Agricultural policy making under international pressures

Agricultural policy making under international pressures The case of South Korea, a newly industrialized country

Yong S. Lee, Don F. Hadwiger and Chong-Bum Lee

The article examines the hypothesis that domestic farm politics determines the nation’s trade policy, not vice versa. In the context of South Korea, a newly industrialized country, it is found that the international political economy significantly dictates the formulation of its domestic farm policy. This is due mainly to Korea’s export-dependent economy. Korea’s dilemma is that while international pressures are mounting for agricultural import liberalization, particularly from the USA, with which it has accumulated a large payment imbalance, its domestic farm interests (which are increasingly independent of government supervision) exert powerful protectionist pressures on government. Caught between the two antagonistic forces, Korean policy makers are seeking ways to scale down their rural economy in order to make it competitive on the one hand, and to make room for increased imports on the other. Yong S. Lee is Associate Professor and Don F. Hadwiger is Professor in the Department of Political Science, 503 Ross Hall, Iowa State University, Ames, IA 5001 l-1 204, USA; Chong-Bum Lee is Professor in the Department of Public Administration, Korea University, Democratic People’s Republic of Korea.

’ The Omnibus Trade and Competitiveness Act of 1988, 19 USC Section 1301continued on page 4 19

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Under pressure from the USA, and to a lesser degree from Australia and New Zealand, the Korean government in May 1988 agreed ‘temporarily’ to lift import bans on several agricultural products, including beef. Meanwhile in the USA in August 1988 President Reagan signed into law the Omnibus Trade and Competitiveness Act, a major trade bill which contained the controversial ‘Super 301’ provisions enabling retaliation against ‘unfair trade partners’. ’ Korea was on a list of Super 301 candidates. In September 1988 the Korean government, for the first time since the import ban in 1985, authorized the importation of 15 000 tons of beef - 10 000 from Australia and 5000 from the USA. This action was soon followed by a new plan to import 39 000 tons of meat for the year of 1989, roughly 30% of domestic consumption estimated for 1989. In spring 1989 the Korean government further revised the quota to 50 000 tons, and it announced that it was considering opening its agricultural markets completely within three years.2 In Washington the 1988 Trade Act began to produce heat as the new year began. The US Trade Representative (USTR) announced in the Federal Register that written submissions from the public, including trade associations and export firms, concerning foreign countries’ trade distorting policies and practices were being solicited.” The response was overwhelming. By 30 March 1989 the USTR had received complaints from 45 trade associations, of which 21 had identified Korean import practices or restrictions as ‘unfair’. Thirteen of these associations complained about Korea’s restrictions on agricultural imports. The associations represented soda ash, almond, cherry, fruit juices, cling peach, wine, avocado, kiwifruit, potato, citrus fruits, chocolates, dehydrated onion and garlic, and rice.4 With respect to restrictions on beef imports, the USA, along with Australia and New Zealand, had taken Korea to a GATT (General Agreement on Tariffs and Trade) panel,

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Agricultural policy making under international pressures

continued from page 4 18 1307, USA, 1988. ’ Dong-A Daily, Seoul, Korea, 17 February 1989, p 2. 3 Federal Register, Vol 54, No 40, 2 March 1989. 4 The United States Trade Representative, Super 301 Case Files (Document), 1989. 5 The United States Trade Representative, Report to Congress on Section 301 Developments Required by Section 309(a)(3) of the Trade Act of 1974, January-June 7989, The Office of US Trade Representative, Washington, DC, USA, December 1989, Pp 89. ‘Theodore H. Cohn, The international Politics of Aaricultural Trade, Universitv of British Columbia Press, Vancouver, C&a$a~90, PP 50-53. ‘Don F. Hadwiger and Young W. Kihl, ‘The political environment and implications for marketing in Taiwan’, in Dermot Hayes, eds, Meat Marketing in Taiwan: A Guide for US Meat Exporting Companies, Midwest Agribusiness Trade Research and Information Center, Iowa State Universitv. . Ames, IA, USA, 1989, pp 9-38. ’ Kvm Anderson and Yuiiro Havami. The Poitical Economy of Ag~icultur& Protection: East Asia in international Perspective, Allen & Unwin, Sydney, Australia, 1986, p 34.

