Research Reports
A Renovation of the Compensation System for Agricultural Market Liberalization in Korea
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AuthorChung, Hoguen
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Publication Date2008.11.01
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Original
The purpose of the study is to make a suggestion on how to renovate current compensation policies for agricultural market openness in Korea in order to accommodate further policy reforms including FTA and DDA negotiation that will be materialized in near future.
For this, we reviewed theories that support making a compensation for policy reform. The items organizing compensation policies related with “for whom, when, how” was discussed. Reviewing the cases of policy reform and adjustment assistance in Sweden, United Sates, and Australia, we extracted an implication on our compensation policy complex renovation. The review and analysis on current compensation measures for agricultural market openness in Korea were conducted.
Korea has been opened its agricultural market since 1978 when cumulated trade surplus became an pressure for market opening. In 2004, Korea made an FTA with Chile and introduced direct compensation for fruits and for closing the orchard. In the same year, rice income compensation measure is started in response with continuous price fall and abrogation of purchasing autumn rice by government.
The discussion of problems in current compensation measures includes the items organizing program that is defined in the study as well as existence of upper limit, precondition to become an candidate, price or income standard, and stability of budget.
The principle of compensation is proposed, which are compensation policies are supposed to be targeted and no over paid, not contradicted with purpose of policy reform, to be efficient in cost, to be transitional and easily removed once it is due, to be mixed with direct payment, indirect assistance, and implicit assistance, and to mixed with be ex-ante and ex-post.
For the current compensation policies including direct payment and indirect assistance, the following recommendation is made. Assistance for closing orchard and rice income compensating fixed payment are transitional and to be defined its due date. Measures, linked with production, such as Rice income compensating cyclical payment, FTA compensating payment, and calf price compensating payment are to be combined with farm income stabilization program, which are prepared for launching and checking its reliability. Indirect assistance to level up compatibility of farmers will be more important as we further open the market.
Researchers: Chong Hogun, Oh Naewon
E-mail address: hogunc@krei.re.kr
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