Research Reports
Structural Adjustment and FTA Strategies of Agricultural Sector
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AuthorEor, Myongkeun
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Publication Date2006.10.01
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Original
The gross domestic product (GDP) of agriculture has increased in the process of industrialization in Korea, but its share in total GDP has kept declining. The agricultural production structure has changed. The share of grain production has reduced while those of vegetables and livestock have risen. The agricultural income has been lagging after the 1990s and the income share of rice has increased while those of vegetables, fruits and livestock have decreased.
The farm incomes are rising, while the gap between urban-rural household income has been expanding because the urban household income increased more rapidly. The farm population has been declining, while the number of the elderly person over 65 years old has increased. The total farm land has decreased; however, the average farm size has increased due to a significant decrease in the number of farm households.
When the Korea-China FTA is signed without the elimination of the tariff on rice, it is expected that the income from rice will be reduced to the 60~80% level of the current income because the rice price is projected to go down by rice tariffication and DDA agreements. Therefore, it is necessary that rice should be excluded from the country schedule of FTA with China for the purpose of food safety, multifunctionality and ecological environment preservation.
When tariffs are eliminated, it is expected that the incomes from soybeans, radishes, pears, grapes, peaches, and pork will be kept on the 50% level of the current income. That means farm size should be expanded around two-fold in order to keep the current level of income.
Incomes from such items as potatoes, red peppers, onions, apples, mandarins, ginseng, and beef will be reduced to below 50% of the current level when tariffs are eliminated. These items are expected to keep the incomes on the 50% level of the current incomes if the 50% tariff is maintained after the FTA. Therefore, a 50% reduction rather than a tariff elimination and about a two-fold expansion in farm size are required to keep the current incomes from these items.
However, the incomes from such items as garlic, radish, sesame, and persimmon are expected to be cut to below 50% of the current level even when the tariffs are lowered by 50%. Therefore it is necessary to allow a longer implementation period along with the 50% tariff reduction for these items.
Barley, water mellon, green onion and most greenhouse vegetables, such as strawberry, tomato, cucumber, melon, lettuce, and pumpkin, will not generate incomes in spite of the 50% tariff reduction. Their revenues may not cover the managing costs. These items have considerable shares in the domestic agricultural production. Moreover, the farmers cultivating these items are relatively young and possess competitive advantages with latest technologies. Therefore, it is necessary to boost the competitive advantages in price and quality along with support policies for structural adjustment on these products.
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