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alleging that Korea’s action was in violation of US rights under GATT legislation.” The pressure was mounting in the USTR’s office to designate Korea, along with Japan, Taiwan, India, Brazil and FR Germany, as a ‘priority unfair trade partner’, and Seoul was under pressure to act quickly. The Korean government chose to negotiate with Washington in spring 1989, finally agreeing to a three-year agricultural liberalization package. During these negotiations tens of thousands of angry farmers in Korea stormed the National Assembly, demanding higher prices for products and ‘down with US pressures’. This was nothing new. Korean farmers had been demonstrating for years seeking higher prices for their products. Four years previously in 1985, Korea had suspended the importation of beef cattle, and the suspension came on the heels of a large-scale domestic cattle crisis, which had left the farm economy saddled with debt. Earlier, under the government’s encouragement, farmers had received loans to purchase imported cows for investment. The price of cows had dropped as supplies increased rapidly during 198446, leaving many farmers in deep economic distress. The policy makers in Seoul were in distress also, caught between intense domestic pressures on the one hand, and relentless international pressures on the other. It is important to point out at the outset that world agricultural trade is much more restricted (and complicated) than industrial product trade. This is because agricultural trade negotiations take primarily a bilateral form owing largely to the exceptions written into GATT legislation.6 Under these exceptions the USA, for instance, had obtained in 1955 a special and permanent permission to use quantitative restrictions (QRs) for restricting the flow of certain agricultural imports to the USA.’ The problem with Korea is that it neither has a waiver, nor is it likely to continue to take refuge in exceptions made for LDCs (less developed countries). Indeed, Korea has accumulated a large account surplus with the USA, and the USA is determined to bring down the payment imbalance. The fact that Korea is the second largest export market for US agricultural products apparently does not reduce its vulnerability to US pressure. It is important to note that this same vulnerability factor confronts Taiwan and apparently other newly industrializing countries as we11.s The point of interest in this article is how the Korean political system responds to the domestic and international pressures that arise under rapid industrialization. It has been suggested that the ‘political costs’ of protecting East Asian farmers have declined, because consumers with rising incomes can afford higher-priced foods.’ However, as argued in this article, the Korean government may suffer a loss of exports if it cannot come to terms with demands by its trade partners for access to Korea’s growing agricultural market. Furthermore, there remain heavy political costs for not protecting Korean farmers. This article describes the ways in which dissatisfied Korean farmers are able to influence their government - by protests, electoral politics, and through farmer cooperatives and farm organizations. Farmer interests and representation are described here, as well as the Korean government’s options for reducing the intensity of domestic and international trade pressures. This article examines what institutions and processes, and nongovernmental forces, are emerging in Korea for making agricultural policy decisions, and speculates on what alternative policies it may

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Agricultural policy making under international pressures

pursue in the light of domestic political tensions and mounting US pressure. To that end the article first describes the environment of agricultural policy making in Korea, and then focuses on politics at the macro and subgovernmental levels, paying particular attention to agricultural imports. The study highlights the key issues in Korean agriculture, and as a case in point suggests how Korean farm politics and US pressure may interplay and eventually affect Korean agriculture, including its livestock industry.

Theory

” Henry A. Kissinger, American Foreign Policy: Three Essays, W.W. Norton, New York, USA, 1969; Graham Allison, Essence of Decision: Exploring the Cuban Missile Crisis, Little. Brown, Boston. MA, USA, 1971. ” Harold Lasswell, Politics: Who Gets What, When, and How, Meridian Books, Cleveland, OH, USA, 1958. “Thomas C. Schellino, The Stratew of Conflict, Harvard University Press, Cambridge, MA, USA, 1963; Allison, op tit, Ref 10. I3 David Truman, The Governmenfal Process, Knopf, New York, USA, 1951; Theodore J. Lowi. The End of Liberalism, 2nd ed, Norton, New York, USA, 1979; Randall B. Ripley and Grace A. Franklin, Congress, the Bureaucracy, and Public Policy, Dorsey, Homewood, IL, USA, 1976. I4 Younc W. Kihl and Dong S. Bark, ‘Food policies& a rapidly developing country: the case of South Korea, 1960-l 978’, The Journal of Developing Areas, Vol 16, October 1981, pp 47-70. l5 Ross B. Talbot and Young W. Kihl, ‘The politics of domestic and foreign policy linkages in US-Japanese agricultural policy making’, in Emen/ N. Castle and Kenzo Hemi, eds, &-Japanese Agriculturaal Trade Relations, Resources for the Future, Washington, DC, USA, 1982, pp 275-337. I6 Charles E. Lindblom, ‘The science of muddling through’, Public Administration Review, Vol 19, Spring 1959, pp 79-88; Charles E. Lindblom, The lntelliqence of Democracy: Decision Making -Through M&a/Adjustment, Free Press, New York, USA, 1965. j7 Lindblom, The intelligence of Democracy, ibid. Public ‘* Chong-Bum Korean Lee, Bureaucracy: Search for Pluralistic Society Korea University Press, (in Korean), Seoul, Korea, 1986; Young-Jin Kim, ‘Special Report of the Legislative Oversight on Livestock Policies’ (in Korean), Unified Livestocks, Seoul, Korea, December 1988, pp 46-49.

