Research Reports
The Effects of Opening Korean Agricultural Markets through the Uruguay Round Agreement
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AuthorKim, Jeongho
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Publication Date2008.11.01
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Original
This study aims to analyze the effects of market opening on the Korean agriculture and evaluate the ex post impacts on the industry as a whole and on its major comprising products on an item-by-item basis.
Korea entered the GATT in 1967. Since then, the domestic agricultural market has steadily been opening up to foreign goods, and today the market opening rate stands at 99.1% (as of 2007). In terms of agricultural import trends, grain imports have stagnated; however, livestock products and fresh agricultural produce such as vegetables and fruits from overseas have been entering the domestic market at increasing rates. Moreover, the market opening has led to changes in the demand for agricultural products.
The additional market opening after the UR led to an increase of consumer surplus and a decrease of producer surplus. The decreased amount of producer surplus is estimated at 563.3 billion won, and the increased amount of consumer surplus is estimated at 611.8 billion won for a total of 17 agricultural items. On the whole, there is 48.5 billion won of increased supply on average annually. However, because the number of consumers is much larger than that of farmers, the damages from expanded market opening is concentrated on farm households.
According to an inter-industry relation effect analysis, a decrease of 829.6 billion won in the total agricultural output is estimated due to both production decrease and the price decline from market opening.
The opening of the livestock market, in particular, is speedier than the farm produce market, but the speed of market opening for vegetables and fruits is remarkable. As a result, domestic agricultural indexes including GDP, farm household income, cultivated area, and livestock inventory are showing declines.
As for grains, the import amount increased while domestic production decreased. Accordingly, the role of the government for the grain market has been curtailed.
In the case of farm products, the domestic price declined due to import expansion, and due to the decline of domestic price, cultivated area and farmer's income dropped. Although the number of farmers cultivating farm products fell, attempts are being made to gain competitiveness and new technologies, and realize a scale of economy.
In the case of the livestock sector, the GDP grew steadily together with the improvement of scale, specialization, and production technology, but the increase rate of Korean beef growers' income slowed down. As for price fluctuation, the variation increased for beef and pigs but decreased for broilers.
The implications for policy making from this study are as follows: first, it is important to gain public sympathy about agricultural market opening and trade liberalization; second, the process to attain public consensus is essential in trade negotiations; and third, it is necessary to intensify ex ante domestic measures for agricultural market opening.
Researchers: Kim Jeong-Ho, Cho Young-Su, Lee Young-Ho
E-mail address: jhkim@krei.re.kr
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