7/23/12

South Korea’s imports of agricultural and livestock products from the US made a downslide even though the Korea and the US Free Trade Agreement (FTA) took effect in mid-March.

A falling share of imports of US products is owing to a steep decline in imports of US livestock products which have been affected by an outbreak of BSE (Bovine Spongiform Encephalopathy) with tariff cuts not being applied in full in the first year of the FTA. Meanwhile, some US agricultural products such as soybeans and cherries saw a rise in their imports, making Korean farmers alarmed.

Imports of US agricultural and livestock products fell 16.8 percent in the second quarter (Q2) of 2012 to $1.91 billion on-year. The import volume also witnessed a 15.5 percent decline, according to the Korea Agro-Fisheries & Food Trade Corporation (aT) and the Ministry for Food, Agriculture, Forestry and Fisheries (MIFAFF).

Imports of US agricultural and livestock products in January last year saw a 0.9 percent growth on-year and a 5.2 percent growth on February. But it is on decline with 8.8 percent fall after the effectuation of Korea-US FTA on March. After that, the fall grew from 15.1 percent in April, 16.7 percent in May and 18.6 percent in June.

An outbreak of BSE in the US dealt a huge blow to the livestock industry, causing a steep fall in the imports of livestock products.

Imports of US meat in the Q2 of this year stood at $124 million, a 20.5 percent fall on-year while those of US pork contracted 35.8 percent to $112 million.

Regarding pork and meat which Korea considers sensitive import items, tariffs are phased out over 15 and 10 years, respectively, thus limiting effects from tariff cuts this year.

As elimination of tariffs would cause setbacks to products such as potatoes, powdered milk and natural honey, tariffs on those items will remain unchanged and import quota will be applied to a certain volume of the products. Rice and rice-related products were completely excluded from the Korea-US FTA negotiation.

The effect of the Korea-US FTA is not negligible, although the imports of US agricultural and livestock products contracted.

In the case of the Korea-EU FTA, imports of EU agricultural products surged one year after the effectuation of the agreement. Accordingly, imports of US agricultural and livestock products can possibly climb over time.

From July last year to May this year, imports of agricultural products from the EU amounted to $2.63 billion. This is a 23.9 percent rise from $21.2 billion for 11 months since July last year.

Considering a sharp rise in imports of US soybeans, cherries and potatoes in recent months, imports of US agricultural and livestock products may grow soon.

Import volume of US soybeans tripled to 97million tons (t) last month, compared to last month’s 32 million t.

A soaring demand for soybeans came from the food industry which rushed to secure sufficient supplies amid all-time high future prices for soybeans.

As for cherries, imports in Q1 declined 14.8 percent compare to the same period a year earlier while it surged 80.2 percent in Q2.

Imports of potatoes and oranges also gained 37.0 percent and 24.5 percent, each.