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We begin this study with a few assumptions well established in political science and public administration, which shall serve as a point of reference for analysis and discussion. The first assumption is that what government does in a democracy is often the outcome of the ‘push and pull’ of domestic politics. International trade decisions - whether made in the USA or in Korea - can be viewed in part as an extension of domestic politics,‘a which is essentially about ‘who gets what, when, and how’.” For the moment, we reject the neoclassical view that government is a ‘rational actor’ with omnipotent power over its people, singularly guided by the game of income maximization in world trade.” Of course, international pressures are real and overwhelming at times. For the purpose of analysis, we assume that the pressures and opportunities generated in the international environment are reflected with varying degrees on the national stakeholders, ie the President, trade representatives, law makers, and significant others. Second, the push and pull of domestic politics largely goes on at the ‘subgovernmental level’ which in the USA consists of executive branch bureaux, special-interest groups and relevant legislative subcommittees.” In Korea, also, the subgovernmental process is ubiquitous;‘4 but, as we shall see later, the dynamics appear to be significantly different from those we know in the USA or Japan.‘” Nevertheless, the concept helps us focus on the relevant power structure within a particular policy arena. Third, policy shifts in Korean subgovernment can be much larger than in the USA. In the USA the decisions made at the subgovernmental level generally take the form of ‘disjointed incrementalism’.16 The decisions and issues at this level are fairly well structured, so the participants rarely look at the whole picture but focus on the incremental changes - deviations from previous agreements and actions. Participants negotiate for short-term consequences, tacitly agreeing on remedial actions if necessary. Since incrementalism finds its genesis in what Lindblom calls ‘partisan mutual adjustment’, a radical policy shift at this subgovernmental level is discouraged.” By contrast, in Korea the pattern of decision making at the subgovernmental level is marked by ‘authoritarian-bureaucratic elitism’.18 Here governmental power is centralized, and bureaucracy remains highly responsive to hierarchical control. Depending on what happens at the macro level of politics, therefore, bureaucracy is entirely capable of making ‘flip-flop’ decisions, deviating significantly from the previous action. The last assumption relevant to our study is about the role that conflict plays in the governmental process. Conflict is a force that disturbs the policy equilibrium. This is because conflict is ‘contagious’,

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environment NATIONAL

w

National cooperatives Independent commodity

I

Figure 1. The environment of agricultural policy making in Korea.

I

and groups

1_1

I

Farmers

I

to use Schattschneider’s word,” and creates a snowball effect attracting otherwise indifferent spectators. The ultimate size of this participation determines the policy outcome. 20 In a way that is unique to Korea in recent years, ‘protest politics’ has emerged as a conflict mechanism to change the established rules of the political game, by which to challenge the otherwise impenetrable ‘authoritarian-bureaucratic elitist’ system.21

Environment

lg E.E. Schattschneider, The Semisovereign People, Holt, Rinehart & Winston, New York, USA, 1960. *’ Truman, op tit, Ref 13, p 19. ” Wonmo Dong, ‘Student activism and the presidential politics of 1987 in South Korea’, in llpyong J. Kim and Young W. Kihl, eds, Political Change in South Korea, PWPA, New York, USA, 1988, pp 169188.

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of agricultural policy making

Figure 1 depicts the environment of agricultural policy making in Korea. The mode1 identifies who are the likely players (institutions and groups) at various strategic points, and where the push and pull of political games is likely to be staged. As the arrows in the diagram indicate, the Korean system operates on a simple logic: public policy-making authority is centralized and hierarchical. Power flows unidirectionally from top to bottom. To understand the dynamics of policy making, the system is best viewed as having two tiers, one at the supercabinet level (macro) and another at the subgovernmental level (micro), the relationship of which is again hierarchical and direct, but fluid. This is in sharp contrast to a fragmented, decentralized system of policy making all too often manifested in the US political system. The authoritarian-bureaucratic system which characterizes the Korean political culture represses popular participation in the policy-making process. This has given birth to ‘protest politics’ - a strategy of conflict that expands involvement in politics. As we shall see later, protest politics forced the former Chun regime to hold a free presidential election in 1987, the first democratic election since 1971. Macro-level policy

With respect

making

to agricultural

policy and trade,

the macro system involves

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Agricultural policy making under international pressures

*‘Spring 1990 witnessed a major party realignment in Korean politics In February 1990 two opposition parties decided to leave their opposition status and to merge with the ruling party under a new name, ‘the Democratic Liberal Party’, thereby giving the ruling party a large legislative majority. As of today, Mr Kim’s Reunification and Democracy Party is the only remaining opposition party. 23 Young W. Kihl and llpyong J. Kim, ‘The Sixth Republic: problems, prospects, and the 1988 Olympiad’, in llpyong and Kihl, op tit, Ref 21, pp 243-251.

