Leave the Beer Alone!

In December 2014, the Seoul High Court ruled that forcing large retail stores to close two Sundays every month was illegal because (1) the law limited consumers' right to choose where to shop and that (2) there was no evidence to suggest that the law actually helped small retailers or traditional markets.

For a while, I was hopeful that there might have been some sense in Korean courts. However, the Supreme Court made sure that common sense and critical thinking stayed dead and buried when they overruled the Seoul High Court and sided with local municipalities.

According to the Korea Times, one of the justices said,

"A regulation for the public good is not only important but also necessary. However, it can hardly be seen as depriving consumers of their right to choose as large retailers do not need protection."

Don't ask me how that makes any sense.

Of course, this is not the only instance of the government meddling in the economy that has screwed over consumers.

The Mobile Device Distribution Improvement Act has shackled all telecom companies to offer the same discounts to their customers, thus forcing people to pay more for their smartphones.

The Book Discount Law prevents retail bookstores from selling books at a discount any higher than 15%.

And a year ago, the Korean government was mulling the International Direct Purchase Law; a proposed law, which would have regulated how much, how, and what individual consumers would have been able to purchase from international websites such as Amazon or eBay.

But now someone has really messed up. Now there are rumors that the government plans to regulate discounts of imported beer.

Let's be frank. Shutting down large retail stores two Sundays out of a month is no big deal. People can plan ahead or just shop online. Making smartphones more expensive pissed off some people, but thankfully smartphones are becoming cheaper anyway. As for books, who reads books? And regulating online foreign purchases sound like it would be easy to skirt around.

But mess with beer? Do they not know what country they're governing? There has been debate about the accuracy of the claim that Koreans drink more than anyone else in the world. but it's without doubt that Koreans are heavy drinkers.

So dear Korean government, you done goofed. If you think the protests have been violent so far, wait until every single pissed off salaryman joins the fray. There will be hell to pay!

So if you know what's good for you, for God's sake, leave the beer alone!

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Korea Needs to Liberalize Its Rice Market

I realize that I said that my next post was going to be my second installment of “Super Fun Economic Review” about the Korean government's increasing hints about depreciating the value of the Won.

Rest assured, that post is coming. However, it's taking longer than I had anticipated.  In the meantime, I wanted to upload this post.

Just today, I read an article in The Diplomat about Korea's refusal to liberalize its domestic rice market to international trade. A few days ago, I also read a very impressive article about this same topic that was written by Eric Deok-jin Song who works over at the Korea-based libertarian think tank, Center for Free Enterprise (자유경제원).

As the article was written only in Korean, however, I have taken the liberty of translating the article into English.

I think that this is a good time to state that I am not affiliated with the Center for Free Enterprise in any way whatsoever. Furthermore, any mistakes in the translation are mine and mine alone.

The first two picture files in this post were from the original post, but I have added the other pictures myself.

Is rice life? How much longer will the taxpayers' money be spent to subsidize rice? Rice has already been losing its status as the country's staple food. From 1995 to 2014 whereas rice production increased about 10%, the amount of rice that has been imported has increased 8 fold. The only two countries in the world that have not opened up their rice markets are Korea and the Philippines. Continuing to subsidize rice is a waste of the taxpayers' money.

The white signboard that the man is carrying reads "쌀은 생명이다," which means "Rice is Life."
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The Ministry for Food, Agriculture, Forestry and Livestock says, “For the future of the rice market, the best decision that we have made was to begin to import rice, but to impose tariffs on imported rice.”

With the government on one hand that says that the opening up the rice market can no longer be delayed and opposing farmers on the other hand claiming that such a move would cause irreversible harm, the differences between the two sides are sharply contrasted. It should be noted that Korea made a promise to the international community to open up its rice market in the Uruguay Round of multilateral trade talks in 1994.

By claiming that rice is unique to Koreans, the Korean rice market has received “preferential treatment” and has been waived from opening up the market at great cost. What was the great cost? For failing to open up the market, Korea was obligated to import up to 51,000 tonnes of rice in 1995. That obligation has steadily increased and this year, Korea is obligated to import up to 409,000 tonnes of rice this year alone. At the end of this year, Korea's grace period will come to an end. Korea can no longer afford to delay opening up the market.

