Don’t delay rice market openingThe government said Wednesday that it would report the major items related to the liberalization of our rice market to the National Assembly and seek approval from lawmakers before it notifies the World Trade Organization of its position on the issue. The government’s move is aimed at forming a consensus with the legislature, even though the market liberalization process does not require preliminary consent from the Assembly. The government plans to devise its measures, including a full-scale opening of our rice market, by June and report them to the WTO in September.
After closing the door to rice imports for the last two decades through high tariffs, the government has decided to open it. The delayed market liberalization measure expires by the end of 2014, and the government seemingly is convinced that getting approval from the WTO to delay the expiration date again would not only be difficult but harmful.
What happened to the Philippines last week is a good lesson for us. The country called for a postponement in the liberalization of its rice market for five years, while promising to increase its mandatory import quota from the current 350,000 tons to 805,000 tons - more than a twofold increase. But the WTO rejected it. Currently, only Korea and the Philippines are delaying the scheduled opening of their rice markets. Given the size of our economy - nine times bigger than the Philippines - we may have to pay a much bigger price if we choose to postpone the liberalization of the rice market.
Our government has already paid a hefty price for the last 20 years for postponing the liberalization of our rice market. The mandatory import quota, which stood at merely 51,000 tons, soared to 408,700 tons this year - accounting for 8 percent of our domestic consumption - after increasing by 20,000 tons annually. That cost Korea 3 trillion won ($2.9 billion). In the meantime, rice consumption has so drastically decreased that even domestic rice is too much. If Korea increases its mandatory rice imports, it will only exacerbate our rice excess.
Japan and Taiwan opened their rice markets in 1995 and 2003, while imposing import tariffs as high as 1,068 percent and 526 percent, respectively. But their rice imports have not increased much and farmer opposition subsided noticeably. In a survey by the Korea Rural Economic Institute on our farmers, 77 percent agreed to liberalization. The competitiveness of our rice has strengthened and the price gap between local rice and foreign rice has sharply narrowed. If the government imposes custom duties as high as 500 percent on rice imports, it surely can open the market.