FAS/Seoul Monitoring of Media Reporting on Agricultural Issues

Today's Date:   Monday June 16, 2014

For Coverage:   June 01 ~ 16, 2014

1. BILATERAL/MULTILATERAL ISSUES

South Korea, Canada initialed FTA…will take effect within the year [Korean, BSY]

http://www.hankyung.com/news/app/newsview.php?aid=2014061205361

SUMMARY: South Korea and Canada reached an initial agreement on their bilateral free trade agreement (FTA), which is expected to be officially signed by the second half of this year. Under the agreement, Korea will open its agricultural market by gradually removing tariffs on beef imports (tariff rate of 40-72%) from Canada in 15 years, pork imports (22.5-25%) in 13 years, and chicken imports (18-30%) in 10 years. Sensitive products such as rice, tangerine, and ginseng are permanently exempted from market liberalization. Korea will also be able to invoke emergency safeguards to protect agricultural market. In return, Canada will eliminate tariffs on automobiles (6.1%) in 2 years, laundry machine and refrigerator (8%) in 3 years.

USTR Cutler “TPP negotiations will include Japan” [Korean, BSY]

http://news.naver.com/main/read.nhn?mode=LSD&mid=sec&sid1=101&oid=001&aid=0006953785

SUMMARY: At the ‘Asia-Pacific Economic Integration and the role of the U.S. and Japan’ panel held at the Center for Strategic and International Studies (CSIS), Wendy Cutler, Assistant U.S. Trade Representative for Japan, Korea, and APEC Affairs, emphasized that the U.S. will do its best to include Japan in the Trans-Pacific Partnership (TPP) negotiations. The TPP is an on-going US-led agreement that is participated by 11 nations including Australia and Japan. Assistant USTR Wendy Cutler also pointed out that the trade negotiations are prevailing worldwide due to growing interests in the “enhancement in trade talks,” which means considering not only the tariffs but also other subjects such as service sector investment as the subject to negotiation. In fact, she was informed that Korea decided to engage in FTA negotiations to boost the development in the services sector in the belief that it could only be achieved only by opening up the market and competing with the U.S. South Korea is conducting preliminary bilateral talks with 12 current member states.

The 12th round of Korea-China FTA negotiation, agriculture 'crisis'[Korean, BSY] 

http://www.palnews.co.kr/board_view_info.php?idx=69911&seq=&seq2=1

SUMMARY: The 12th round of South Korea-China FTA talks will be held in July in Korea. At the previous negotiation, two parties discussed all areas of FTA from products, service and investment to regulations and cooperation. The negotiation, however, did not make a significant progress due to the conflicts on the scope of market opening. China demanded South Korea to open the market in terms of the farm goods, while South Korea wanted more access to the manufacturing sector. Two parties also seek to establish agreements on the issues concerning the certificate of origin, customs procedures and environment.

2. BIOTECHNOLOGY ISSUES

“US Agricultural Products and Food”, Korea’s GMO Labeling Standards Will Apply” [Korean, BSY]

http://news.naver.com/main/read.nhn?mode=LSD&mid=sec&sid1=102&oid=001&aid=0006953410 

It is likely that Korea’s GMO labeling standards will apply to various agricultural and food products such as corn and soy imported from the United States to Korea.  While the United States prohibits the use of GMO in manufacture of the organic processed food, Korea not only prohibits the use of GMO but also applies the non-detection-standard, which strictly regulates organic labeling by not allowing the use of “organic” claim when GMO is detected in the analysis result.

It is known that the Ministry of Agriculture, Food and Rural Affairs (MAFRA) had the 3^rd round video conference with and the Office of the United State Trade Representative (USTR) and the U.S. Department of Agriculture and both sides came close to apply Korea’s GMO labeling standards.  In return, it is known that the government will take a positive review of the U.S. demand related to the use of antibiotics in livestock. While the United States does not allow the use of organic claim for animals treated with antibiotics, Korea allows organic labeling when the required withdrawal period passes after discontinuation of medication.

As for the U.S. demand to pasture ruminant animals for a certain period of time, the Korean government replied that other sufficient measures are being taken to guarantee animal welfare.

Starting from this year, the government has unified the management system for organically processed food which now requires a certification by the MAFRA in order to be able to label processed food as organic and has decided to recognize countries that have a certification system equivalent to that of Korea through establishing an equivalency agreement.

