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Diversion of FTA benefits

Korea Times, Seoul

Diversion of FTA benefits

30 March 2012

Importers and distributors, not consumers, are the chief beneficiaries of free trade agreements (FTA). Korea badly needs drastic reform in the distribution channels as consumers are victims of price gouging.

Prices of imported strollers, excluding accessories, are 2.4 times as expensive as in their original markets, despite relevant FTAs with Korea.

A survey shows that baby carriages by six foreign brands are more expensive in Korea than any other country. Importers, distributors and retailers add 20-30 percent to the price at each stage of distribution. Vendors also exploit the behavior of many Korean shoppers who often confuse expensiveness with quality.

The predatory pricing keeps consumers from reaping the benefits of tariff-free products, including wine, beef and cars.

Korea has free trade arrangements with eight countries and economic blocs, including the United States, the European Union, Chile, the Association of Southeast Asian Nations, India and Peru. FTA negotiations are under way with seven countries including Canada, Mexico, Turkey, Colombia, China, Australia, and New Zealand. Nine more deals are being considered with nations such as Vietnam, Japan, Indonesia and Malaysia.

The lingering domestic opposition to FTAs will subside when consumers enjoy the benefits of tariff-less foreign products. Igniting competition among importers and distributors is necessary to prevent them from monopolizing the benefits from FTAs.