The Effects On Agricultural Sector Of The Future Korea-China FTA And The Main Issues

The purpose of this study is to assess the economic effects ofKorea-China FTA and also to analyze the main issues that are likely toemerge in the process of FTA negotiations. Assessment of the economic effects of Korea-China FTA on theagricultural sector should be based on recognizing of the specificitiesof Korea-China agricultural trade. First, Korea and China, especiallythree Northeastern provinces, share a similar structure of agriculturalproduction as well as consumption pattern. This implies that China canenjoy exceptionally advantageous economic gains in the Korean market.Second, China's competitiveness in agriculture, in particular in termsof price competitiveness, outweigh that of Korea, which implies that thegain will be one-sided. Third, due to geographical proximity between twocountries, maintaining freshness of agricultural products, which oftenhinders agricultural trade, is not a problem, which further strengthensChina's competitiveness. As a result, the effects of FTA on trade willlikely be magnified. Fourth, the large size of China's agriculturalsector will likely dominate the agricultural trade between two countrieswhen there is tariff elimination. Based on these factors, complete tariff elimination for agricultureproducts is expected to result in serious damages to the farming sectorin Korea. Therefore, insisting of full-scale liberalization in theagricultural sector is likely to put enormous political burden on thoseengaged in FTA negotiations, and also significantly increase the costsof compensation for farmers. A more sensible approach seems to be to selecta list of sensitive items and subject it to negotiations in the FTA process.My analysis suggests that the most sensitive items include crops, fishand vegetables.In order to build an environment for Korea-China FTA, number of stepsneed to be taken. These include: an early establishment of a joint studycomprising the government, civil experts and enterprises;a consensusbuilding process for the general public;and an exercise of leadershipon the belief that Korea-China FTA will provide a framework ofco-prosperity in Northeast Asia.