3. ECONOMIC ISSUES

Worries Arise Among Korean Companies as Value of Korean Won is Expected to Further Strengthen ... Stronger Korean Won may Restrict Korea's Export-driven Economy [Korean, OSY]

http://news.donga.com/3/all/20140610/64161100/1

Summary: According to the Korea Exchange Bank, the value of the Korean won has gained significantly against most of the leading international currencies this year.  For example, the value of Korean won has increased to date by 6.6 percent against Chinese Yuan, 5.8 percent against European Euro, 5.3 percent against Japanese Yen, and 4.9 percent against American Dollar since March 1.  Some of the marketers now forecast the exchange rate would continue to strengthen even further in the coming months.  As a result, there are increasing worries among the industries and policy makers that stronger Korean won would restrict the growth of Korean economy which relies heavily on the export market.

4. GRAIN & OILSEED ISSUES

Daesang-Holdings Co Ltd completed the construction of palm-oil factory in Indonesia [Korean, BSY]

http://mnews.joins.com/news/article/Article.aspx?ctg=mobile_A1&total_id=14924556

SUMMARY: Daesang-Holdings Co Ltd, the holding factory of Daesang corporation, announced on June 10 that the construction of palm-oil factory in West Kalimantan Kubu Raya, Indonesia, is completed and it will soon begin the production. This was 20 months after the construction began in September 2012. The annual output is 35,000 tons. There will be about 2,500 local workers in the factory and plantation.

 American rice, cheaper than domestic rice by more than 20,000 won per 20 kg...Protection through high tariffs is 'temporary' [Korean, BSY]

http://bizn.khan.co.kr/khan_art_view.htmlartid=201406092158205&code=920501&med=khan 

SUMMARY: It seems that the government will officially declare the rice tariffication at the end of this month. The rice tariffication, which will come into effect in January 2015, will enable the access of foreign rice into the domestic market with the tariff rate of around 300 to 500%. Korea has extended its tariffication obligation in 2005 for the second time, and was obliged to import minimum market access (MMA) quota of 205,228 tons, rising annually to 408,700 tons by 2014. The government claims that the further increase of MMA quota will have adverse impact on the domestic market and that the rice tariffication is inevitable. The problem is that shielding the domestic rice market with high tariffs is a temporary measure. If the Doha Development Agenda (DDA) talks reach an agreement, South Korea will lose its status as the developing country, and must substantially lower its tariff rate. Currently, DDA talks are negotiating to cut the tariff rates of the developed countries to 23-46%, while maintaining the rates of the developing countries. Not only that, once the rice market opens, in the future FTA and TTP negotiations, Korea will face international pressure to abolish its rice tariffs. Thus, some argue that the government should remain standstill without increasing the MMA quota until the DDA talks are concluded.

5. LIVESTOCK ISSUES

Poultry prices will continue to go down despite World Cup [Korean, BSY]

http://news.naver.com/main/read.nhn?mode=LSD&mid=sec&sid1=101&oid=001&aid=0006958149

SUMMARY: Poultry prices will remain low despite the Brazil World Cup in June, midsummer heat in July and August, and Asian game in September due to excessive supply of chickens, decrease in consumption after Avian Influenza (AI) re-emerged, and lack of interests in sports events. In fact, chicken supplies in June (76,680,000) increased by 6.7% from last year’s supplies. According to Ministry of Agriculture, Food, and Rural Affairs (MAFRA) and Korea Rural Economic Institute (KREI), the chicken prices per 1kg will maintain 1,400-1,600won (9-21% lower than last year’s) in June. In July and August, the prices will be 1,700-1,900won per 1kg (4-16% lower), and will continue to decline after September.

Growing Porcine Epidemic Diarrhea Virus raises alarm in farms [Korean, BSY]

http://www.munhwa.com/news/view.html?no=2014061101071724106002

SUMMARY: There is a widespread concern that the newly emerged disease, the PEDv, will spread nationwide. Since the outbreak in November 2013 to March 2014, 23,559 pigs revealed disease symptoms in 84 swine farms located in various regions including Geyongbuk, Gyeonggi, Chungbuk, Chungnam, Jeonnam, Jeonbuk, Jeju, according the Korea Animal Health Integrated System (KAHIS) and Nonghyup Economic Research Institute (NERI). Exposure to the virus causes severe diarrhea and vomiting, and is especially fatal to young piglets with a mortality rate as high as 100 percent. Summer will temporarily slow down the spread as the virus cannot survive in high temperatures. In the fall, however, it is highly likely for the virus to reemerge and continue to pose threats to the swine farms up until next spring, thereby influencing the pork prices.

