Not long after concluding free trade agreements (FTAs) with the United States and the European Union (EU), Korea has now initiated discussions for an FTA with China. It's been noted, however, that the Korea-China FTA is likely to impose significant costs on Korea's agricultural industry, compared to the earlier agreements with the United States and the EU.
Not surprisingly, a public hearing on Feb. 24 to debate the ratification of the Korea-China FTA was disrupted by protestors from various agricultural groups. According to a recent report completed by the Korea Institute for International Economic Policy, within 10 years of a Korea-China FTA, Korea's agricultural production will be reduced by almost 15 percent: fruit by $1.02 billion and vegetables by $977 billion.
The projected loss in total Korean agricultural production has been valued at about $2.8 billion a year, four times larger than the residual damage estimated from the Korea-U.S. agreement. If cuts to import tariffs are deeper than expected, this loss will increase.
Clearly, the forecast isn't all cloudy, as other sectors in Korea's economy start to gain. Based on figures released from various national agencies and think tanks, Korea's GDP is expected to jump 2.5 to 3.0 percent as a result of an FTA with China. And exports to China are expected to rise 30 percent. The flip-side is that agricultural imports from China, mainly veggies; horticultural products and meat, will likely surge by more than 200 percent, according to the Korea Rural Economic Institute.
The ratification date for this bilateral pact between Korea and the world's fastest growing economy remains unknown, but the Korean government is likely to keep sensitive items, including rice, chili, vegetables and commercial flowers, on its radar during future trade negotiations.