Research Reports
A Study on Strategies for Increasing Agricultural Exports by Utilizing FTAs (Year 1 of 2)
-
AuthorLee, Byounghoon
-
Publication Date2014.12.30
-
Original
Background of Research
Beginning with the FTA with Chile in 2002, Korea has signed 12 FTAs with 50 countries as of October 2014, and its proportion of FTA trade volume is expected to be over half its total trade volume. Some expect a large increase in regional exports if the FTAs are actively utilized, but exports have not grown as much as expected. This is because Korea’s FTA utilization ratio of agricultural products export is 22.8%, which is a very low level. That is, it shows that the FTAs, which the nation signed, have not been used efficiently in agricultural export and that export increase effects due to FTA preferential tariff cuts were small in the agriculture sector.
The reason for the low FTA utilization ratio in agricultural products export is that most export companies are small-scale so they do not know a prerequisite for FTA preferential tariff reduction, place-of-origin regulations, or they have difficulties in being issued a certificate of origin for export owing to lack of people exclusively in charge. Unfortunately, in the field of agricultural products, the current state of rules of origin by FTA and by item has not been fully examined.
Therefore, this study aims to seek for new export strategies which can maximize the FTA utilization ratio by comprehensively reviewing place-of-origin regulations by item and by FTA partner country and the tariff rate structure.
Method of Research
We drew strategies for increasing exports by partner country and by item suitable for the FTA environment by comprehensively reviewing the current situation of FTA partners’ export markets and rules of origin.
First, we analyzed the present state and features of rules of origin by FTA to identify the FTA utilization status of agricultural exports and practically improve preferential tariff benefits. For this, we estimated agricultural exports’ utilization ratio of FTA preferential tariff by FTA partner and by item group, and suggested plans to enhance the utilization ratio by major market. We also compared and analyzed preferential tariff structures on the basis of tariff concessions by FTA partner and by product group, and measured tariff reduction effects by item group and by process criterion of major countries including the US and the EU. To figure out the requirements of rules of origin, which are the most important in maximizing FTA preferential duty benefits, we analyzed the rules regarding major agricultural products, compared FTA partners’ rules and their characteristics, and analyzed the restrictiveness in the agricultural products sector by FTA by designing or calculating 13 stages of previous studies’ restrictiveness index related to the place of origin.
In addition, we analyzed the relation among FTA utilization ratios in export by using determinants of FTA utilization such as the previously calculated FTA preferential tariff benefits and place-of-origin restrictiveness indices, and analyzed the effect of rules of origin, which are the key of FTA utilization, on overall trade through trade creation and trade diversion effects. Last, we established detailed export strategies suited to the FTA environment and drew policy implications to dominate the export markets of FTA partner countries by investigating and analyzing difficulties of domestic exporters and importers of agricultural products in export to the nations.
Research Results and Implications
According to the research result, various strategies are needed to maximize FTA effects by comparing FTA partners’ complex and diverse country-of-origin regulations and analyzing their features in order to increase tariff reduction effects and the low FTA utilization ratio in agricultural export.
First, given that strict place-of-origin regulations lower trade creation effects resulting from FTA preferential tariff benefits, a strategy is necessary to maximally raise import barriers of strict conditions for imported agricultural products by independent rules of origin from a point of view of a net importer of agricultural products before the conclusion of the regulations agreement, and to maximally lower export barriers by negotiating eased rules for exported agricultural products. In case of the FTA place-of-origin regulations agreement which have been already signed, improper rules should be revised through the existing implementation committees by FTA.
Additionally, because domestic exporters of agricultural products have difficulties in FTA utilization mainly due to lack of information and complex procedures related to the place of origin, policies are needed to expand the provision of information regarding FTAs, nurture FTA experts, and diffuse the management system of FTA certificates of origin in order to promote the exporters’ utilization of FTAs. A certain level of government support can also be an effective strategy to cultivate FTA specialists of domestic companies in FTA partners in the mid and long term.
Researchers: Lee Byoung-hoon, Eur Myong-keun, Chung Dae-hee,
Park Han-ul, Yun Yeong-seok, Han Bo-hyun
Research Period: 2014. 1. - 2014. 12.
E-mail address: bhlee@krei.re.kr
- Next
- The Current Status of Energy Use and Policy in Agriculture and Rural Communities (Year 2 of 2)
- Prev
- A Study on the Korean Food Related Policy