Importing STEs in Korea and Japan: Evolution, Operation, and Implications

Agricultural trade policies in Korea and Japan drew much attention during the negotiations leading to the Uruguay Round Agreements on Agriculture (URAA). Before the UR the countries and others had been using non-tariff barriers and many other intervention measures in agriculture. Korea and Japan argued vigorously for maintaining their farm import barriers and subsidies. Throughout the negotiating process, Korea and Japan faced counter-arguments from agricultural exporting countries and countries pursuing agricultural policy reform. Both Korea and Japan have long used state trading enterprises (STEs) to manage a significant part of their agricultural imports. How these STEs operate and their implications changed somewhat with the URAA. As new World Trade Organization (WTO) negotiations on agriculture begin, this is a good time to review the role of these STEs and investigate how importing may evolve if that role changes. Korea and Japan use STEs for a variety of commodities. But in both countries rice has a special status. In the URAA, both countries were granted a waiver from tariffication for rice. This special treatment for rice comprises one of the few exceptions for the “bound tariffs only” principle of UR agreements (Josling, et al., p.180). Instead of tariffication, rice markets for both countries are opened with the Minimum Market Access (MMA) provision and an explicit import quota. Other agricultural products also faced MMA commitments as a part of tariff rate quota (TRQ) programs. There are also items with the Current Market Access (CMA) provisions. For some of these products, state trading is used for the TRQ