Abstract
Abstract The paper analyzes the potential trade distortion effects of state trading enterprises (STEs) on soybean imports to Korea. Traditionally, STEs have exercised exclusive rights to import the so-called strategic products, to ensure food security, domestic price stabilization, and import mark-ups. However, STE imports have been criticized on the grounds that industries using soybeans as a raw material are unable to obtain a diverse mix of quality material and cannot exercise the “right to choose” their own ingredients. Under a theoretical framework, a tariff equivalent of the STE is postulated to equate imports by private firms with imports by the STE. An empirical model is constructed and estimated using annual data spanning 1980–2009. The estimated results show that providing exclusive rights to imports has a negative effect on market access. When the STE pursues consumer welfare, the import-reducing effect turns out to be smaller than that in the producer welfare maximization case.
Highlights
State trading accounts for a significant part of agricultural imports to Korea
Major state trading enterprises (STEs) in the country include the Ministry for Food, Agriculture, Forestry, and Fisheries (MIFAFF), which has an exclusive right to import rice, the country’s staple crop, and the Korea Agro-Fisheries and Food Trade Corporation, a public entity, which monopolistically administers the imports of sensitive products
In line with the ideas presented in the literature, this paper aims to analyze the trade distorting effects of Korean STE imports
Summary
State trading accounts for a significant part of agricultural imports to Korea. The so-called sensitive agricultural products, such as rice, red pepper, garlic, onions, ginger, sesame seeds, soybeans, certain other beans, and buckwheat, have been subject to state trading for a long time (Korea Agro-Fisheries Food Trade Corporation, 2012). Major state trading enterprises (STEs) in the country include the Ministry for Food, Agriculture, Forestry, and Fisheries (MIFAFF), which has an exclusive right to import rice, the country’s staple crop, and the Korea Agro-Fisheries and Food Trade Corporation (aT), a public entity, which monopolistically administers the imports of sensitive products. STEs account for a substantial proportion of world trade in grains, dairy products, and sugar (Ackerman and Dixit, 1999). The General Agreement on Tariffs and Trade (GATT) and the World Trade Organization (WTO) both recognize STEs as legitimate participants in international trade subject to certain disciplines (Roberts, 2001; WTO, 2003)
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