Agriculture and livestock will be hardest hit by the trade pact between the U.S. and Korea as the lifting of trade barriers will wipe out at least 12.67 trillion won ($10.5 billion) of local production over the next 15 years, the government estimates.
Farmers here will face an uphill battle fighting the inflow of cheaper products from the world’s largest economic bloc.
The government plans to provide a total of 21.1 trillion won over the next decade on the farming, stockbreeding and fisheries industries but analysts say the market here will be significantly downsized in the long term and eventually many will be forced to change jobs.
“Because of the friction between the ruling and the opposition party, protective measures for industries facing a major blow have not been completed. Dry-land farmers and livestock breeders will be the most severely affected victims,” said Kim Hyung-joo, a research fellow at LG Economic Research Institute.
The trade pact was ratified by the country’s ruling-party controlled National Assembly Tuesday, paving the way for duty-free trade across automotives, manufacturing, agriculture, electronics and more. The deal is expected to take effect Jan. 1.
The most severely affected group will be hog farmers and ranchers.
All frozen and processed pork products will be duty-free by 2016. Up to 40 percent of tariffs imposed on U.S. beef will be eliminated over a 15-year period. The net effect will be $1.6 billion of trade deficit in red meat in the next 15 years, according to a government report.
“Since U.S red meat will come in 10 to 30 percent cheaper, consumers here will buy less local produce. The market is shrinking because hog farmers are competing not only with U.S. exporters, but also with those from Europe, Canada and Australia,” Lee Sang-won, head of research at Hyundai Securities said.
The fishing industry is expected to import $11.8 million more in seafood over the next 15 years when its outbound exports are to increase by only $780,000 in the same timeframe.
“On the other side of the agricultural ledger, U.S. producers will be facing virtually no new competition from Korea,” said the U.S.-Korea FTA Business Coalition, the largest U.S. industry group in support of the trade pact.
“This is because Korea is a small exporter of agricultural products, focusing mainly on fish and specialty food items, and U.S. tariffs on most of these types of products from Korea are already very low or zero,” it said.
Almost two-thirds of U.S. agricultural exports, valued at $1.91 billion, will immediately become duty-free when the FTA takes effect. When all agriculture-related tariffs are phased out in 15 years, the deal will increase U.S. farm exports to Korea by $1.6 billion, the American Farm Bureau Federation estimates.
The government has been devising plans to offset the downsides of the trade pact.
The Finance Ministry, in charge of budgeting government spending, said it plans to inject an annual subsidy of 50 billion won to 100 billion won for dry-field farmers for at least for a decade. The protection measures announced by the Finance Ministry, Agriculture Ministry and other relevant agencies include subsidizing up to 90 percent of losses incurred from competing products from the U.S., such as red meat, poultry, dairy, soybeans, corn, potatoes, wine and fruits. The Agriculture Ministry plans to finance some startup fees farmers require to upgrade their production facilities, on top of consulting services.
The Agriculture Ministry is currently pushing for approval on more protection measures, saying the amount that will be lost due to the deal is bigger than originally thought.
“The latest analysis says that the effect of the KORUS FTA is more detrimental to local farmers and fishermen than previously researched four years ago. The government should approve additional protection measures,” said Agriculture Minister Seo Gyu-yong.
By Cynthia J. Kim (
cynthiak@heraldcorp.com)
