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Sunday, Sep 21, 2014

Asia

Korean rice market opening

The Korea Herald/ANN | Sunday, Sep 21, 2014

A farmer holds a sickle on a rice field in Gimje, south of Seoul in this file photo.

KOREA'S rice market will open fully to foreign imports starting next year, ending 20 years of rice import caps.

On Thursday the government announced that it would seek a 513 per cent tariff on rice imports as it fully liberalises the rice market, explaining that the high tariff will protect Korea's rice farmers.

Under an agreement with the World Trade Organisation, Korea gradually increased its rice import quotas for 20 years instead of fully opening its rice market.

That agreement expires at the end of this year. The country's annual quota for rice imports for this year is 408,708 tonnes, or about 9 per cent of the national demand, with a 5 per cent tariff on the imported grain.

Rice market liberalisation is a politically sensitive matter and the announcement was immediately met with vehement protests by farmers, who vowed to fight the government on the issue.

At the end of September, the WTO will be notified of the proposed tariff rate, which has been touted by the government as the highest possible allowed to protect the local rice industry under the WTO agreement. The WTO review and approval could take several months.

Whether the WTO will approve the proposed tariff remains to be seen as large rice producers such as the US are likely to oppose such a high tariff rate.

Also worrying the farmers is the question of whether the government will be able to maintain the 513 per cent tariff rate in the future as the country negotiates free trade agreements with various countries, despite the government's pledge that rice market liberaliSation will be excluded from any future trade agreements.

After the full market opening, Korea is obligated to continue to import 409,000 tonNEs of rice per year at a 5 per cent tariff rate to meet the minimum market access (MMA) volume.

Faced with declining rice consumption, the rice farming industry would like to see the MMA purchase channeled elsewhere, as food aid to North Korea or elsewhere, for example. Rice consumption in the country has steadily declined, sinking to 67.2 kg per person last year from 80.7 kg in 2005.

Full liberaliSation of the rice market is an unavoidable event that has been delayed for 20 years. The government and the rice farming industry have had ample time to prepare for it.

To soften the blow to the rice farmers, the government has earmarked 14.1 billion won in next year's budget to cover direct subsidies to farmers. The interest rate on 11 different policy loans for rice farmers will be lowered by 0.5 per cent to around 2 per cent.

Farmers are a conservative group by nature; however, they must seek innovations to boost the competitiveness of their products.

Improving the quality of rice grains, boosting productivity and planting alternative crops are ways to boost the competitiveness of Korea's agricultural sector.

Rather than viewing liberaliSation of the rice market as a doomsday, farmers should seek ways to take advantage of the new conditions that they face. Market liberalisation and global competition are now a fact of life and the rice farming industry is no exception.

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