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the Blue House (the Executive Office of the President), the Economic Planning Board, the Ministry of Agriculture, the Ministry of Trade and Industry, and the ruling party leadership. Other policy areas would embrace different ministries. The Ministry of Finance controls all revenues, including customs, and is generally interested in finding sufficient revenues. The Ministry of Trade and Industry represents business interests, including export firms and food processing industries, and favours trade policies which ensure increased export markets. The Ministry of Agriculture, Fisheries and Forestry (hereinafter called the Ministry of Agriculture or MAFF) is a rel,ltively small ministry in its share of national budget (7.7% for 1989); but as the name indicates, the ministry is the hub of national agricultural politics. At the macro level, the ministry functions in an advocacy role for the nation’s farmers, promoting the goal of food self-sufficiency, stressing the need for protectionism, and generally resisting agricultural imports. The position that the ministry takes is largely supported by the National Assembly, but it is often at odds with the Economic Planning Board and the Ministry of Trade and Industry. The Economic Planning Board (EPB) is the premier cabinet agency, and it plays a leading role in agriculture as well as in other policy areas. While the EPB’s primary function is revenue forecasting, budgeting and economic planning, it is an important economic adviser (on domestic as well as trade policy) to the President. On economic matters, the EPB’s power and influence are unmatched. Of particular importance among the EPB’s roles is its responsibility for conducting the nation’s longrange economic planning. Past Presidents have used the EPB’s planning process successfully to restructure the national economy. If, for instance, a President’s priority is to develop the nation’s beef cattle industry, the EPB would project that priority in the nation’s long-range economic planning, and subsequently in the budgetary process. With respect to international trade, the EPB leadership is in favour of free trade, in principle, and for doing away with protectionism. In the wake of recent political change, the power of the National Assembly has increased significantly vis-&vis public policy making and public administration. The resurgence of legislative power was caused by the 1988 National Assembly election. The ruling party, the Democratic Justice Party (DJP), captured only 125 of the 299 seats, failing for the first time in the 40-year constitutional history of the Republic of Korea to form a majority coalition.22 The remaining seats went to the three and Democracy opposition parties. Of the three, the Reunification Party (RDP) - a new party created by the former dissident leader from southern rural Korea, Mr Kim Dae Jung - was most successful by winning 70 seats. A major source of RDP seats was its solid majority in Cholla-Do, a large agricultural region which in the past supported the ruling DJP. The 1988 election broke up the rural consensus for the first time in recent history. Rural representation was spread among the DJP and other opposition parties, with the potential to shape future agricultural policy. Of the 224 seats distributed among voting districts - an additional 75 seats were allocated at large - 147 seats (or nearly 66%) went to rural areas (non-metropolitan) whereas 77 seats (or 34%) went the ruling party captured a higher to large urban areas. 23 Overall, percentage of rural representation (71.3%) than opposition parties did (62%), although in absolute numbers the opposition parties edged the ruling party by winning 23 more seats from rural areas. Rural power in

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the National Assembly was demonstrated when the National Assembly in November 1988 unanimously passed an agricultural appropriation bill much larger than the original request from the Ministry of Agriculture. Another significant change, which adds to the power of the National Assembly, resulted from the constitution of 1987. The new constitution restored the legislative oversight function, which had been dormant during two previous administrations. During 1988 an agricultural subcommittee completed a sweeping investigation of administrative malfeasance and possible wrongdoings involving the 1983-85 beef and cattle crisis. It is conceivable that the legislative oversight function may provide an effective instrument by which the opposition party leaders, in particular, are able to influence policy design and implementation. Already the Assembly has asserted its power to approve the price level for rice and to increase sharply appropriations for agriculture. Although important policy decisions continue to be planned at the Blue House, the potential reactions of opposition party leaders cannot be ignored in policy making.24 Subgovernmentalprocess

24Young-Jin KimI OP cirl Bef 18; CnongRim Kim, ‘Potential for democratic change’, in llpyong and Kihl, op tit, Ref 21, pp 44-72.

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For agricultural policy and trade, the policy subsystem (or the micro level) includes the specialized bureaux in the Ministry of Agriculture; legislative committees on agriculture; national cooperatives including the National Livestock Cooperative Federation and the National Agricultural Cooperative Federation; independent commodity groups; and farm protest groups. Just as the Blue House and the ruling party leaders have direct control over the ministry, the agricultural bureaux also tower over the cooperative organizations and individual farmers. With respect to livestock decision making and policy implementation, the Livestock Bureau within the ministry is delegated a broad responsibility. The bureau oversees livestock production, dairy production and pasture development, feed administration, and livestock products and marketing. It also establishes levels of feedgrain imports and beef imports, and issues import licences. The three national cooperatives - one for agriculture, one for livestock and one for fisheries - are large and centralized, and powerful in their control of regional branches. However, they are creatures of public law, under the Ministry of Agriculture, and as of now they are instruments of the Ministry of Agriculture. Farmers have viewed their local cooperative officials as though they were government officials. This may no longer be the case in the future; as we shall discuss, farmers have recently gained the power to elect their local leaders. Within the livestock-related arena of the national government, the Livestock Bureau is the main power broker. The views of the bureau leadership have a significant bearing on key policy issues, policy recommendations, policy design and implementation, regulation and control. Nevertheless, the bureau leaders are not free from presidential intervention. When conflict arises - when opposition party leaders raise charges in the media, or farmers take their grievances to the streets - the Executive Office of the President or the ruling party leaders often intervene in the bureau’s deliberation process. The 1984 import suspenI . sion, debt relief, and raising procurement prices for farm goods represent a few of the latest examples of Blue House intervention. Knowing that the bureaux are relatively subservient to leaders at the

Agricultural policy making under international pressures

macro level, opposition conflict strategy.

political

parties

and farmers

often utilize such a

Protest politics

25Schattschneider, op tit, Ref 19, p 40. ” Ibid, p 67. 27Ibid, p 68. 28 Dong, op tit, Ref 21.