Skyrocketed pork prices…CJ raises Spam price by 10.5% [Korean, BSY]

http://www.hankyung.com/news/app/newsview.php?aid=2014061166231

SUMMARY: After Lotte food decided to raise the costs of meat products by about 16% and, Cheil-Jedang (CJ) followed its footsteps, announcing that the meat product prices will go up by 10.5% at most. The company explained that this change was inevitable due to unusually high prices of pork. Currently, domestic ham prices rose by 28.7% compared to the last year’s prices (about 3,900won per 1kg), while American picnic costs 45.2% more (about 4,500 won per 1kg) due to the outbreak of PEDv in North America.

Pork prices are skyrocketing [Korean, BSY]

http://joongang.joins.com/article/657/14924657.html?ctg=

SUMMARY: The start of grilling season, the rise of imported cattle prices, and the increase in demand as consumers began to prefer pork over poultry products in an attempt to avoid Avian Influenza (AI) and, the 10% reduction in pork supply due to Porcine Epidemic Diarrhea (PED) virus in the U.S. are pushing up pork prices. In fact, the prices have gone up so high that there are barely any price differences between pork and imported beef. For instance, this month’s pork price is only 5% cheaper – 107won per 100g - than that of Australian beef. Swine producers worry that continuous imbalance in supply and demand will not only cause prices to go up, but will also decrease pork consumptions. The problem is that the prices show no signs of slowing down as the vacation season is approaching next month. It is predicted that the prices will finally go down after Chuseok, Korean Thanksgiving Day.

Change in Chinese customers' appetite engenders 'excessive increase' in the imported beef prices [Korean, BSY]

http://www.mt.co.kr/view/mtview.php?type=1&no=2014060915415751047&outlink=1 

SUMMARY: The imported beef prices are rising in South Korea due to the substantial expansion in China's beef imports that has impacted the international market price. Chinese customers, who have long enjoyed pork or chicken, are now increasing their beef consumption. The poor conditions of U.S. pastures that are caused by the extreme drought in the Southern and Middle East areas do not help the situation either. Currently, there are no signs of beef prices coming down.

6. MARKETING ISSUES

Top Three Korean Cosmetics Companies Compete in the Diet Food Market [Korean, OSY]

http://news.donga.com/3/all/20140616/64304481/1

Summary: Leading cosmetics companies in Korea have expanded their competition into "inner beauty" products, targeting the 2 trillion won ($2 billion) diet food market.  All top tree cosmetics giants in Korea, LG Life & Health, Amore Pacific, and Aekyung have launched new product lines this year along with heavy investment in reorganization of the sales force.  In particular, the companies have focused on developing differentiated sales channels from competitors that include network (home visit) sales, TV home shopping, and franchise beauty shop chains.  New products by the companies have all reported early successes as the companies already had high reputation among the target consumers for research capacity and product quality.  For example, 'VB Slimer DX' by Amore Pacific launched in April this year has made an early success by making over 10 billion won of sales within one month of launching.

Imported Seafood, Fresh Fruits, Beer and Snacks Expand Market Share in Large-scale Retail Stores [Korean, OSY]

http://www.hankyung.com/news/app/newsview.php?aid=2014061576881

Summary: Offering lower price and diversity, imported foods are expanding market share in large-scale retail stores ('hypermarket') in Korea.  While local seafood supply is on a continuous decline, Korea's imports of seafood this year through May increased 6.2 percent over the same period last year.  Imported hair tail accounted for 52 percent of hair tail sales in Lotte Mart.  Imported fresh fruits accounted for 41.3 percent of fresh fruit sales in E Mart this year through May, which was much higher than last year's 36.2 percent.  Imported beer sales in Lotte Mart this year through May went up 34.6 percent while sales of local beer declined 4.5 percent.  Sales of imported snack in E Mart this year through May went up 5.6 percent while sales of local snack declined 4.9 percent.

