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THE COMPETITION IN 1997
U.S. and
Competitor Expenditures on Export Promotion and
Export Subsidies for Agricultural, Forestry and Fishery Products
Korea
The Korean government carries out two main programs to support exports of agricultural products. One is a marketing program which subsidizes costs for Korean companies participating in trade shows. Expenditures for this program for 1997 are estimated at $3.5 million and are included in Table 1 of this report. The second program is a credit subsidy program, which is not included in the table. Both programs are executed by the Agricultural and Fishery Marketing Corporation (AFMC), a quasi-government agency. Korea is one of the major markets for agricultural promotions. The FAS Agricultural Trade Office estimated that more than 16 competitor countries spent nearly $9.4 million promoting their agricultural products in Korea.
Korean Promotion Activity:
AFMC has participated in food exhibitions since 1988 in order to develop agricultural export markets. It participates in large food exhibitions such as Green Week and ANUGA in Germany, Foodex in Japan, FMI in the U.S.A. and SIAL in France. AFMC sources said that in 1996 a total of 508 companies participated in 17 major overseas food shows under Korean pavilions organized and sponsored by AFMC, and made export contracts worth $141 million. AFMC organizes and recruits Korean food processors and provides them with free booths under the Korean Pavilion at food shows. Korean food processors cover all other expenses including travel and lodging. These companies normally exhibit traditional Korean foods and generally target Korean residents in foreign countries. Products promoted are primarily processed products. AFMC funding for these activities is estimated at $3.5 million for 1997.
AFMC also provides credits of about $103 million to Korean exporters for periods of 3, 6 or 12 months to purchase raw agricultural products such as chestnuts, mushrooms, apples, pears and strawberries. More than 90 percent of agricultural products purchased with credits are exported to Japan. Credits are provided at an interest rate of 5 percent. The standard commercial rate is at least 11 percent. These credits are not included in Table 1 of this report.
Competitor Activity:
As a major importer, Korea attracts most of the major agricultural producing countries and their producers’ and processors’ promotions. It is estimated that 16 countries other than the United States budgeted about $9.4 million for promotions in Korea. Canada accounts for just under one-quarter of the promotion expenditures by competitors, followed by Australia (20 percent), New Zealand (18 percent) and Malaysia (13 percent). The EU, Chile, China, Brazil and Indonesia compete less aggressively. Top commodities promoted by competitors are meat and poultry products, oilseeds and forest products.
The largest single competitor expenditure is the $1.5 million spent by the Australian Meat and Livestock Corporation (AMLC) for the promotion Australian meat. AMLC maintains a five person office in Seoul which is working to recover market share lost in recent years. Its main activities include trade shows, retail and hotel promotions, educational programs in Australia for trade and press teams and public relations activities such as newsletters, an industry guide, posters and point of sale materials. The New Zealand Meat Producers Board and the Canadian Beef Export Federation conduct similar but smaller promotion programs through their Korean offices. Poultry promotion is generally conducted by private industry in cooperation with Korean importers. The major competing countries are China, Canada, Thailand France and the U.K.
In the oilseed sector, the largest promotion effort is conducted by the Malaysian palm oil industry, which was budgeted to spend $1.2 million in 1997. Most of its activities are conducted through the Malaysian Palm Oil Research Institute in Seoul, but the industry also operates a liaison office in Hong Kong. Promotion activities include trade and buying missions, technical seminars, public relations, research and trade servicing. Canada, through its embassy, actively promotes canola oil and meal, as well as food-use soybeans. They have successfully lobbied the Korean government to lower the tariff for canola oil, although it is still higher than the rate for soybean oil. The Brazilian and Indian embassies also sponsor promotions for soybeans and meal, while the Chinese embassy and Hong Kong based dealers promote sunflower seeds, soybeans and soybean and rapeseed meal.
Forest products are promoted by a number of countries. The largest expenditures are by New Zealand and Canada which each spend over $500,000 annually. Chile and Indonesia spend more than $100,000, while Malaysia, Russia and China each spend about $60,000. The principle tool employed by these countries is the provision of technical assistance and the development of publica relations materials. Trade shows, translation and distribution of information, trade missions and donations of building materials are also used.
China, Canada and Australia are the main competitors for grains. The China National Cereals, Oils and Foodstuffs Import and Export Corporation (COFCO), formerly known as CEROIL, maintains an office in Seoul while the Canadian Wheat Board services Korea from its Tokyo office and the Australian Wheat Board works out of Hong Kong. These organizations negotiate prices with individual buyers and conduct promotional activities such as holding seminars, providing technical services and sponsoring trips for buyers to their home countries. Canada spends about $330,000 per year on market promotion for grains and Australia spends about $230,000. Chinese promotion expenditures are only about $70,000. However, China is very competitive on price when it decides to export.
Competitor activity for fruits and vegetables is fairly limited. The largest promotion effort is by the New Zealand Kiwifruit Marketing Board which participates in trade shows, conducts in-store demonstrations, sponsors advertising and other public relations efforts. It recently opened a regional office Korea. The Chilean Embassy promotes fresh grapes through in-store promotions, sponsoring trade teams’ travel to Chile and arranging meetings. A private Canadian company promotes frozen potatoes through a Korean representative who participates in trade shows, and conducts other promotional activities. Australia currently does little promotion in the fruit and vegetable area, but is seeking approval for its oranges and is expected to begin a major promotion effort once they are accepted by Korean quarantine officials. Wine is promoted primarily by European countries such as France, Italy, Spain and Portugal. As usual, France is the most aggressive wine promoter, sponsoring tastings and seminars.
Finally, dairy promotion is carried out primarily by New Zealand, Australia, Denmark and Canada. Both New Zealand and Denmark operate through partially or wholly owned companies in Korea. Trade show participation and cheese tastings are common promotion activities. In addition, Australia and New Zealand sponsor Korea trade mission visits to their countries. The EU also provides export subsidies for dairy products exported to Korea, although no expenditure estimates are available. It is estimated that Canada, Australia and New Zealand each spend about $100,000 per year on dairy promotion, while the EU countries (mainly Denmark) spend twice that amount.
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