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Agriculture at risk under FTA with China

The Hankyoreh, Seoul

Agriculture at risk under FTA with China

Small Manufacturers fret over exposure to Chinese competition

By Kim Hyun-dae, agriculture correspondent

3 May 2012

Major concerns about a potential South Korea-China free trade agreement are already being voiced by the agriculture community and small manufacturers.

Farmers’ groups are demanding the government halt its FTA negotiations with China. Anti-government sentiment among farmers is deepening, as the FTA situation came around the same time as a discovery of bovine spongiform encephalopathy in a US cow. “The government is unilaterally pushing ahead with a South Korea-China without any communication with the farmers who will be hurt by it,” said Korean Peasants’ League policy committee chief Lee Dae-jong.

Lee declared that the organization would be embarking on an “all-out battle.”

The Korea Rural Economic Institute estimates that South Korean agricultural production will drop by as much as 2.36 trillion won (about US$2.1 billion) within ten years if tariffs are removed for all Chinese agricultural products except rice. This is nearly three times the estimated 880 billion won per year in reduced production related to the South Korea-United States FTA.

In a recent report titled “Agricultural Sector Response Strategies to a South Korea-China FTA,” Seoul National University agricultural economics and rural development professor Im Jeong-bin noted that South Korean fruit, grains, and vegetables are respectively 7.4 times, five times, and 5.7 times more expensive than Chinese products.

The blow from increased Chinese imports is also expected to be severe for small manufacturers and textile companies, which mainly produce low value-added industrial products.

Kim Tae-hwan, head of the trade promotion department for the Korea Federation of Small and Medium Business, said, “There is also a prevailing feeling of concern about domestic damages in the machinery and food processing industries.

"If tariffs disappear between South Korea and China, we can expect a hollowing out of industry and increase in unemployment as domestic factories relocate to China," Kim added. "This is going to require a delicate approach."

In particular, the textile industry is worried that the increased trade deficit with China if the FTA comes to pass will offset the anticipated rise in exports from FTAs with the US and the European Union.

The Korea Institute for Industrial Economics and Trade predicted the trade deficit in textiles would increase by US$400 million if all tariffs in the sector are abolished with a South Korea-China FTA.