BARRIERS TO SOUTH KOREAN MARKET EXPLAINED
Korean beef producers regard Canadian beef as unnecessary competition in their high-quality grain-fed beef market, and are pressuring their government to maintain the ban on Canadian imports.
As a result, Amos Kim, director of the Canada Beef Export Federation operations in Seoul, South Korea, says Canada must be prepared to make every effort to regain access to this market. That includes WTO action, although Kim feels that may be a last resort.
Speaking at the Canadian Cattlemen’s Association’s national convention in Regina in mid-August, he urged Canadian producers to hang tough. He feels it’s still possible for Canada and South Korea to settle the beef trade issue outside a WTO dispute panel, expected later that month.
Bilateral negotiations might be the way to go, he says, because it could take as long as two years for the WTO to reach a final ruling and the risk for Korea is greater if it waits for a WTO ruling. The South Korean government is aware that the ruling could set a precedent if it requires them to grant market access to Canadian beef from cattle over 30 months of age, in which case, Korea may have to grant the same access to the U.S. and European Union.
The safety of Canadian beef is no longer the real concern. Political sensitivity is high and the issue has boiled down to one of supporting the domestic beef industry, he explains. The fact that Canada has uncovered more cases of BSE than the U.S. is used by the Korean government to justify its decision to let U.S. beef into the country and keep Canadian beef out, regardless of Canada’s control measures.
“In almost every consumer survey, Korean consumers attach the greatest priority on the domestic product. While this is the result of patriotism and appreciation of domestic beef quality, it is also based on the assumption that domestic products are safer than imported products,” Kim says.
To regain market access, Kim recommends Canada take a strong stand and not depend on the goodwill of the Korean government, based on its past record, and because it could change at any time. If you’re not proactive, you can’t claim rights in Korea, he advises.
He has high hopes that Canada’s new Agriculture Market Access Secretariat will help to improve communications with Korean officials and adopt a co-ordinated and politically acceptable approach to resolving the issue.
Kim also urges the Canadian beef industry to look beyond winning the WTO case and begin to address marwww.
ket challenges immediately to positively position Canadian beef when trade resumes. The main challenges include strong demand for domestic beef, ongoing consumer resistance to U.S. beef, which could be transferred to Canadian beef, and Korea’s country-of-origin labelling law implemented in July, 2008 for beef sold at restaurants. A mandatory beef traceability system from farm to retail was implemented in June of this year.
The Korean beef industry
Though farmers are less than seven per cent of Korean population they are politically influential because most Koreans still have ties to agriculture. Cattle are one of Korea’s top agriculture products, accounting for 31 per cent of total agriculture production.
In response to Korea’s foreign trade policies since the mid-1970s, a Korean beef herd that had grown to 2.8 million head in 1996 dwindled to 1.4 million head by 2001. It has increased steadily since to 2.6 million head in June 2009. The vast majority are Hanwoo cattle, a domestic breed.
With support from the Korean government, cattlemen have increased their efforts to produce high-quality, corn-fed beef and differentiate it from imported beef, Kim adds. As a result, Korean beef accounts for 50 per cent of consumption even though Hanwoo beef retails for three times more than U.S. grain-fed beef.
The average herd size is about a dozen cows.
Korean beef producers do most of their own marketing, with the packing plants serving mainly as custom processors.
The country’s 300 beef importers are small and medium-size companies with little political influence. Facing snowballing economic losses due to devaluation of the Korean won, excessive inventories of U. S. beef due to poor demand, and the credit crunch, major importers have declared bankruptcy or began restructuring in 2009.
U.S. gets preferential treatment
The resistance of Korean consumers to purchasing U.S. beef is steeped in South Korea’s long history of military and economic ties to the U.S.
This is a country that has been invaded more than 3,000 times. Japan’s colonization of Korea lasted from 1910 until 1945 when Japan was defeated. During the Korean War South Korea delegated operational control of its military to the U.S. and only regained peacetime operational control in 1994. It won’t regain wartime control until 2012 at the earliest. Even then the U.S. influence on Korea’s national security is expected to continue unless the relationship between the U.S. and North Korea fundamentally changes, Kim says.
As a result, South Korean leaders have always made it a priority to maintain U.S. support. But in recent years, Kim says this domination by the U.S. has become a source of anti-American sentiment. Some Koreans believe president Lee Myung-Bak’s leadership style, rather than BSE concerns, triggered the massive candlelight protest against the border reopening to U.S. beef in 2008.
“Korean people, especially those in the 40-years-and-under age group, have decided not to eat U.S. beef no matter what the science says,” Kim adds. As a result, sales of U.S. beef have been slow. It’s estimated that there is currently a four-to five-month supply of U. S. beef in Korea. Market analysts say it may be the end of 2010 and in the worst case, 2012 before consumption of U.S. beef normalizes to the pre-BSE level.
The U.S. receives preferential treatment from the government because South Korea’s phenomenal economic growth has been achieved mainly through exports to the U.S. China and Japan are also large export markets, therefore, they are sometimes considered deserving of special attention.
Being South Korea’s 17th largest trading partner, Canada doesn’t have as much leverage. Kim says it may be unrealistic to expect the same consideration as the U.S. Though Canada’s low-key approach and co-operation has been abused by the Korean government, as evident in its hollow promise to open trade to Canadian beef after U.S. beef, Canada’s request for the same access as the U.S. without doing any work may have been seen as naive and somewhat arrogant by the Korean government.
Since the Canadian government didn’t appear to be concerned about the Korean market until its formal request for negotiations to reopen the border midway through 2007, the Korean government may have viewed Canadian beef as a side issue that could be dealt with when they had time, he explains. Korean officials might have also thought that Canadian beef could cause additional problems in pursuing the recovery of U.S. beef exports to Korea. To avoid further straining their relationship with the U.S. the government seems to have opted for the smaller risk of violating WTO principle and OIE recommendations.
“This is the reality the Canadian beef industry has had to face for the past years,” Kim says.
VERY FEW INJURIES ON LONG-HAUL TRIPS
A two-year transportation research project has found nearly all cattle put onto long-haul rigs reach their destination without injury.
The study team led by Dr. Karen Schwartzkopf-Genswein at Agriculture and Agri-Food Canada’s Lethbridge research station surveyed producers and commercial truckers hauling loads of cattle on long trips to, from and within Alberta. They collected information on trailer type, loading density, distance travelled, time in transit, transportation delays (frequency, length and reason), animal description (type, weight, sex, age, condition), and incidence of animal injuries (dead, downers, lame), and a variety of other things. Information was collected on nearly 9,000 trucks, and close to half a million cattle.
Key findings from the long-haul trips include:
Trip length and duration: Long-haul trips averaged 1,080 km and 16 hours (loading to unloading). Only two per cent of fat cattle and eight per cent of feeder cattle were on trucks longer than 32 hours, although the law allows for trips up to 48 hours.