Published : 2014-03-04 20:19
Updated : 2014-03-04 20:19
One important issue that the government has to decide in the next few months is whether to open the nation’s rice market to foreign exporters, as Korea must inform the World Trade Organization of its decision by September.
Under the Uruguay Round trade agreement that took effect from 1995, Korea was allowed to postpone opening its rice market for 10 years until 2004. But one string was attached: It had to give foreign rice exporters a minimum level of access to its market.
The mandatory import amount was initially set at 1 percent of Korea’s annual rice consumption but gradually increased to 4 percent in 2004.
In 2005, Korea managed to extend the agreement for another 10 years. But this time, it was required to ratchet up the import quota from 4 percent to 7.96 percent in 2014.
Now, Korea has to grapple with the problem again. As before, it has two options: Try to extend the agreement for another 10 years or open up the market.
Yet keeping the rice market closed is no longer a viable option for the country. If Korea pushes for a further delay in liberalizing its market, rice-exporting countries will surely demand a sharp increase in the import quota. This is exactly what happened to the Philippines when it decided last year to further postpone opening its market.
For Korea, the current import quota is already excessive. This year, it has to import about 410,000 tons of rice, which amounts to 9.7 percent of its rice output in 2013. It can ill afford any increase in mandatory rice imports.
The problem with a rice import quota is that it is retained even after a country opens up its market. Furthermore, foreign rice brought into the nation under the minimum market access obligation is cheap, with a mere 5 percent tariff rate.
Cheap rice imports benefit consumers but the other side of the coin is that they negatively affect local rice growers and could undermine the rice industry, increasing food insecurity.
It may sound paradoxical but liberalizing the rice market would be more effective in curbing rice imports. This has been the case with Japan, which opened its market in 1999, and with Taiwan, which followed suit in 2003. The reason for this is the high tariff rates they impose on imported rice.
The agriculture minister, Lee Dong-phil, recently suggested that Korea would be able to impose 300 percent to 500 percent tariffs on rice imports. Experts say a tariff rate of even 200 percent would make foreign rice more expensive than local rice.
So even if Korea embraces the liberalization path, rice imports are unlikely to exceed the current amount under the minimum market access provision.
Yet to Korean farmers, implementing rice tariffs is perceived to be more threatening than expanding the import quota. They worry that the government might agree to lower the tariff rates to clinch free trade deals with foreign countries. Yet Lee rules out such a possibility, saying that rice is the most important item in trade talks.
Lee said the government would make a decision on the issue by June. Yet before reaching a conclusion, a public discussion on the subject needs to take place and farmers’ concerns must be eased.