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The special 20 year waiver that South Korea had obtained as part of the Uruguay Round negotiations that created the World Trade Organization (WTO) is expiring, and the government announced this week it would be opening the country’s rice market in accord with its treaty obligations. The country is not exactly going to free trade in rice—there will be a 513 percent tariff (no, that isn’t a typo) and if the rice price falls below a certain level, a special safeguard provision kicks in, allowing the tariff to be temporarily increased. South Korea’s trade partners have three months to object to the proposal which is due to go into effect 1 January 2015.
But the government continues to support local production, so what to do with all this high cost rice? According to a report in the Maeil Business Newspaper, the government plans to divert rice imported under its minimum market access (MMA) commitment to its aid program, which is principally targeted at….North Korea. According to the article by Kim Gi-chul, while such usage of imports under the MMA commitment was not permitted under the existing agreement, no such guarantee was included in this latest proposal sent to the WTO, opening up the possibility that imports could be diverted North as aid rather than sold on the local market.
I have frequently criticized South Korean rice aid on the grounds that it was likely to be diverted to elite consumption (especially if it were delivered through the port of Nampo which serves Pyongyang). But to be clear, South Korea is not alone in having its aid policies driven by parochial political interests rather than programmatic considerations: the US does plenty of similarly stupid things in its aid program for equally venal reasons.
In the meantime, the Chosun Ilbo, not normally known as a cheerleader for the Kim Jong-un regime, is reporting in an unsourced article that North Korean sharecroppers are gon' get a bettah deal from de Massa going to be provided with enhanced incentives. According to the paper, the farmers are supposed to get more land for their own use, and the split on the collective land is supposed to go from 70/30 to 60/40. The state reportedly has pledged to continue to provide the cultivators with seeds, fertilizer and farm implements. But the article does not indicate if the farmers are expected to pay for the inputs, and if so, how prices will be set, and crucially insofar as the sale of grain in the market remains prohibited, how prices will be set for the grain that they are permitted to sell back to the state. In the past, the state has set prices for both inputs and outputs.
Nevertheless, I suppose this modest reform is commendable. Ultimately, the solution to North Korea’s chronic food woes is the revitalization of the industrial economy which would allow the country to earn foreign exchange and import bulk grains like its neighbors, China, South Korea, and Japan do, though hopefully without a 513 percent tariff. But in the meantime, anything that benefits North Korea’s farmers should be applauded.
(Apologies for the introductory ad below, but I couldn't seem to circumvent is this time....)
