this much harm, things will be even harder in the future,” said Ahn Byeong-il, a professor of food and resource economics at Korea University.

The KORUS-FTA eliminates import duties on 97.9% of US agricultural goods. Over the past five years, tariffs have been completely abolished on 954 of the 1,531 items on the list of agro-livestock concessions. That is to say, tariffs are still in place for 37.3% of these items.

The reduction and elimination of tariffs through the KORUS-FTA has been found to be a major factor behind increasing imports of US agro-livestock products. “Over the past five years, imports have mainly increased in items for which tariffs have been reduced or abolished or have a tariff-free quota, such as beef, pork and cheese (192% increase in import volume), milk powder (1,300% increase in import volume) and fruit,” said Han Seok-ho, an analyst with the Korea Rural Economic Institute.

Although the import volume of US grains, feed and chicken has actually decreased since the KORUS-FTA took effect, the Korea International Trade Association (KITA) concluded that “this is because of local conditions, including the outbreak of avian influenza and poor harvests in the US.”

“Nearly all farmers in South Korea are suffering direct or indirect harm to their income and production because of the increase of American imports,” said Han.

This is leading to calls for South Korean negotiators to go on the offensive during the talks to redress the existing imbalance in agro-livestock concessions. “The concessions in the agro-livestock sector should be readjusted as part of a proactive strategy of balancing interests between the two countries,” said Lim Jeong-bin, a professor of agricultural economics and sociology at Seoul National University.

Kim Hong-gil, chairman of the Hanwoo Association, argues that tariffs on beef imports (40% in 2011, phased out over 15 years) should be frozen at their current level (24%) or that the phasing-out period should be reset to 20 years and that the sanitary requirements for US beef should be adjusted from the current limit of 30 months to 20 months.

“We need to ask the US for genuine improvements, such as considerably relaxing the standards [300,000 tons of beef a year] for activating safeguards on agricultural products, which are completely failing to protect against US imports, and eliminating the unfair and unbalanced tariff-free quota for milk powder [increasing annually by 3% from 5,000 tons of milk powder a year],” said Han Min-su, chief of policy for the Korean Advanced Farmers Federation.

South Korea’s Trade Treaty Conclusion Procedure and Implementation Act specifies that the government’s efforts to implement a trade treaty must not prevent it from carrying out its constitutional duty to protect and foster the agricultural, livestock and fishing industries.

In related news, the South Korean government is planning to officially announce the initiation of the talks to revise the KORUS-FTA on Dec. 28, after concluding the domestic implementation procedures by reporting its trade plans to the National Assembly and following deliberations with the US on the schedule of the talks.

By Cho Kye-wan, staff reporter

Please direct questions or comments to [english@hani.co.kr]

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