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In a pluralistic society, ‘[i]t is the weak’, observed Schattschneider,25 ‘who want to socialize conflict, ie to involve more and more people in the conflict until the balance of forces is changed’. The chemistry of conflict is that it is ‘contagious’, to use his word, capable of introducing disequilibrium to the otherwise ‘pluralist heaven’. Schattschneider further observed: ‘Conflict is so powerful an instrument of politics that all regimes are of necessity concerned with its management, with its use in governing and with its effectiveness as an instrument of change, described growth and unity [emphasis added] ‘.26 While Schattschneider the role of conflict mainly within the context of US democracy, his logic is equally applicable to other societies, including socialist regimes. Conflict in a bureaucratic-authoritarian system would require a higher threshold for expansion (eg violent clashes) than might otherwise be the case in a more open democracy. Protest politics - some call it ‘street politics’ - is the primary strategy for socializing conflict within Korean politics at present. In a figurative sense, the dynamics of protest politics is that of the ‘squeaky wheel’. The squeakier the wheel, the more grease it gets, because the squeaky part, unless attended to, may soon spread to the entire system. As Schattschneider described it so perceptively some 30 years ago: ‘To destroy the equilibrium is to destroy one government and to create another’.27 Protest politics in Korea did just that, not once but three times within the past 30 years.*s The recent history of Korean politics is to a large extent a history of protest politics, and protest politics has profoundly changed the Korean political landscape. While the old regimes - Rhee, Park and Chun were ushering the country into an era of unprecedented economic growth, they were inadvertently creating conditions for a new dynamic of protest, in that the fruits of the economic miracle were not being equitably shared. Even more importantly, the economic miracle came at the great expense of basic human rights and aspirations for democracy. Masses of people in the streets, led by college students, successfully toppled the Rhee regime in 1961, and other waves of protesters brought down the formidable Chun regime in 1987. As we shall see below, protest politics pervades Korean agricultural politics. In the Korean economic landscape today, farmers feel themselves to be losers relative to urban workers, and they understand the they have efficacy of protest politics: ‘it works’. Equally important, intellectuals and skilled vanguards at their disposal: radical students, liberal intelligentsia and religious advocates. Under the Park administration, farmers were successfully co-opted to the regime via infrastructure improvements in the New Community Movement (popularly known as the ‘Sae-Maul Movement’). Using the cooperative structure the government successfully converted most rice farmers to a ‘green revolution’ technology which enormously increased yields. Yet under the Chun administration the President’s brother, as head of Sae-Maul, instigated a cow-purchase scheme under which farmers were offered generous financing (through the cooperatives) to purchase imported cows at inflated prices. As the cattle supply in-

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creased rapidly while the price nose-dived, many farmers were left with net losses from farming, deeply in debt and angry. During the Park and Chun periods, a massive exodus of population took place from rural Korea to a few metropolitan areas, pushed by depressed farm income and pulled by industrial jobs. In 1960, the farm population represented over 50% of the total population. By 1987, it had shrunk to 18.5%. Most of these rural residents are comprised of older persons.29 Shortage of youthful manpower, relatively low farm income and unmanageable debts characterize the rural Korean economy today. Korean farmers have become increasingly militant. A violent demonstration held on 13 February 1989 in Seoul resulted in a bloody clash between 12 000 farmers and riot police. These farmers had stormed the National Assembly demanding the elimination of use taxes on irrigation water, and particularly, seeking higher procurement prices for vegetable produce. The government earlier had encouraged farmers to reduce tobacco production - because US cigarette imports were to be allowed and instead to grow vegetables. Protestors, initially demanding higher prices for vegetable produce, ended up demanding ‘Down with US pressures’.

Organization

and politics of the livestock farmers

Korean agriculture today is in a state of rapid transition. While the average farm size remains small, production of some commodities particularly livestock - is becoming specialized and is in the hands of relatively few producers, some of them corporate giants. Furthermore, Korean farmers today, including large producers, are becoming increasingly organized, and are also aligning themselves with various advocacy groups which often take a militant posture in promoting farmers’ interests. Among the important organizations are agricultural cooperatives, independent commodity organizations, and national farm advocacy associations. Agricultural

2g Korean Ministry of Agriculture, Fisheries and Forestry, Agricultural Statistical Yearbook, Seoul, Korea, 1988. 3o Choong-II Seo, A Study on the New Structural Design of Agricultural Cooperatives (in Korean), The Korean Rural Economics Institute, Seoul, Korea, December 1987.

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cooperatives

The three Korean agricultural cooperatives - for agriculture, for livestock and for fisheries - are large, highly centralized (at least until now) and influential; they provide many integrated services and are responsible for the ‘management’ of important agricultural programmes. 3o Many producers - particularly large ones - belong to these coope;atives. Large producers have their own purchasing, credit and marketing channels, and therefore find it unnecessary to join the national cooperatives. It is important to note that the national cooperative federations are powerful in their relationship with member farmers, yet weak in influencing public policy. This is because power in Korea flows down the hierarchy, and the cooperatives until now have been so structured as to serve the political interest of the existing regime. This is a major irritant to cooperative officials and farmers alike. As we shall see later, the cooperatives are now undergoing a major structural change, Figure 2 shows the internal structure of the National Livestock Cooperatives Federation. The Livestock Cooperatives Act of 1980 created the present National Livestock Cooperatives Federation (NLCF) by absorbing the existing Livestock Industry Development

Agricultural policy making under international pressures

National

Livestock

Cooperatives

Federation

Specialized

Local livestock cooperatives

livestock:

Livestock farmers union

Livestock farmers

3 Commercial livestock farmers and related industries

Average farmer

Figure 2. Organization of the National Livestock Cooperatives Federation.

