KOREA RICE LIBERALIZATION

---

---

CASE NUMBER: 516

CASE MNEMONIC: RICE

CASE NAME: KORRICE

---

1. The Issue

Through the GATT Uruguay Round of multilateral negotations, the government of the Republic of Korea opened most part of its agriculture and fisheries market on July 1, 1997. Because of domestic circumstances and the importance of these items, the Korean government still tries to restrict the import of beef and rice by non-tariff barriers such as quotas of quantity. As a result, some other countries, which are major agricultural exporters, demand that the Korean government remove non-tariff barriers on the commodities. Several significant problems are, however, expected to occur if the Korean government immediately opens its rice market. The import of rice, first, creates substantial problems in Korea's domestic economy. Second, widely spread cultural focus on Korean is important. The purpose of this paper is to research not only the economic aspect but also the cultural aspect on the import of rice in Korea.

2. Description

The Issue

The social structure of Republic of Korea can be divided into two parts: urban and rural. About 30 years ago, more than 70% of population in Korea was rural and engaged in farming. By 1995, only 22% (about 9 million) of the population remained in the rural area, and the agricultural population makes up about 80% of the rural population. Agriculture still occupies an important section of Korean politics and society even though its contribution to GDP is less than 5%.[In 1997 agriculture, fishing, and forestry products occupied 5.7% of GDP of South Korea. EIU. p.10.] Rice is a main source of farm income. The farmers of South Korea have very low non-farm income, and rice accounts for about 45% of total income, providing fully 50% of the income from farming. In order to protect petty farmers, the Korean government limits farm size to 3 ha/household and executes "a system of double-prices for rice". Through this system the Korean government purchase rice at high price from farmers at harvest time, and sell it at low price to consumers (see Table 1).

Table 1. South Korea: Information of Agriculture

Arable land ('000 ha)	Labor force (%)	Annual growth rate of rice area	Rice in total calorie supply	Milled rice consumption per capita	Total rice consumption ('000 ton)
1,700 (1993)	30 (1994)	-3.1 (1990-94)	38 (1992)	100 (1992)	3,273 (1992)

Source: Riceweb, Regional Report.

More than 70% of the ricefields h ave stable irrigration systems, and the rest is rainfed. At one time, more than half of the ricefields were double-cropped with wheat but rice is single-cropped now because of the import of wheat. Rice agriculture of Korea is very different from other countries. As already mentioned, the limitation of 3 ha/household means that agriculture is structured for small-scaled farmers. Except for the southwestern part of the country, most ricefields are located between mountains with steep slopes. [IRRI]

Current Economic Context

Nowadays, most East Asian countri es including South Korea face serious economic problems. The slowdown of global economic growth and increased tension between Western and Asian models of capitalism made the countries hard to maintain their economy. Since the beginning of economic development South Korea's economy faces the most difficult time now. Therefore, economic recovery is the most important issue in Korea, so the economic effects caused by rice imports is very significant. The unemployment and trade deficit resulted by the import of rice would be a obstruction to economic recovery.

Because of the natural circumstan ces of Korea, the country has depended on trade in order to develop and to maitain its economy. Recovering the economy, the Korean government has to extend its trade surplus. In 1996, the GDP (Gross Domestic Product) per capita of Korea was $11,285. It was reduced to $8,500 in 1997 because of financial crisis in East Asia, and in 1998 it is expected to reach $6,500. [EIU. p.13] In 1998, the export of Korea is expected to increase by about 10%, and import are expected to decrease by about 20%. The currency devaluation in South Korea exerts a favorable influence upon Korea's trade; however, agriculture would shrink with a decrease in consumption, and the increase in the price of fertilizer and agricultural chemicals (see Table 2).

