Can South Korean Agriculture Survive Free Trade?

Can South Korean Agriculture Survive Free Trade?

No more of this

It can through a wholesale revolution

Two views exist on South Korean agriculture –a pessimistic one that argues it will collapse in the face of opening markets, and an optimistic one that argues it will become more competitive once South Korea reforms a structure in which the majority of farmers are insignificant and small.

Since the agreements in the Uruguay Round of the World Trade Organization in 1993, South Korean agriculture has struggled with the prospect that its markets would open to competition. 

Even as the Doha Development Agenda, started in 2001, was indefinitely suspended, the occurrence of free trade agreements (FTA) is expanding, representing regionalism and reflecting the economic situations of each state. South Korea has more than 50 FTAs, the first signed with Chile in 2004. However, agriculture has been at the epicenter of South Korean political and social conflicts through the trade talks resulting from the Uruguay Round, including the FTA with Chile, the FTA with the US, dubbed the KORUS FTA, the opening of the rice markets, and the FTA with China.

South Korea aimed to become an “advanced trading state” as it started to negotiate its first FTA. The public’s view on agriculture were very different depending on where they stood on the topic. Some argued that agricultural and rural areas would collapse when border protections disappeared, while others argued that South Korean agriculture would be competitive once its structure, in which the majority of farmers are insignificant and small, is reformed.

The debate on whether to open up the agricultural market now seems to have come to an end, with the full opening resulting from the South Korea-China FTA. South Korean agriculture has not collapsed nor has it become competitive, at least not yet. Now the question is how it will cope with a new world where tariffs are shrinking. It is not just a question of responding to the opening up of the market, but also of taking action via social, environmental and rural changes that dictate agriculture’s future.

As market opening widens, imports of agricultural and livestock products, which amounted to US$10.9 billion in 2006, will reach US$30 billion by 2026. More products will be imported from more countries than ever before.

The farming population will decrease from 3.39 million in 2006 to 1.97 million in 2026. The proportion of those aged 65 and over in rural areas will increase from 30.8 percent to 48.3 percent. This means that a decrease in the farming population will rapidly hollow out the agricultural labor sector, making labor intensive agriculture difficult. In response, agriculture will be mechanized and automated, and facilities and equipment will be used. In addition, it will go smart as advanced information and communications technologies (ICT) will be adopted.

Moreover, socio-environmental changes will alter the future of the agricultural and food industries, including the low birth rate, female empowerment, an aging society, growing interest in food safety, and the younger generation’s changing thoughts on South Korean produce.

These various factors could result in diverse prospects for South Korean agriculture. Those opposed to FTAs are still pessimistic. They argue that tariff reduction will result in increasing imported produce encroaching on the agricultural product market. From 2003 to 2013, the imported fruit market has grown more than 12 percent per year. It is hard to deny estimates that agricultural imports will reach $30 billion in 2026.

However, if groundbreaking change occurs within the industry, such as farming becoming smart and instrumental as the agricultural population decreases, the future of South Korean agricultural industry won’t necessarily be gloomy

It is crucial to figure out a way to make agriculture a competitive industry instead of a failing one in a situation where both pessimistic and optimistic views co-exist. Three large changes will be helpful.

First is to change the nature of the business concept. South Korea cannot survive in price competition with states such as the US, where food is the focus. Agricultural and rural areas should be upgraded, as its consumers have been, by fusing the food sector with various other industries.

Second is breaking away from labor-centered agriculture by promoting smart-farms based on science and technology, as is the case in Israel and the Netherlands.

Third is creating small but strong agricultural businesses by altering the structure of the industry. In other words, a “small but strong agricultural industry” should be developed.

Changing the business concept

Agriculture is no longer simply an “eating” industry, but is developing into an “eatertainment” industry, combining entertainment such as tourism, user experiences, leisure, arts, and culture with “eating.” As the spectrum of agriculture expands, opportunities for creating new value are also increasing.

Competitiveness previously differed according to the amount added to land, labor, and capital. Traditional agriculture, which concentrates on expanding resources such as human and physical factors, was maintained. However, the concept of modern agricultural competitiveness is shifting towards “multiplication” or seung. Now, when fixed factors are multiplied by new information and creativity, value added can have manifold effects. In other words, with the discovery of original ideas, new and higher value can be added. Discovering and cultivating such creative talent is the most important task at hand.