By Lo Chu-ping
In 2011, U.S. President Barack Obama told South Korea he would send the U.S.-South Korea Free Trade Agreement to Congress for review only if “South Korea agrees to import all parts of U.S. beef, regardless of the age of the cattle.” However, the beef protests of 2008 were on such a massive scale and still so fresh in the memory that South Korean President Lee Myung-bak hesitated to agree to such a demand, and even the U.S. had to make some concessions.
In the end, the U.S. agreed only to sell beef to South Korea that was under 30 months old at the time of slaughter—knowing all the while that this was just a temporary move.
Now South Korea has become the fourth largest export market for U.S. beef. Its imports of American pork are also expected to increase several fold in the next few years. As a result of the trade agreement, roughly 30,000 jobs in the animal husbandry industry are expected to be created in the U.S. As for South Korea, its gross domestic product is projected to increase by 5.56 percent as a result of the trade accord, with over 350,000 new jobs created.
In terms of GDP growth, South Korea will gain far more than the U.S. Which is why it was willing to yield to the U.S. on the beef issue. The alternative would have been to sacrifice the interests of Hyundai automobiles and Samsung electronics.
A similar set of events is now playing out in Taiwan. Even though the agriculture industry accounts for less than 2 percent of Taiwan’s GDP, farmers played a large role in the nation’s recent presidential elections. In the U.S., on the other hand, the agriculture industry accounts for 6 percent of GDP.
Now that Obama is fighting for re-election, he will certainly want ROC President Ma Ying-jeou to help him, just as he helped Ma with his re-election campaign. Obama will want Ma to help reduce unemployment in the U.S. by agreeing to import American beef and ractopamine-enriched U.S. pork as well. Since the U.S. presidential elections are in November, Obama will expect Ma to return the favor very soon.
Taiwanese want the Trade and Investment Framework Agreement with the U.S., but they do not want ractopamine. Did the Koreans and Japanese not feel the same way? Taiwan’s economy will grow as a result of both the Cross-Straits Economic Cooperation Framework Agreement (ECFA) and TIFA. Without TIFA, Taiwan will fall farther behind South Korea, and will be forced to move closer to mainland China.
Taiwan Sugar Corp. and many flower growers in Taiwan have made investments in the U.S. for the production of butterfly orchids. Perhaps the government can do something for pork farmers, by helping them relocate to the U.S. They could then raise ractopamine-free pork there and ship it back to Taiwan. That is the strategy followed by some companies in Japan.
When South Korea first opened up to U.S. beef, major distributors there refused to sell the product, out of fear of offending their customers, and U.S. beef could only be purchased at certain specialized stores. South Korean beef importers also refused to import U.S. beef offals as well.
Surely, the ROC government can come up with equally creative ways to control beef imports at their source. It should be able to help importers and distributors in their desire to either sell or not sell U.S. beef and pork imports; so that those who are afraid of ractopamine have the option of not buying it, while those who do not mind it can have it if they want. If the government is successful in this task, Taiwan, too, should be able to open the nation’s doors to U.S. beef and pork products, just as Japan and South Korea did.
Since the 2009 financial crisis, Asia has become the largest growth engine for American beef sellers. The only problem has been the lingering concerns over safety. Thus U.S. beef associations placed numerous advertisements in South Korea touting the “trustworthiness” of U.S. beef, just as they carried out the “we care” ad campaign throughout Japan.
Surveys show that over the last three years this strategy has been very effective. Whereas over half of Japanese consumers used to think U.S. beef was unsafe, this number has now fallen to 28.8 percent; and those who consider U.S. beef to be safe have increased threefold to 35.6 percent. The number of South Koreans and Japanese who feel that U.S. beef is safe now outnumbers those who consider it harmful. Such is the power of advertisement. This suggests that as long as the public feels that U.S. beef is safe to consume, ROC President Ma Ying-jeou should survive politically even if he gives permission for it to be imported.
After South Korea settled on its globalization strategy in 2003, it earmarked US$104 million for agricultural reforms between 2004 and 2013. This fund—derived from taxes on nonagricultural consumer goods, and equivalent to the entire budget of the ROC Council of Agriculture for the last 30 years—will be used to help farmers respond to the challenges brought by FTAs. In addition, it has been used successfully to reduce opposition to U.S. beef in South Korea; and now that the FTA talks have come to a successful conclusion, the world is filled with admiration for what South Korea has accomplished.
After the FTA talks with the U.S. concluded in 2007, South Korea added an extra US$21.8 billion to its agricultural budget, money that will be used between 2008 and 2017 to mitigate the impact of the trade agreement with the U.S. For instance, South Korea is offering purchasing guarantees, and will provide US$1,000 in subsidies for every beef, and US$90 for every pig. In addition, the fund is also being used to help the children of farmers find work at jobs created as a result of the U.S.-S.K. FTA.
South Korea is currently in FTA talks with mainland China. Such an FTA will have an even bigger impact on the South Korean agricultural sector than the trade agreement between South Korea and the U.S. One wonders how much additional money South Korea will spend to make the FTA with mainland China work.
Ma has said he wants Taiwan to join the Trans-Pacific Partnership within 10 years. If Taiwan can follow South Korea’s example, and try to help the nation’s farmers make adjustments after Taiwan joins the TPP, Taiwan is more likely to feel at ease with the prospect of joining the TPP. At the very least, Taiwan’s pig farmers are less likely to feel so incensed. Perhaps their unhappiness and anger is the reason why at the moment “South Korea can, and Taiwan cannot.” (HZW)
Lo Chu-ping is assistant professor of agricultural economics at National Taiwan University. These views are the author’s and not necessarily those of Taiwan Today. Copyright © 2012 by Lo Chu-ping
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