Can S. Korea go global? End irrational price

The Korea Herald, Asia News Network, Seoul

Despite frequent floods and droughts, South Korea has had bumper crops in recent years. As a result of continued investment in irrigation and other agricultural projects, the nation now produces more rice than it needs to feed its population.

Is that the vindication of concerted efforts that the South Koreans, knowing well what it was like to go hungry, made in the past to overcome chronic food shortages? Unfortunately, the answer is a resounding no. Such abundance is not a blessing at all, but it is a problem more serious than a shortage, which can be made up for with inexpensive imports.

The surplus cannot be exported, as it will be six to nine times as expensive as -- not 6 to 9 percent more expensive than -- its rivals in the international market. South Korea may have to send some of it in aid to the starving North Koreans or keep it in the open to rot, as many of the storage facilities will be literally filled to the brim before the government completes all the purchases it has promised to make at subsidized prices.

That would not be so unbearable, though, if it were only a passing problem. But the nation will face more serious challenges to come when it is forced to open the domestic market to cheaper imports in the years ahead. Negotiations with the World Trade Organization are scheduled for 2004 on the wider opening of the domestic market. In addition, a new round of WTO trade talks, starting in the near future, is certain to speed up liberalization in rice trade.

What should be done about rice cultivation in South Korea? There is no other choice than to make it competitive in price. Otherwise, it will have to abandon rice production in the globalized world of free trade, where protection of farmers is being chipped away at a fast pace.

It is necessary for the government to phase out its subsidies to rice growers, almost all of them owning tracts of land too small to be economically viable, as a means of prodding agricultural restructuring, which is long overdue. A price cut would discourage cultivation by uncompetitive farmers and give rise to corporate farming.

Providing a safety net for displaced farmers or making up for losses in their incomes is a separate problem, which the government will have to deal with as part of its welfare policy.

The government appeared to be on right track when it was nearing a decision to reduce next year's purchase prices 2 percent from this year. That would have sent a strong message to farmers, who had been staging violent protests against the forthcoming change in policy since a 20-member advisory commission for the minister of agriculture and forestry proposed a cut ranging from 4 percent to 5 percent last month.

President Kim Dae-jung also indicated a change in policy when he said, "The era is over when farmers demand a price increase to the government after engaging in wayward rice production. We will have to adopt a new agricultural policy in compliance with the decision, made at the WTO ministerial conference (in Doha, Qatar), that rice markets be opened."

But all of a sudden, the government made an about-face and announced last week that it would freeze the prices. It was a deplorable act of capitulation to the demands of farmers, who form one of the strongest voting blocs in the nation, ahead of two major elections next year -- gubernatorial and presidential.

It will be more regrettable if rival political parties are united in overriding the government's decision and raising the prices on their own when the motion on rice prices is sent to the National Assembly for approval.

That is most likely, though, given the fact they have rarely failed in the past to give one or two percentage points on top of the government-proposed prices.

The major opposition party, which is only one seat short of forming a majority voting bloc in the National Assembly, has already promised to raise the price of rice, saying that freezing them would "kill agriculture." The minority party in office would not like to antagonize farmers by supporting the proposed freeze.

The opposition party is right when it says it would help kill the nation's agriculture to peg the prices at this year's level. But it would hasten its demise if they are raised. That is a message coming from the advisory commission on rice prices, half of whose members have recently resigned in protest