Saturday, July 22, 2006

US ROK FTA - Fancy Fruits

One thing of endless debate among foreigners is "Is Korea an expensive place to live?". Every year different research firms announce global cost of living indexes. Seoul usually ranks quite high. Detractors like to point out how such are biased toward the cost of living for multi-national expats. In a way both sides are right. However one thing that has always bothered me is how people like to go around and say "Food is so cheap here". Being a "food guy", chef, and and once an owner for a restaurant I strongly disagree. One of the things that has always bothered me is the high price for fruit and other agricultural goods. Glad to know that thanks to the FTA talks I found one reason for it:

In free trade negotiations with Korea, the United States has demanded that the Korean government abolish a mark-up system on agricultural products that are imported through state-run agencies...Under the mark-up system, the Korean government pockets any difference between the initial price of certain imported agricultural produce and the price the produce fetches at public auctions held by state-run agencies.

Incidentally, I am not too sure based on the explanation here in the Joongang if this is a valid complaint made by the US side. It seems that all the government is doing is pocking the difference between what US producers wish to sell produce at versus what Koreans are willing to pay for this. In other words the brunt of this tax is being paid by Korean consumers than US producers.

On the other hand if this is used in combination with a quota, such as Korea has for rice and citrus, Korea is artificially raising the price even more by keeping this fruit out. Logically speaking, if one were to buy as much US products as they wanted the auction price would be closer to the market clearing price anyway (i.e. the non-inflated price). 

This brings me to perhaps a disturbing thought. If the US is attacking the auction system, it could very well mean that they have already conceded Korea's quota system on these goods. Say it ain't true Uncle Sam!


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