Abstract
South Korea' s self-sufficiency in rice, its key food staple, has come at a
high cost to both consumers and
the government. South Koreans pay some of
the world' s highest prices for rice and the government pays
out annual
subsidies to producers worth billions of dollar. The combination of protection
from imports
and generous subsidies has allowed rice production in Korea
to remain small-scale in comparison with
farming in developed countries in
the West. The average farm size in Korea is less than 1.5 hectares (ha),
though for full-time rice farmers this rises to 4.5ha. This figure is still
tiny when compared to the average
size of US rice farms which stood at
160ha in 2002.
In 2009, however, a number of factors have worked to make
Korean rice farming appear more
competitive. The rise in the price of rice
on the world market and the depreciation of the won has made
domestically
produced rice less expensive when compared to that on the world market.
Korea' s bumper
rice harvest of 4.84mn tonnes, up by almost 10%
year-on-year, has seen stocks saw putting more pressure
on the domestic
rice price. National stocks have been further enhanced by Korea' s obligation
to import
rice under a minimum market access (MMA) arrangement agreed with
the World Trade Organization
(WTO).
Questions have now begun to be
raised about whether it would be beneficial for Korea to begin to lift
restrictions on rice imports now instead of waiting until 2014 when it is
obliged to open up the market to
tariffed rice imports under its WTO
commitments. This would allow Korea to end the MMA agreement
and be spared
from having to import rice. Despite the potential savings to the government,
however, we
see it has highly unlikely that the Korean rice market will be
liberalised before the 2014 deadline. The
government of President Lee
Myung-Bak, already unpopular, would be unwilling to risk losing more
support among rural voters who are sure to oppose the plan.
While the rice
market looks set to be protected for some years to come, South Korea' s
energetic pursuit of
free trade agreements (FTAs) over the last few years
is likely to see competition from imports increase for
other agricultural
sectors. While the KORUS FTA with the US is still stuck waiting for
ratification,
negotiations with other major agricultural exporters are
going ahead. In July, a deal was signed for an
FTA with the EU and
negotiators hope that it will be ratified by early next year. Talks are also
underway
for FTAs with Australia and New Zealand.
This is worrying
news for Korea' s dairy and livestock producers. All four of the aforementioned
markets
are major producers of livestock and dairy - together the US, EU,
Australia and New Zealand supplied
98% of Korea' s non-fat dry milk powder
in 2008. Livestock producers will be helped by strict country of
origin
labelling regulations and Korean consumers strong preference for domestically
produced meat.
Dairy producers will be at more of a disadvantage. If all
four FTAs do eventually come into force, it
could lead to some
re-structuring in the Korean dairy sector, which has already been suffering
from over
production in recent years. However, we see the sector being
able to rely on continued strong government
support as no future
government will be willing to see Korea' s food security further reduced.
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