Kegular

Source: NLCF, Annual Reporf, 1987.

Associate

” National Agricultural Cooperative Federation, Annual Report (in Korean), Seoul, Korea, 1986. ” Korea Rural Economics Institute, ‘Agricultural cooperatives: organizational problems and prescriptions’, in An Organizational Analysis of Commodity Organizations in Korea (in Korean), Korean Rural Economics Institute, Seoul, Korea, 1986, pp 21-85.

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membership membership

Corporation which was founded in 1978. The NLCF presently has 158 cooperatives with a total of 185 000 member farmers. As Figure 2 shows, the federation is organized into two divisions: the local livestock cooperatives and the specialized livestock cooperatives. The local cooperatives are structured by regional boundaries, and the specialized cooperatives by selected livestock breeds. The specialized cooperatives also include some commercial livestock farmers and livestock-related industries under ‘associate member’ status.” According to the 1980 Livestock Cooperatives Act, the NLCF’s President is appointed by Korea’s President (the Blue House). The federation’s President in turn appoints the Vice-President and trustees, in consultation with the Minister of Agriculture. The Minister of Agriculture retains the power to appoint the auditor in consultation with the Minister of Finance. The federation has a 12-member board of managing directors, and these consist of three representatives each from the Ministry of Agriculture, the Ministry of Finance and the Bank of Korea. The remaining directors are elected by the national general conference, one from the specialized cooperatives and two at large.32 The 1980 law empowered the Minister of Agriculture to supervise the NLCF and to issue policy directives as he deems necessary. He may delegate part of this power to the federation’s President and also to the Provincial Governors. With respect to policy recommendations, the federation’s central leadership alone is empowered to exercise such authority. Since the federation’s central leadership is virtually handpicked by the regime, it is not likely to challenge government policy, nor are member farmers from the bottom of the hierarchy. Although the NLCF’s annual report states without qualification that the federation is an ‘independent corporate body under the Livestock

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33 National Livestock Cooperatives

Federation, Annual Report (in Korean), Seoul, Korea, 1987. 34 Korea Daily, 3 December 1989, p 2. 35 The Special Committee for Democratic Reform, Legislative Record Volume 6, the 144th Korean National Assembly, Seoul. Korea, 1988. 36 Seoul Economist, 15 December 1988, p 1.

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Cooperatives Act ‘,33 in reality the NLCF and the other two cooperatives have been simply instruments of the government, particularly in implementing government programmes and mobilizing farmers. The instrumental function is best understood by what the federation does in day-to-day operation. The NLCF performs two broad functions: cooperative self-help business in service to producer members, and management of government programmes (also called ‘policy business’) in service to the government. The Ministry of Agriculture, which applies one set of definitions, claims that 70% of the federation’s work represents policy management business, while both NACF and NLCF, which apply another set of definitions, contend that policy management business represents only 28.5% of their activities.“4 In general, self-help business includes supplying feeds to livestock producers, handling agricultural imports, serving as the main farmers’ banking and credit institution, providing auctions and a few central markets, and offering productivity training seminars and public information. Farmers argue that these services are essential to them, but the NLCF leadership complains that the self-help business is not self-sustainable. During the 1984-85 cattle crisis, for instance, the NLCF lost a great deal of its cash reserves as many farmers defaulted on their NLCF loans. By contrast, the management of government programmes creates virtually no risk because these government-delegated functions are funded by the Ministry of Agriculture. These include supplying farm chemicals, equipment and other raw materials, and managing special rural development funds and also the livestock development fund (discussed below in more detail). Because policy management is the business of the government, it may interfere with the federation’s mission as it seeks to represent producers’ interests. In summer 1988, the 144th National Assembly instructed its newly established Special Committee on Democratic Reforms to look into possible structural defects in the organization of the National Cooperatives Federations. In November 1988, thousands of farmers and cooperative officials staged a protest in the National Assembly square demanding action to liberalize and improve the self-governance of the national cooperatives. The lawmakers told the farmers that reform legislation was forthcoming which would enable the farmers to elect their own co-op leaders at both the national and local levels.“” The special committee finally reached an agreement on this issue in December 1988. On the structural question, the lawmakers only hinted at the possibility that the cooperatives might be structured independently of the Ministry of Agriculture. The Ministry made it clear that it opposed such a move, arguing that ‘the Federations’ policy management business involves the management of government funds, and therefore, the policy management business should not be exempt from the governmental review process’.36 The agricultural cooperatives in Korea are at a crossroads today. It is unlikely, in our view, that they will be left completely independent of the Ministry’s control so long as the lucrative ‘policy business’ remains within the cooperatives. Of course if the structural reforms - selfgovernance and political independence - do take place, the cooperatives may prove a vehicle for a unified front in producers’ quest for power and influence in the formulation of agricultural policy.