Lotte Mart Launches 'Trois L' Private Label Wines Imported from France, Italy and Germany ... Offered at 9,900 Won Per Bottle [Korean, OSY]

http://www.hankyung.com/news/app/newsview.php?aid=2014061002901

Summary: Lotte Mart, a leading large-scale retail store chain in Korea announced on June 10 that its private label wine brand 'Trois L' was launched.  Under the brand, three different single varietal wines were offered, a Cabernet Sauvignon dry red from France, a Moscato white from Italy, and a Donfelder sweet from Germany.  Each wine was priced at 9,900 won per bottle, indicating that the product was targeting everyday shoppers.  Lotte Mart commented that it will continue to launch great value wines sourced directly from foreign wineries and contribute to the development of the local wine market in the future.

Daesang's Palm Oil Plant in Indonesia Starts Operation [Korean, OSY]

http://news.donga.com/3/all/20140611/64161798/1

Summary: Daesang, a leading supplier of processed food in Korea, announced on June 10 that its palm oil plant in Indonesia started operation.  The plant has 111 square kilometer of palm tree farm and can produce 35,000 metric tons of palm oil a year.  Daesang pointed out that it was the first Korean food company that developed a palm oil production plant in foreign country.

"Lotte Will Open 20 New Department Stores in Foreign Markets within the Next Five Years", New President [Korean, OSY]

http://news.donga.com/3/all/20140611/64161768/1

Summary: Wonjun Lee, new president of Lotte Shopping, a leading retail company in Korea, said in his inagural press interview that Lotte plans to open 20 new department stores in foreign markets within the next five years.  Currently Lotte has 7 department stores in three different countries, including China and Russia. 

Large-scale Retail Chains Report Strong Sales Growth of Imported Private Label Beer ... Low Price Attracts Consumers [Korean, OSY]

http://www.hankyung.com/news/app/newsview.php?aid=2014061028821

Summary: E Mart, the leading hypermarket store chain in Korea, reported that private label beers that it imported directly from foreign breweries took 9.2 percent of total beer sales in its stores in May 2014, a sharp increase from 5.1 percent in 2013.  Lotte Mart, another leading hypermarket store chain also reported that 'L Beer' that it developed with a German brewery a couple years ago has become the leading sales beer in its stores.  Retailers explained that the success of the imported private label beers was mainly due to low price.  For example, retail price of a 500 ml can of 'L Beer' is 1,600 won which is 11 to 14 percent cheaper than leading local beers such as Cass and Hite or 50 percent cheaper than leading imported brand beers such as Asahi and Heineken.

"Opening of the Rice Market is Something Unavoidable", The Largest Group of Korea Farmers Support Rice Tariffication [Korean, OSY]

http://www.hankyung.com/news/app/newsview.php?aid=2014060990321

Summary: A representative of the largest body of farmers in Korea ('Han-Nong-Yeon') spoke in a seminar on June 9 that tariffication could be better option for the Korean rice farmers than extended Minimum Market Access system with increased mandatory import volume provided that the Korean government establishes support programs for the local rice farm industry in advance including excluding rice from on-going or new trade negotiations (such as FTA and TPP) that Korea gets involved, banning sales of local rice mixed with imported rice, and lowering the interest rate on farm loans.  Korea is scheduled to present its new rice trade protocol to WTO in September.  It is reported that Korean farmers are developing divided opinions on the issue.  For example, another leading farmers group, 'Jun-Nong', reconfirmed its position against the rice tariffication in the seminar by stating that Korea should be able to remain on the same MMA system without having to increase the mandatory import volume until DDA negotiation generates an agreement.

7. OTHER MISCELLANEOUS ISSUES

European Commission and Korean government will hold a final meeting to evaluate Korean IUU fishing activities [Korean, BSY]

http://news.kbs.co.kr/news/NewsView.do?SEARCH_NEWS_CODE=2873545&ref=A 

SUMMARY: Today, the delegation from the Directorate General for Maritime and Fisheries of the European Commission will hold a final meeting with Korean government to discuss regulation enhancement regarding IUU (illegal, unreported and unregulated) fishing and to determine whether to designate South Korea as an IUU fishing nation. In fact, the European Union preliminarily identified South Korea as an IUU fishing nation last November based on illegal fishing activities by Korea vessels in the other country’s exclusive economic zone (EEZ) in West African waters. If South Korea is designated as an IUU fishing nation, its marine products will be sanctioned in EU member states, and the vessels engaged in the past illegal fishing will be prohibited to enter any harbor in EU.