The purpose of this study is to provide an economic analysis of the Korean rice market in the face of transition, thereby minimizing social costs and conflict. The study seeks to provide alternative policies that can adapt to changes in the domestic and foreign circumstances.
Since the 1990s, the Korean agricultural industry has been going through change internally and externally. From a global perspective, it faced pressure to open its markets through the Uruguay Round and bilateral agreements, threatened by imported agricultural products that have absolute advantage in production costs. In particular, the rice market, which has received government protection since the 60s through the double price system, is particularly stressed with the growth of pressure to abolish subsidy and price supports. From an internal perspective, the decreased consumption in rice has led to the government purchasing price to exceed the consumer price, alarmingly increasing the burden of the double price system on the government.
The double-price system was the most significant instrument in rural policy since the 70s. However, the system of government purchase price increasing farmers’ incomes and rice production, thereby leading to rural development has been gradually broken since 1990. Such a change implies the necessity in policy to meet the change of the times, eventually leading to the need for a reassessment of the double grain price policy.
First, there is no need to induce production increases through a high government purchasing price with 100% self-sufficiency in rice supplies. Second, an indifferently high purchasing price has brought up the problem of excessive concentration of government subsidy, while individual farmers are excluded. Third, the government’s indifferent releasing of Tongilgye rice seems to be ineffective in providing social security means. Considering the excessive burden on government finances and its low efficiency, there is a need to reevaluate the efficacy of the double-price system.
Considering the farmers’ distrust towards agricultural policies, vulnerability of the agricultural industry, and political dynamics, allowing farmers to choose the alternative themselves over government’s unilateral response seems more desirable, and the following progressive measures in improving the structure seem necessary:
First, decrease the purchase of Tongilgye rice from production in 1991. The government’s excessive supply should either be donated or rented to the poor or social welfare agencies to provide means of social security. It can also sell to factories through public auctions. Second, adopt the subsidy for Crop Switching Management and encourage low-efficient rice fields to go through crop switching. Third, the government should modify its purchasing policy to buy at a fixed price and quantity from the current wholesale market formation price. Fourth, decreasing the special grain management account deficit from grain price policy, along with parts of the preparatory budget for building agricultural production base, are more desirable to be utilized in strengthening social security in rural societies by building a living base and preparing for rural ageing, instead of building an agricultural production base. Fifth, continuous efforts towards structural improvement must be made by helping rural families increase their farming size, boost efficiency, and reorganize farming systems.
우루과이라운드 농산물협상과 미가지지정책(The Uruguay Round, agreements on agriculture, and rice price support system)
|Series Title; No||정책연구시리즈 / 90-14|
|Subject Country||South Korea(Asia and Pacific)|
|Subject||Economy < Trade|
|Holding||KDI; KDI School|