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Agricultural policy making under international pressures Table 1. Independent

a Estimates. Source: This table is derived from Korea Rural Economics Institute, Korea’s Changing Agri-

cultural Sector and the Activation of the Farmer’s Organizations, September 1987, Table 7, p 307.

Associations Herb producers Florists Chicken Pigs Deer and antelope Honey bees Dairy cattle Silk worm

commodity organizations

and membership

size.

All producers

Membership

4 10 303 10 4 51 1 092 91

1 702 1 667 931 1 621 494 2 394 20 000 91 563

oooa 365 000 160 182 500 oooa 563

26.8 16.1 0.3 16.0 11.8 4.7 18 100.0

Independent commodity organizations and other advocacy groups

w Anderson and Hayami, op tit, Ref 8, p 89. 38 The Korea Rural Economics Institute, Korea’s Changing Agricultural Sector and the Resurgence of farm Organizations (in Korean), KREI, Seoul, Korea, 1987, pp 287-319.

428

Farm organizations are also becoming differentiated in their service to producers of different sizes and specialities. New categories of farmer representation include the independent commodity organizations and farmer advocacy groups. Among livestock producers there are commodity organizations for swine, chickens and dairy. The Korea Swine Association, for example, was established in 1974 by several leading producers. Commodity organizations are financed by small membership fees, by additional contributions from members, and by payments for product advertising and promotion. Commodity groups are in the process of seeking producer taxes to provide more adequate funding for all functions, including political advocacy. The initial goals of the independent commodity groups are to upgrade production technology, improve product quality and promote sales. They also seek to provide political representation. Since these groups are ‘structurally’ independent of the Ministry of Agriculture, they are freer than the national cooperatives in making recommendations to the government, and they occasionally help farmers to organize protests. For example, the Korea Swine Association represents producers’ interests in two principal ways: by interacting with leaders within the Ministry of Agriculture, and by engaging in street protests to put pressure on Korea’s President and his Economic Planning Bureau, who are presumed to be more interested in promoting Korean exports than in protecting Korean agriculture. The commodity groups have protested to the US Ambassador as well. The livestock groups work together to oppose beef and other meat imports because they know that Korean consumers are ready to substitute one meat for another in order to realize a price advantage.37 Table 1 lists the major commodity organizations, comparing membership with total number of producers. Table 1 gives an impression that the membership in the specialized, independent commodity organizations is small. The numbers, however, are deceptive because relatively few large operators account for the majority of swine, chicken, and dairy production. 38 The trend towards specialized agriculture is encouraged by farm organizations: Korea’s livestock cooperative has advised farmers they should not expect to make a profit with fewer than 10 hogs, and the Korea Swine Association has suggested a minimum size of 50 hogs. The third set of farmer organizations may be called the ‘advocacy’ groups, and these represent the heart of ‘protest politics’ as we described above. The most active of these groups are the National Catholic Farmers Association, the National Christian Farmers Association and the National Catholic Women’s Association. While these

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Agricultural Table 2. Income and indebtedness unadjusted for inflation).

a Second income means earnings from sources other than crops, eg livestock, vegetables and off-season employment. Source: Ministry of Agriculture, Fisheries and Forestry, Agricultural Statisfical Yearbook, 1987.

policy making under international

per capita Korean farmer,

1977-86

pressures

(‘000 Korean won,

Source

1979

1980

1981

1982

1983

1984

1985

1986

Crop income Second income= Total Debt

1 531 696 2 227 0

1 754 938 2 693 338

2 476 1211 3 687 437

3 031 1 434 4 465 830

3 330 1 797 5 128 1 285

3 699 1 850 5 549 1 784

3 2 5 2

3 677 2318 5 995 2 192

698 037 736 024

organizations generally are issue-oriented and call attention to pressing farm economic issues, they also get involved in ideological advocacy, eg farm income’ and ‘give us ‘restore democracy for farmers’, ‘guarantee local autonomy’. Our own tally based on newspaper reports shows that in 1985 alone the farmers carried out 16 separate nationwide demonstrations, and in 1986, a total of 22 demonstrations. The issues were diverse, ranging from farm debt to procurement policy, imports, water use tax and local self-governance. These groups have been effective in mobilizing farmer turnouts and in building coalitions with other sympathizers (radical student groups, religious groups, opposition political parties).

Income, institutional obstacles and food security During the past few years Korean farmers have taken their problems to the streets, to the National Assembly and to the Blue House. An analysis of these protests reveals that the issues raised by the farmers are essentially of three related types: (1) price support, (2) institutional reform, and (3) food security. In recent protest rallies, beef and cattle imports have often been a target; this is because, in our opinion, the untimely and corrupt cattle purchase programme of 1982-84 drove many family farmers to bankruptcy. However, food imports associated with mistaken policies are not the only cause of farm troubles. Structure of Korean farm income

” The Korean Economic Planning Board, Family Seoul,

Income

Korea,

and Expenditure p

Survey,

84.

