Influence of Policy Research in Korea

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Agricultural Policy Under the WTO An Asian
Perspective
March 1, 2002 Jung-Sup Choi Korea Rural Economic
Institute jsupchoi_at_krei.re.kr
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Contents
1. Structural Problems of Korean Agriculture
2. Korean Agriculture Under the URAA
3. Responses to the Doha Ministerial
4. Rice Policy at a Cross Road
5. Farmers Demands on the WTO Negotiations
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Structural Problems of Agriculture

• Extremely small farming scale
• 1.4 ha per farm (Korea) 1.5 ha (Japan)
• Farm income depends highly on agriculture
• 65 for Korea (less than 20 for Japan)
• Low direct income payments to farmers
• Only 2.6 of farm income (9.4 for Japan)
• Importance (Dominance) of rice
• 52 of agricultural income comes from rice
• Agriculture including rice maintained by border
  protection domestic supports

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Structural Problems of Agriculture

• Low agricultural growth rate
• 1.1 in 2000 (8.8 overall growth)
• Share of agriculture (2000)
• Population 8.5
• GDP 4.0
• During 1970-2000
• Total population increased by 15 million but
  Rural population decreased by 10 million.
• Topology is adverse to agricultural development.

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Agriculture Under the URAA

• Market liberalization
• Tariff rate reduction 24 during 10 yrs.
• Average agri. tariff reduced to 62 in 2004.
• TRQ (market access) set up for major crops.
• Domestic support
• Subsidies reduction target set AMS to be cut
  13.3 during the implementation period.
• Reduction commitment is binding.
• Korea has implemented the commitments.

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Self-Sufficiency Rates
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Agriculture Under the URAA

• Political arrangements
• Agricultural problems attracted great attention
• Special tax for agricultural development
• Presidential Commission on Rural Reconstruction
  (PCRR)
• Agricultural Development Programs
• Aimed at enhancing agricultural competitiveness.
  
• Loans became farm debts after the crisis.

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Agriculture Under the URAA

• New environment of agricultural policy
• Implementation of URAA commitments
• Influence of agricultural exporting countries
• Importance of direct income payments
• Severe restriction on government policy measures
• Surge in imports of some agricultural products
• Beef and oranges as a showcase
• Feed grain market has been open before URAA
• Income gap became wider against urban hh.

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Farm Income vs. Urban Household Income
Thou. won
30,000
Urban
27,000
24,000
Farm
21,000
18,000
15,000
12,000
1992
1993
1994
1995
1996
1997
1998
1999
2000
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Responses to the Doha Ministerial

• without prejudging the outcome of negotiations
  we commit ourselves to comprehensive negotiations
  aimed at
• Substantial improvements in market access
• Reductions of, with a view to phasing out, all
  forms of export subsidies and
• Substantial reductions in trade-distorting
  domestic support. Ministerial Declaration

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Responses to the Doha Ministerial

• Non-ag. sector welcomes the new round
• Growth GDP 3.4, exports 6.4 KIEP
• Domestic non-ag. market is wide open SEI
• Welcome since 73 of GDP depends on trade KTA
• Expectations on
• tariff reduction, and
• stricter anti-dumping cases

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Responses to the Doha Ministerial

• Ag. sector prejudges the new round results
• More liberalization of markets
• From exemption to tariffication
• From tariff rate quota (TRQ) to tariff-only
• Lower tariff rates larger TRQ
• More reductions of domestic support
• Lower purchasing price of rice
• Less quantities purchased
• Ag. service sector likely to be the losers.

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Rice Policy at the Cross Road

• URAA exempted rice from tariffication.
• MMA rice quota filled with processing rice.
• Government raised rice purchasing price after the
  financial crisis.
• 116 up from 1986-88 (17 down in Japan).
• Rice production increased.
• Agricultural income share increased
• 38 (1995) to 52 (2000)
• Reduction in rice consumption accelerated.

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Reduction in Rice Consumption, Korea, Japan,
Taiwan
Per capita consumption, kg per yr.)
160
140
Korea 1979
120
Japan 1962
100
80
Taiwan 1974
60
40
20
0
1
3
5
7
9
11
13
15
17
19
21
23
25
27
29
31
33
35
37
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Rice Policy at the Cross Road

• Rice stocks to production ratio soared.
• Rice Marketing Committee recommended rice
  purchasing price cut (-4 to -5).
• Farming groups are strongly against the cut.
• Government announced same as previous price for
  2002 crops.
• The future of rice policy is debated actively.
• Less rice, higher quality in branded-bags.
• Re-negotiation on rice exemption scheduled in
  2004 at WTO.

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Farmers Demands

• Strengthen negotiating abilities to
• Deal with requests on market openings
• Maintain the developing country status
• To guarantee rice farmers income, design a new
  rice policy including
• Raising direct income payments and
• Establishment of public stockholding scheme
• Take advantage of the green box of URAA
• e.g., decoupled income support, domestic food
  aid, etc.

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Concluding Comments

• Doha Declaration omens for negotiation results of
  new round--Farm sector as a loser.
• Agriculture lagged behind a rapid economic growth
  and has structural problems.
• Korea and Japan do NOT share as much as before in
  terms of agriculture.
• Rice policy reform is under way, but bumpy.
• As a WTO member, China will play a bigger role in
  East Asian agriculture.

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Thank you for your attention!