Impacts and Implications of Korea-EU FTA to Agricultural Sector after 5 Years of Effectuation

Abstract

○ In the 5th year of implementation of the Korea-EU FTA, the volume of trade of agriculturaland livestock products between two parties was reduced compared to the 4th year due to theimpact of change in domestic and overseas conditions; however, it increased compared to anormal year before the pact went into effect.- In the 5th year of implementation, the value of import of agricultural and livestock productsfrom the EU stood at USD 3.5 billion, down by 4.7% than the previous year and up by68.2% than an average year before the effectuation.- In the 5th year of implementation, the value of export of agricultural and livestock productsto the EU was USD 340 million, down by 1.5% than the previous year and up by 68.2%than a normal year before the effectuation.○ In 2015, the utilization rate of preferential tariffs for agricultural and livestock products importedfrom the EU was 82.2%, while the rate for products exported to the EU was 69.5%.- Items whose rate of utilizing FTA preferential tariffs for import is 90% or over among productswith USD 100 million of the value of import or over include pork, cheese, wine, etc.- Items whose rate of utilizing FTA preferential tariffs for export is 90% or over among productswith USD 10 million of the value of export or over include gelatin, ramen, etc.○ Due to reduction of tariffs for the Korea-EU FTA and decreased domestic production, the volumeof pork imported from the EU increased by 2.1% compared to the 4th year and 76.0%compared to an average year before the effectuation.- Although competition became intensified, including conclusion of FTAs with dairy productexporting countries such as Australia and New Zealand, the volume of import of dairy productsin the 5th year of implementation rose by 14.9% compared to the previous year and146.0% than a normal year before the effectuation due to an increase in the production ofdairy products in the EU and decline in prices.- The volume of import of corn and barley increased compared to the 4th year of implementation;with a decrease in the imports of wheat, however, the total volume of importof grain from the EU dropped by 2.7% compared to the previous year and grew by 369.9%compared to an average year before the effectuation.○ Thanks to reduction of tariffs, the effect of decreasing import price was achieved in the 5th yearof implementation, including the import price of pork down by 8-17%, dairy products by8-16% and grain by 3-28%.○ As part of domestic measures to deal with the impact of opening the market by the Korea-EUFTA, performance in policy was ensured, including improvement of stockbreeding productivityand spread of eco-friendly stockbreeding.- From 2011 to 2015, the budget of KRW 4 trillion and 838.4 billion was executed for domesticmeasures to supplement the Korea-EU FTA (86.8% compared to the initial plan).- Projects for modernizing livestock facilities contributed to improving the productivity of eachlivestock type, and projects for vitalizing natural recycling agriculture and supporting livestockmanure processing facilities served spreading eco-friendly livestock production.