When South Korea agreed to open its rice market in 1994 under the Uruguay Round multilateral trade talks, then-President Kim Young-sam had to apologize to the people for revoking his campaign promise that, if elected, he would stake his presidency on protecting the local rice market from imports.
In 2008, Lee Myung-bak, still fresh from his victory in the presidential election the previous year, faced fierce protests from farmers and liberals against the government’s decision to import beef from the U.S. The consequent political and social upheaval ruined his first year in office.
These two episodes illustrate well that matters related to farm market opening ― more broadly, things that affect farmers’ lives ― easily become hot national issues.
This is why its agricultural sector is still heavily protected by the government ― to the degree that it excluded rice from its free trade agreements with both China and New Zealand last year.
Granted, there are industries that need an appropriate level of protection. But the situation in some sectors ― like rice and milk ― causes concern as excessive government protection and consequent market distortion entail serious problems.
Both the domestic rice and milk markets are suffering from chronic oversupply.
There are so many surpluses that farmers and industry officials are even struggling to store their products. It is indeed a big problem if some dairy farms are pushed to slaughter cows to cope with the glut.
Industry figures show that milk stockpiles at the end of last year amounted to 230,000 tons, about 2.5 times more than in 2013. The surplus largely stems from the decline in consumption, accelerated by the shrinkage of the number of children ― its largest consumer group ― and increase of substitutes.
Why, then, don’t dairy farmers cut back on their production? They don’t have to, because the government has been buttressing the supply prices by tying the prices of farm milk to production costs and inflation rates since 2012. In other words, farmers are fairly rewarded no matter how much they produce and whether or not there is an oversupply.
A similar ― but longer-standing and more serious ― problem lies with rice. There is a stockpile of about 500,000 tons of imported rice and as much locally produced rice. The government is spending huge sums of money to store the rice, some of which now has to be put outdoors due to the shortage of storage facilities.
As one can easily see, Koreans eat less and less rice: The per capita intake of rice, which reached a peak of 136.4 kilograms in 1970, has halved since, with the record being broken each year. It should come as no surprise that a recent study found that Koreans consume coffee more frequently than rice ― 12.2 times versus 9.6 times each week.
Notwithstanding, the nation’s rice farms feel little pressure to reduce production, because the government makes up for the fall in rice prices by providing direct subsidies to farmers. As a result, Korea’s rice output grew to 4.24 million tons last year, compared with 4.23 million tons in 2013.
The time has come to address this stupidity that farmers are encouraged to maintain or even increase production as demand continues to fall.
A market economy should be the prevailing principle in the agricultural sector as well, and the government should devise wiser farm support measures instead of maintaining the traditional price-buttressing policy. It is simply ridiculous to keep producing something for which there are no places to store, let alone sell.
