Research Reports
Trade Policy for the Promotion of Food Industry in Korea
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AuthorSong, Jooho
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Publication Date2012.12.30
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Original
Background of Research
This study is aimed at suggesting an appropriate trade policy for the food industry in Korea. The growth of food industry has been remarkable recently, but there are relatively fewer studies focused on processed food compared with the studies on agricultural products. Most concerns were centered on how to protect farmers in coping with DDA and FTAs. As a result, tariff rates for agricultural products remain high but tariff rates for processed food remain low in Korea. Therefore, tariffs of raw agricultural products are high and the tariffs of processed products are low in Korea which is contrary to the developed countries.
Method of Research
When analyzing the protection rate of processed products, tariffs of raw or intermediate products should be considered together with the tariffs of final products. This study calculates the effective protection rates for processed products and raw products using an input-output table. The concession results of processed agricultural products were analyzed in comparison with those of raw agricultural products in the Korea-U.S. FTA and the Korea-EU FTA. A survey of food processing companies was added to find out the barriers in trade and their priorities of interest in trade policy.
Research Results and Implications
The estimation results show that effective protection rates are higher than nominal protection rate in many processed products. It is somewhat an unexpected result but it tells that many processing companies can import raw products with low in-quota tariff rates within the TRQ system. Korea operates TRQs in 66 major agricultural products in the WTO and some more in FTAs. However, for some highly processed products, such as ice cream, bread and grain cookies, sauces, animal fats, and bean curd, the effective protection rates are lower than nominal protection rates, which is called tariff de-escalation. It needs to be improved in the future. Korea applies relatively few specific tariffs and seasonal tariffs compared with other developed countries.
The reform of tariff policy should be oriented to reduce the tariff wedges between raw products and processed products. Also, Korea should use specific tariffs and seasonal tariffs for more tariff lines. TRQ administration should be transferred to more market-oriented methods and for the products of which the TRQ-applicable quantities are increased every year, it needs to be excluded from the TRQ list.
Many food processing companies interviewed ask for integrated country-of-origin rules in many FTAs. They also demand more information on each exporting country's inspection and quarantine regulations. Import licensing procedures should be also improved through consultation and negotiation between the authorities of interested countries.
Researchers: JooHo Song, Ji-Hyeon Choi, Dae-Hee Chung, Hanul Park, Sounghun Kim
Research period: 2012. 1. - 2012. 11.
E-mail address: jhsong@krei.re.kr
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