Korea-China FTA could deal fatal blow to farmers

By Kim Tong-hyung

The news simply keeps getting worse for Korean farmers, crumbling under the fear of an existential crisis as the country moves to ink a slew of free trade agreements (FTAs) with major economies flexing bigger muscles in industrial agriculture.

There are observers who anticipate that Korea’s recently-ratified free trade pact with the United States, once it kicks in, will eventually have farmers here hanging on the ropes. An FTA with China, which is also on the table, could prove to be the uppercut that floors them.

In a recent report, the Korea Institute for International Economic Policy (KIEP), one of Korea’s many state-run think tanks, admitted that an FTA with China will hit the local farming industry in a way the Korea-U.S. FTA never could.

Should its free trade negotiations with China go through, Korea may see production in its agriculture and fisheries sectors drop around 14.26 percent from the levels of 2005 due to the influx of cheaper Chinese products. Under an extreme scenario that both countries decide to remove import tariffs on all agriculture products, the margin of decline could extend to 20 percent.

The economic value of the lost production could measure up to 3.3 trillion (about $2.8 billion) a year, KIEP said, nearly four times larger than the annual 815 billion won damage it expects from the influences of the Korea-U.S. deal.

``The damage to the local farm industry from a Korea-China FTA will be at least twice as big as the damage from the Korea-U.S. FTA,’’ the KIEP report said.

A separate report from the Korea Rural Economic Institute (KREI) projected that the loss in agricultural production due to a Korea-China FTA would be around 2.7 trillion won on the premise of a 50 percent cut in import tariffs on all agricultural products. Chinese agricultural imports will likely surge by more than 200 percent after the FTA kicks in, according to the report.

``The Korea-U.S. FTA will lead to a 3 percent decline in agricultural production for the first 15 years after the deal becomes effective. One could assume that the effect of a Korea-China FTA will be three to five times larger,’’ said Moon Han-pil, head of KREI agricultural trade research team.

``It’s imperative that the government works to implement protection for sensitive items such as rice to minimize the damage to local farmers. It would be wise to lower tariffs but not eliminate them entirely on items including chili, garlic and cabbages, and provide protection for vegetable growers and commercial flower growers, sectors that are expected to be badly exposed to the Korea-U.S. FTA.’’

Aside from its deal with the U.S., Korea has so far signed FTAs with a variety of economies, such as the European Union, Chile, Singapore and the Association of Southeast Asian Nations (ASEAN). Next on the to-do list are deals with China, Canada and Australia.

It’s obviously too early to tell how the complicated web of falling import tariffs will affect different people and companies here, although Korea’s electronic and automotive powerhouses like Samsung and Hyundai are likely to emerge as winners. There is less suspense in guessing who the big losers would be as farmers here brace for the possibility that they are relying on a decaying business model.

Farmers have begun expressing their anger over the slew of FTAs in the pipeline. Cattle farmers from around the nation organized and attempted to release up to a thousand cows, bulls and calves in front of Cheong Wa Dae last week. The planned protest was defused by police.

On his recent trip to Beijing, Korean President Lee Myung-bak agreed with Chinese leader Hu Jintao to officially begin negotiations for an FTA between the two countries within the next two months.

Opposition parties such as the Democratic United Party (DUP) slammed Lee’s verbal commitment, urging the government to take a closer look on how a free trade deal with China could affect farmers and manufacturers here.

``It’s obvious that a Korea-China FTA will devour our farmers and also decimate our small-and-medium-sized companies and light manufacturing sector,’’ said DUP lawmaker Choi In-gi.

``Consumer electronics, cars and mobile phones will be among the sectors that could benefit from a boost in trade, but other industries will be hurt severely by China and its competitiveness based on cheaper labor. Government officials have struggled mightily to prepare plans to protect farmers from the affects of the Korea-U.S. FTA, so it’s hard to imagine why they are so eager to proceed with a free trade pact with China.’’