Koreans Should Look at Big Picture in Garlic Conflict

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Koreans Should Look at Big Picture in Garlic Conflict

China’s countermeasures to the imposition of tariffs by Korean authorities on imported Chinese garlic, which rose to 315 percent from 30 percent, were predictable. Only the Korean government is surprised with China’s retaliation.

Refusing to accept the results of an investigation by a Korean trade committee on the extent damage to local farmers due to Chinese garlic imports, the Chinese warned that they would take action if the Korean authorities raise tariffs on the garlic products, at bilateral talks.

Korea has its reasons to limit imports of Chinese garlic. Garlic entering Korea from mainland China was worth $3.4 million in 1997, but jumped to $9 million in 1999. Korea took necessary steps according to WTO regulations and talked with Chinese authorities beforehand, offering to increase the imports of other Chinese goods while reducing the imports of Chinese garlic.

China also has its reasons to defy the Korean decision. In Korea, the price of garlic plummeted from 3,100 won ($3) per kilogram to 1,900 won per kilogram in just one year. Meanwhile domestic garlic production increased from 394,000 tons to 484,000 tons, but exports stayed the same at 36,000 tons.

To these figures, the Chinese say, “The tariff does not consider the actual size of exports. The price of garlic dropped due to local production, thus, raising tariffs on Chinese garlic is unfair."

The conflict over garlic imports is being transferred to consumers with the sudden increase in price and the affect on future trade with China.

Local consumers will be buying garlic four times more expensive than before, thinking the purchase is a way of helping our farmers. However, the embargo of Korean mobile phones and polyester going to China is serious business. The two goods are worth a total of $512 million in exports. Korea will lose $512 million to save $15 million.

The Chinese market accounted for half of Korea’s total trade surplus (mainland China: $480 million; total including Hong Kong: $13 billion) in 1999.

The Korean government is arguing that the Chinese countermeasures are unfair because they were announced without prior negotiations and that the embargo is likely to bring Korea about 50 times more damage than the garlic tariff will bring to China.

Now, Koreans have to think about the losses that could come about by this conflict. Damage to Korea would be too large to ignore. Moreover, China is not yet a member of the WTO, so filing a suit with the organization is impossible.

If the garlic conflict negatively affects the current talks on business between the two nations, Korea could lose a potential market in mainland China, not only for mobile phones, but also for IMT 2000, the next-generation mobile telecommunication service. China still runs a government-controlled market and telecommunications is most definitely a state-run sector. The Korean government should think about the big picture and future interests in the squabble over Chinese garlic.

by Kim Chong-su

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