New Korean beef import policies help improve U.S. stake in the market - South Korea - includes related article

New Korean Beef Import Policies Help Improve U.S. Stake in the Market

Reductions in Korea's import restrictions for beef have made it one of the leading market prospects for U.S. beef exporters. The potential size of Korea's beef market is considerable--some analysts project Korean beef imports could reach 700,000 tons by the year 2000 with greater liberalization. The U.S. beef industry has a good opportunity to obtain a significant share of this large, growing market. The United States primarily produces grain-fed beef, which has become popular in hotels and restaurants in Korea. In addition, the costs to U.S. firms of selling beef to Korea have dropped in the past decade as the Pacific market, especially Japan, has developed.

Korean Demand for Beef Changing

The role of beef in the Korean diet is complex. For most of the past two centuries, Korea was a poor country that was unable to afford expensive foods. Its high population density meant that land for raising beef cattle was scarce. Also, a strong Buddhist element in Korea's culture opposed eating meat. On the other hand, a steady-though-limited supply of beef came from the draught-animals used in rice production. This supplied the basis for many traditional Korean dishes featuring beef, such as stews, kalbi (grilled short ribs) and bulgogi (a grilled dish). The past two decades have brought great changes to Korean society. The country has urbanized rapidly. More women are working and real incomes for urban households have increased. These factors favor greater patronage of restaurants and increased consumption of food away from home, which usually translates into higher meat consumption. Korea's agricultural sector is not prepared to meet this increasing demand for beef. Korean agriculture, as in some other East Asian countries, is dominated by small-scale rice production. Korean agricultural policymakers, anxious about small rice farmers' prospects, have tried to find ways to diversify farmers' income. One major intiative encourages raising cattle for beef production on existing rice farms. Another establishes a dairy industry on new, larger farms, based on Holstein cattle. This herd produces meat as a byproduct with the slaughter of older cows, young bulls and some heifers. However, efforts to stimulate more widespread and specialized raising of cattle for beef, chiefly using native Korean cattle as the breeding base, have run into problems. Korean cattle numbers have fluctuated wildly, with extremely high prices for cattle prevailing in some periods, while much lower prices have resulted from near-panic selling at other times.

Changing Times Bring Policy Changes

In the 1970s, these domestic agricultural policy considerations drove Korea's import policy. Beef imports were allowed only to fulfill domestic shortfalls. When imports for general consumption did occur, they came from Australia and New Zealand. A small but stable trade in grain-fed beef for tourist hotels was filled by U.S. exporters. In the 1980s, Korea was an important but variable market for U.S. beef, with trade still dependent on the policies of the Korean government. In 1985, Korea was the fifth largest U.S. beef market with exports valued at $6.1 million, despite the market being virtually closed by an import ban at mid-year. In 1988, Korea reappeared as the fifth largest U.S. beef market at $25.6 million, even though the market was open only from August through December. In 1990, the United States exported 32,660 metric tons valued at $116 million, about 30 percent of Korean imports. Korea has changed greatly since the 1970s and early 1980s. These changes include a worsening of Korea's domestic beef supply situation, a growing demand for beef and shifting views about import protection for agriculture. Together, these events have generally increased the cost to Korea of maintaining trade barriers to beef. As a result, in 1990 Korea agreed to liberalize its beef trade in three stages. The first stage, which expires at the end of 1992, sets minimum import quota levels. In 1992, expanded interim trade levels will be negotiated for the 1993-96 period. In 1997, Korea must completely liberalize or otherwise bring its policy into conformance with the General Agreement on Tariffs and Trade (GATT).

Changes Hold Promise

Korea represents a major potential market for beef, perhaps the third largest in the world. With trade liberalization and a favorable economic climate, Korean beef imports in the year 2000 could range from 340,000 to 700,000 tons. This would be equivalent to up to one-third of present levels of the entire Pacific beef trade. The potential for large U.S. beef exports to the Korean market under free trade is based on the premise that Korean consumers will shift toward higher levels of grain-fed beef if given the opportunity. The United States produces primarily grain-fed beef, while Australia and New Zealand are the major producers and exporters of grass-fed beef in the region. Korean cattle are largely confined and fed a diet of both forage and mixed feed, giving the meat characteristics of both grain-fed and grass-fed beef. U.S. exporters should be well equipped to take advantage of this tremendous growth opportunity. Increased exports of beef to Japan have brought greater market integration and specialization in the Pacific beef trade. Major beef markets in the Pacific can generally be serviced together with other Pacific Rim markets, while recognizing that individual differences exist. This has lowered export costs for Pacific Rim beef trading firms, especially in the United States. U.S. exporters will be able to apply some of the lessons learned in the Japanese market to take advantage of the opportunities in the Korean market.

Jones is with the Dairy, Livestock and Poultry Division, FAS. Tel. (202) 447-7285. Dyck is with the Economic Research Service. Tel. (202) 219-0614.

COPYRIGHT 1991 U.S. Department of Agriculture
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