Table 2. South Korea: Economic Data =20

	1993	1994	1995	1996	1997
GDP at market price (W bn)	267.2	306.1	351.9	390.2	421.0
Real GDP Growth (%)	5.8	8.6	8.7	7.3	5.5
Consumer price inflation	4.8	6.2	4.5	4.9	4.5
Export fob ($ bn)	80.9	93.7	123.2	130.1	138.6
Import fob ($ bn)	79.1	96.8	127.8	144.9	142.5
Exchange rate (av; W:$)	802.7	803.5	771.3	804.5	951.3

Source: EIU, Country Report.
December 10, 1998 W1,219: $1

The import of agricultural products has rapidly increased every year. As a result of opening of agriculture market, the import of those products resulted in a huge trade deficit; for example, 12,000 tons of onion and 9,000 tons of garlic were imported in 1997. As already mentioned, rice was ruled off the whole opening for 10 years. However, for 10 years Korea has increased the import of rice from 50,000 tons to 200,000 tons. The import of rice will cause several significant effects, and the effects are closely related with the economy and culture of South Korea.

Rice Imports into Korea

According to the report of the Sa msung Economy Institute, the import of rice would reduce the GDP of Korea by four billion US dollars and the production of rice of Korea by two million tons (about 41%). Actually, the regular price of rice in international market is only about 25% of Korea's. Therefore, the import of rice will destroy the basis of agriculture in Korea. More than a half farmers in Korea engage in rice farming, so about 400,000 farmers would lose their job after the opening of rice market.[Weekly Chosun. p. ] Especially, unemployment is very a serious problem in Korea. It is expected that officially measured unemployment will reach around 9% in the second half of this year.

However, the Korean Confederation of Trade believes that the "true" level of employment is much higher than the official measure, at over 16% (see Table 3).[EIU. p.25]

Table 3. Unemployment Rate in South Korea

	1996	1997
	Dec	Jan	Feb	Mar	Apr	May
Unemployment Rate	3.1	4.5	5.9	6.5	6.7	6.9

Source: Bank of Korea, Principal Economic Indicators.

The cultural aspect is also a significant issue regarding the import of rice in Korea. Rice has been the chief article or consumption and lifestyle for Koreans for a long time. In terms of Korean tradition, rice is not only a main grain but also the symbol of life. Because of the temperature of the Korean peninsula, the Koreans had to depend on rice farming for their survival. The economy had totally to be controlled by a result of the farming every year because Korea was an agricultural country for the most of its history. This circumstance made the Koreans to think "the farmer is the base in the world". When the Korean government began to develop its economy, agriculture became a driving force; so, the economic success made Koreans sure that agriculture must be the base of the society even though it occupied a small part of the national economy."

As already mentioned, rice has been related with daily lives in Korean society. For example, most Korean food has to be served with steamed rice and the steamed rice is considered as the main meal. Also, rice has a special meaning for some ceremonies. Rice and rice cake are used at wedding or funeral in some region. At weddings, it signifies the supplication for fecudity, and rice implies food for ghosts at funerals.

This concept is related to a security issue in the import of rice because many people in Korea regard the import of rice as the deprivation of the right of self-survival. Also, many Koreans worry about the use of rice as an arm to enforce Korea for some ways. The special situation of the Korea peninsula deeepens this conception. Anti-American sentiment is a related problem because many people think the United States violates the sovereigniity of the Republic of Korea on the progress of negotiations.

Question or Comment, please click Korea Rice Liberalization here.

3. Related Cases
BASMATI Case
BENGALI Case
DOOSAN Case
JAPPRICE Case
KORPOLL Case
MAIZE Case
NKORNUKE Case
TUMEN Case
URUGUAY Case
VIETWOOD Case

Keyword Clusters
(1): Trade Product = RICE
(2): Bio-geography = TEMPERATE
(3): Environmental Problem = HABITAT LOSS

4. Draft Author: Jungsoo Han (October 1998)

B. LEGAL CLUSTERS

5. Discourse and Status: AGRee and COMPlete

Agreement between South Korea the WTO was reached in January 1994. As a result, the Korean government agreed to open its agricultural and fishery market by the reduction of tariff equivalent and the curtailment of direct support for domestic agricultural market and exports of agricultural goods.

