Research Reports
Effects of FTA between Korea and EFTA on Agricultural Sector
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AuthorEor, Myongkeun
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Publication Date2004.12.01
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Original
Korea will start formal negotiations on FTA with European Free Trade Association(EFTA) as well as joint studies and working-level consultations with ASEAN, Mexico, Canada, India, MERCOSUR in 2005 at the same time.
EFTA, consisted of 4 non-member-states of EU such as Switzerland, Norway, Iceland and Liechtenstein, put an importance on multifunctional role of agriculture. It also maintains policies for open market in spite of its low level of agricultural competitiveness.
The trade relations of EFTA are mainly consisted of EFTA Convention, which stipulate internal trade relations among member states, EEA, which is related to trade with EU, and a variety of FTAs, which represent trade relations with the 3rd countries. EFTA has signed FTA agreements with 20 countries so far. It, however, has been reduced to 13 countries as EU expands.
Switzerland, one of EFTA member states, has maintained high self sufficiency ratios in staple commodities for people's living. The self-sufficient rate of milk and dairy products is almost 100 percent and that of meat is more than 80 percent. Switzerland has maintained balances and diversity in agriculture by self sufficiency in various agricultural products. Norway also maintains self sufficiency in most agricultural products except fruits. The self sufficiency ratios of meat and milk are almost 100 percent and that of grain is over 50 percent. The stable demand and supply of agricultural products of EFTA member states can be attributed to various policies for maintaining multifunctionality of agriculture based on the consensus on the role of agriculture.
In order to prospect mutual agricultural trade relations and production structure after FTA between Korea and EFTA, revealed comparative advantage (RCA) and trade specialization index(TSI) were used in this study. It showed that Korea has comparative advantage in pears, tomatoes, mushrooms, crackers and pastries, while EFTA has comparative advantage in cheese, chocolate products and sugar confectionery, etc. If tariff is abolished by FTA between Korea and EFTA, agricultural imports from Switzerland are estimated to increase by 10 percent and those from Norway by 17 percent. Agricultural exports to Norway also prospected to increase by 20 percent while those to Switzerland remain almost constant. In general, however, the effects of FTA between Korea and EFTA on agricultural trade are not expected to be enormous.
EFTA proceeds FTA through concession proposal for processed agricultural products, under HS code 25~97, in the main negotiation while it prepares concession proposal for basic agricultural products, under HS code 1~24, in the bilateral agricultural agreements with individual partner countries. Switzerland has low level of concession rate for meats and fats of plants and animals, and excludes animal products, grain, grain powder and seed for vegetable oil, etc from concession items along with low level of tariff elimination. In the bilateral agreement with EU, these items were excluded from tariff reduction items virtually. Norway also didn't concede grain, grain powder, meat and dairy products in the agreement with EEA. It conceded less for grain, grain powder, meat and dairy products and imposed high specific duties on feed and other materials for feed and its additives, plants and animal fat, etc.
In spite of minor differences between member countries, EFTA tends to reduce concession rates or refrain tariff elimination for necessary products which play important roles on food security and multifunctional tasks. Korean position for FTA is similar with that of EFTA in that it has low agricultural competitiveness. Thus, Korea needs to review the concession strategies and experiences of EFTA's FTA policy.
Researchers: Eor Myong-Keun, Kwon Oh-Bok, Lee Hyun-Ju
E-mail address: myongeor@krei.re.kr
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