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(News Focus) Tariff rate becomes key to South Korea's rice market opening

2014/07/18 11:42

By Kim Eun-jung

SEOUL, July 18 (Yonhap) - With its decision Friday to open the rice market after 20 years of postponement, South Korea now has to wrestle with tariff rates that will determine how it can protect the nation's farmers already threatened by cheaper food imports under a slew of free trade agreements.

Friday's decision follows years of controversy over the pros and cons of opening up a market that for Koreans is synonymous with food and psychological security.

The National Federation of Farmers' Association, the most left-leaning farmers' group, strongly criticized the government's decision to open the market, calling it the result of a "lazy trade policy" and demanding negotiations on behalf of farmers' interests.

"We have urged the government to prepare various (negotiating) cards, including standstill and waiver, in entering the trade war," the association said in a statement. "Even if (South Korea) announces a high tariff, the U.S. and China will not stop expanding their foothold in the local market and making excessive demands."

   Proponents of opening the market argue that standstill or waiver won't come for free and insist that negotiators focus on setting high tariff rates.

"If the government negotiates an extension (of the waiver,) it may be able to say that at least it tried," said Park Dong-kyu, a senior researcher at the Korea Rural Economic Institute (KREI). "If the government shifts its stance after an unsuccessful try, it would be considered a failed attempt... Then the government may not be able to focus on setting a high tariff, which is the most important part. It could seriously hurt the national interest."

   The Korean Advanced Farmers Federation (KAFF) said further postponement of market opening in exchange for additional minimum market access (MMA) volume would have a "very negative impact" on the local rice market.

Instead, the KAFF said the government should exclude rice from all FTA negotiations in the future and not renegotiate the rice sector in trade deals already in effect. It also demanded financial assistance to keep farmers' income stable and regulations to block illegal distribution of imported rice.

Choi Won-mok, a law professor at Ewha Womans University, said raising the MMA quota is a "suicidal act" because there is already excessive imported rice in stock.

"A rational government would take a leading role to set the high tariff rate and open the rice market," Choi said. "As setting the tariff rate on imported rice needs approval from all WTO members, it has to go through extensive efforts to achieve the proposed rate."

   The agriculture ministry claims it can set the tariff at as high as 400 percent, while institutes and scholars propose a rate ranging from 300 percent to 700 percent.

Experts also say the government should adopt a special safeguard, which would give South Korea the authority to impose contingency restrictions on imports in special circumstances.

Some worry that even after the tariff rates are set with the WTO, the import tariff could go lower in South Korea's bilateral trade agreements with individual countries, a claim the government strongly denies.

"There is a possibility that a respective country may demand lowering the rice tariff when negotiating a free trade deal," Kim Yoo-tae, president of Nonghyup Economic Research Institute, said. "The government will have to firmly stand on its position that does not make concession on rice imports in future FTA talks."

   Farmers groups also urged the government to negotiate with WTO members to allow flexible usage of imported rice.

Currently, 30 percent of the rice imported under the quota system must be consumed as food. South Korea cannot export the imported rice or transfer it to a third country. Because of such regulations, Seoul had to import 95 tons of rice when it provided humanitarian assistance to North Korea from 2000 to 2007.

"Along with the high tariff, the government should negotiate to lift the restrictions on rice usage to handle the supply and demand in the local market and be able to use the imported rice for various purposes," the KAFF said at a July 11 public hearing held at the National Assembly.

As the current mandatory import quota remains in place even after tariffication, local farmers and experts say the government should come up with measures to deal with falling rice consumption.

KREI researcher Park says that imported rice under a high tariff would not be a threat to homegrown rice, noting that rice imported from the U.S. and China has been auctioned at 60 percent to 70 percent of the domestic price at the local market.

"In other words, consumers have paid certain premiums for domestic rice. It illustrates the improved competitiveness of the local rice industry that has made progress during the grace period," Park said. "If imported rice was better than domestic rice, its auction price would have been set at a higher level."



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