By Park Si-soo
The government will provide long-term state loans to a troubled pork-processing company to help it withstand increased competition triggered by Korea’s free trade agreement with the European Union (EU), the National Trade Commission (NTC) said Thursday.
This is the first time the government recognized damages to a local firm in relation to the free trade pact since it went into effect last year.
The company in North Jeolla Province will be eligible for a state loan up to 3.5 billion won ($3.09 million) that will mature in eight years and also benefits from other financial and administrative support to help boost its sales and exports, the NTC said.
The Korean livestock sector is among industries that have been hit hard by the country’s free trade deals with the EU and the United States.
In 2010, market shares of Korean and European pork were at 84.76 percent and 5.65 percent, respectively. Korean products, however, shrank to 70.98 percent at the end of last year, shortly after the Korea-EU FTA went into effect in July of 2011. The market share of European pork grew to 12.22 percent over the cited period.
“We expect more companies to apply for the rescue program,” a NTC official said. “We will swiftly response to their requests in cooperation with the Ministry of Knowledge Economy and the Small and Medium Business Corporation.”
The official said the trade commission is already reviewing three other cases, including a claim from a beverages maker that its sales of traditional Korean liquor dipped significantly amid growing imports of European wine.
Experts here have warned that livestock farmers and relevant industries will see their income shrink in the wake of FTAs with the EU and the U.S.
The Korea Rural Economic Institute (KREI) said in a July report that livestock farmers are projected to earn a combined income of 1.79 trillion won in 2012, down 17.9 percent from last year’s 2.19 trillion won. The institute attributed the decline to higher production costs and lower prices for meat.
“Prices of domestically-produced meat have headed downward over the past few years due to growing imports of meat products,’’ KREI said in the report. “Attracted by lower prices amid the economic downturn, many Korean consumers prefer it, bringing down the demand for domestic meat.”
Despite falling market prices, it said, livestock farmers here have to spend more due to surging labor and feed costs.
“Most livestock farmers have and will see their financial standing deteriorate as they grapple with higher production costs. But unfortunately, they cannot reflect it in retail prices because of the cheaper imported meat,” KREI said.