The first two lines above and below the Korean and the Philippines flags say "The only two countries in the world that have not opened their rice markets are Korea and the Philippines."
The circles and the text in the middle of those circles say "Rice production has fallen from 4,690,000 tonnes to 4,230,000 tonnes.  Korea has had to increase its obligatory rice imports from 50,000 tonnes to 400,000 tonnes.  An average Korean's rice consumption has fallen from 532 bowls per year to 336 bowls per year."
The last line says, "How much longer will the taxpayers' money be spent to subsidize rice? How much longer will we be forced to import rice?  It is time to compete with imported rice."
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Despite having protected the rice market much more and much longer than any other industry, Korea's agriculture industry has barely survived. Despite continuous large-scale investments, Korea's agriculture industry's competitiveness remains at a standstill. Due to a decline in the number of farming households, more and more people have begun to abandon their farms. As a result, only senior citizens and low-income families continue to live in rural areas, which threatens to shrink Korea's agriculture industry even further. Although rice production has increased somewhat, average income has fallen, which has caused a great income disparity.

Opening up the rice market will provide our agriculture market with new opportunities. Korean agricultural products are popular in China. That is because the Korean brand is considered a trustworthy brand by Chinese consumers. Opening the rice market will not lead to imported rice flooding the Korean market but rather an increase in our exports to overseas markets. Now is the time to increase the rice industry's competitiveness and to focus on the debate of raising tariffs.

Korea's agricultural industry stands at a crossroad. It can either crash as a declining industry tends to do or it can find ways to become a competitive industry. Using competitiveness as a springboard, it has to find the right direction in order to become an advanced agricultural industry. It has to extricate itself from all of its excessive protections and move away from its land-intensive production methods in order to pursue more capital-intensive production methods.

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The Confederation of Farmers Alliance that has long opposed the opening of the rice market has already begun to engage in all-night sit-ins and other forms of protests. Instead of engaging in unreasonable protests, they have to embrace market principles and the entrepreneurial spirit. In order to transform the industry into a competitive one, and to transform it from one focused on 공자유전 (耕者有田), which is established in Article 121 of the Republic of Korea Constitution which states that “the State shall endeavor to uphold the notion that those who till the land will use the land,” to one that is focused on 경자용전 (經者用田), which is the notion that those who can manage the land can use the land. Furthermore, the regulations and restrictions on the agriculture industry ought to be abolished.

Only this effort can lead to an increase in new capital investment that is needed to increase the industry's competitiveness and establish an international business that can compete globally.

That large businesses are always opposed to entering the agriculture industry in Korea is worrisome. Dongbu Group, which had built a state-of-the-art facilities in a tomato production facility but faced opposition from farmers groups and had no choice but to discard millions of tomatoes. Dongbu Group had even signed a contract to export domestically produced tomatoes to Japan. However, the farmers and the farmers groups opposed this. After having lost millions, Dongbu Group withdrew from the tomato business.

Toyota, the symbol of Japanese manufacturing, on the other hand, has built and is strengthening their agricultural productivity. The agriculture business is gaining strength to becoming a vital business in the future.

Whenever a free trade agreement has been signed be it with Chile, the United States, the European Union, ASEAN, Australia, or Canada, the farmers have never failed to angrily protest. Yet even with the importing of Chilean grapes, domestic grape production has increased. The beef market has been opened but Korea's beef industry has not weakened. It is the same with other agricultural goods. The farmers have begun to improve their quality, scientific methods, and have begun to become more competitive.

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Although competition and opening up markets can threaten domestic businesses initially, it has in fact strengthened the domestic industry.

Agricultural products have increased in value and improved their income levels. People have to accept this new change and farmers must stop thinking of themselves as farmers and instead think of themselves as “farmakers” and “farmarkets.” Farmers have to accept the entrepreneurial spirit that can only exist within capitalism and only this can ensure the successful development of a competitive agricultural industry.

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