6. Forum and Scope: Korea and MULTI-national organization

The free trade of rice is significant issue on the agreement between the WTO and Korea. Because of weakness of rice agriculture and market, the Korean government does not open it as the WTO requires. However, the Korean government finally decided to open its market by M.M.A. (Minimum Market Access); for example, rice market is opened with 10 years moratorium period.

7. Decision Breadth: MULTI [membership countries of the WTO]

8. Legal Standing: Treaty

The WTO provision on the Uruguay Round was implemented in this case. The Korean government have carried out the treaty since 1997.

C. GEOGRAPIC CLUSTERS

9. Geographic Locations
a.Geographic Domain : Asia
b.Geographic Site : East Asia
c.Geographic Impact : South Korea

10. Sub-National Factors: YES

11. Type of Habitat: TEMPERATE

The Korean peninsula is located between the PRC and Japan, and the Republic of Korea occupies about 47% of the peninsula's southern part. About 70% of the peninsula consists of mountains. The country is considered to be in AEZ 6, characterized as warm subhumid subtropical with summer rainfall. However, the peninsula has a continental weather pattern with temperature extremes of up to 40C degree in summer and as low as -40C degree in winter. Because of its hot and humid climate in summer season, rice has been the chief article for the Koreans for about three thousand years; therefore, rice has been closely related with daily lives and mentality of the Koreans. For example, most Korean meals must be served with steamed rice.

D. TRADE CLUSTERS

12. Type of Measures: Import ban [IMBAN]

13. Direct vs. Indirect Impacts: DIRect

14. Relation of Measure to Impact
a. Directly Related : YES [RICE]
b. Indirectly Related : NO
c. Not Related : NO
d. Process Related : YES [HABITAT LOSS]

15. Trade Product Identification: RICE

16. Economic Data
Refer to "table 1, 2"

17. Impact of Measure on Trade Competitiveness: BAN

18. Industry Sector: FOOD

19. Exporter and Importer: Thailand, China, and US and SOUTH KOREA

In 1997 the People's Republic of China accounted for about 95% of rice imports of South Korea (about $10,140,000). Despite strong effectiveness of the US on the progressive agreement between WTO and Korea, US companies derived little profit from Korean rice market because of its higher production cost than other exporters' in Asia. [The United States Department of Agriculture, "Agricultural Outlook." Oct. 20, 1998.]

E. ENVIRONMENTAL CLUSTERS

20. Environmental Problem Type: HABITAT LOSS

21. Name, Type, and Diversity of Species
Name: Rice
Type: Plant/Grain

Today rice is a staple for over 2/3 of the world's population. Yet little is known about the origins of rice cultivation. Archeological evidence suggests that rice has been feeding mankind for more than 5,000 years. The first documented account is found in a decree on rice planting authored by a Chinese emperor about 2800 B.C.. From China to Greece and also from Persia to the Nile Delta rice migrated across the continents.

22. Impact and Effect: LOW and PRODuct

23. Urgency and Lifetime: N/A and 1 year

24. Substitutes: LIKE

The diet of Korean has been gradually changed since the 1950S. The inflow of the Western culture has greatly effected on the food habits of Korean. Because of the widespread of bread and the improvement of noodle industry, nowadays wheat occupies a big part of the diet in Korea.

F. OTHER FACTORS

25. Culture: YES

26. Trans-Border: YES

27. Rights: NO

28. Relevant Literature

The Economist Intelligence Unit, "Country Report= 3rd quater 1998: North and South Korea"

Shin, Kookhwan. "The Choices and Challenges for the Korea's Economy". Woosin-sa, Seoul, Korea, 1995

Sung, Jinkeun. "The National Economy and the Korean Agriculture". Eulyu-Culture, Seoul, Korea, 1995

IRRI (International Rice Research Institute)

Riceweb

Korean Rural Development Administration (Korean)

The United States Department of Agriculture

Agriculture Research Information, Seoul National University (Korean)

BACK TO TOP