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Family farming in Korea today is in trouble. There is a shortage of youthful manpower in the rural areas. Fertilizers and machinery are expensive. The price of agricultural produce is often below the production cost. The future of livestock farming - especially beef cattle - is becoming increasingly uncertain and even risky. Between 1980 and 1986, the average farm household income slightly more than doubled, increasing from 2.3 million won to 5.6 million won, trailing about 10% behind the average city household income.39 The average farm debt during this period, however, increased more than sixfold, as shown in Table 2, from 338 000 won in 1980 to 2 192 000 won in 1986. As crop prices have been kept low, most farmers have been encouraged to get involved in other income-generating activities (‘the second income’) such as raising livestock and growing vegetables and tobacco. In 1986, the second income constituted about 33% of a farmer’s income. Nearly half of this extra income came from support from family members living in cities. This is where, it seems, farmers feel apprehensive about their agricultural future. As we have seen earlier, the cattle crisis of 1984, caused by government policy, left many farmers deeply in debt, and in 1988, the government refused to underwrite relief from a vegetable surplus after it had encouraged tobacco farmers to switch to vegetables. These actions

429

Agricultural policy making under international pressures

increased farmer distrust of government, already deeply rooted feelings of relative deprivation within the Korean society. Institutional

in their

reform

We have seen that the environment of agricultural policy making is hierarchical, and authority devolves downward. The environment provides practically no formal structure by which farmers may directly participate in and influence the making of agricultural policy. To the average farmer, the cooperatives are powerful because they are authorized to allocate important resources. Farmers have little control over the agendas of the cooperatives, and even if they did, it would make little difference because the cooperatives - at least until now - have had little power over what the Ministry of Agriculture does. Korean farmers’ demands include democratizing the cooperatives and guaranteeing local autonomy. The institutional structure is complex, and the political culture of authoritarianism is deeply rooted in the governmental process. 40 Bringing genuine democratic reform to the Korean government process may be an elusive goal for years to come. Food security

Until recently, Korea remained an agrarian society, with food selfsufficiency being the nation’s number one priority. Much has changed in recent years, as the country has emerged as a major exporter - the 12th largest exporter in world trade - with roughly 40% of its GNP coming from international trade. Korea must look at its agricultural sector in the context of its overall economic performance.4’ Yet the country’s recent colonial experience under Japan, and the food shortages which occurred during that period, are too painful to be forgotten. Koreans consider food self-sufficiency as their national goal, and they are extremely sensitive to the question of food security. They are suspicious of foreign powers and are violently anti-colonial. Only in this context can the food self-sufficiency argument be interpreted. No matter how expensive domestic food prices become, the Koreans whether they are farmers, trading firms or consumers - are not likely to abandon agriculture. ‘[T]he general consensus in Korea’, a Korean economist observed recently, ‘seems to be that there should be complete self-sufficiency, at least in rice.‘“2 The ideal of ‘complete’ food self-sufficiency is symbolic at best; yet this symbolic logic is going to define what is acceptable and what not.

Where will Korea go from here?

40Chong-Rim Kim, op tit, Ref 24. 41 Man-Che Kim and Sung-Tae Ro, ‘Korean international macroeconomic policy’, in Thomas 0. Bayard and Soo-Gil Young, eds, Economic Relations Between US and Korea: Conflict or Cooperafion?, The Instituta for International Economics, Washington, DC, USA, 1989, pp 43-65. Q Soo-Gil Young, ‘Korean trade policy: implications for Korea-US cooperation’, in Bayard and Young, ibid, pp 119-l 58.

The Korean political system is under severe and conflicting pressures, both from farmers and rural communities and from its trading partners, including the USA, which wishes to export more agricultural products as a means of correcting the bilateral payment imbalance. What choices are available to Korean policy makers? At an abstract level, the policy options may be found somewhere between the two outer limits, US pressure on the one hand and domestic agricultural politics on the other. In response to US pressure, Korean policy makers could accept the political risk of reducing some import barriers. They might seek to reduce their trade volume with the US by diversifying overseas markets. A far more realistic option for Korean policy makers is to restrucfure their agricultural sector and make it competitive to the extent possible in

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POLICY

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1990

Agricultural policy making under international pressures

the world market. What choices are there in order to rebuild the Korean rural economy? Focusing on the livestock industry - particularly beef cattle - two policy scenarios may be worth pursuing, one with a short-term objective and another with a long-term goal. Price stabilization: a short-term objective The price of beef in the Korean market is generally twice as high as in the US market. Cattle prices are about four times as high as in the USA. If the Korean government, therefore, wishes to save the domestic cattle industry in the presence of beef imports, it must use some sort of quota system for beef imports and maintain a ‘dual price structure’ at least in the short run. In practice, the government would purchase foreign beef at a competitive price, and sell it in the domestic market at a higher price, to protect the domestic price structure. This is essentially what the Roh administration is contemplating. The 6th Five-Year Plan (1987-91) proposed by the Ministry of Agriculture includes livestock price stabilization on the national policy agenda.4” To that end the government in 1988 established the Livestock Farming Promotion Fund (LFPF) which is to be financed by the profits earned from meat imports. The LFPF was placed under the control of the National Livestock Cooperatives Federation, and it establishes the ‘safety-net’ price of native beef cattle and for meat. When the market price falls below the safety net, the LFPF buys up the surplus cattle; and when the price rises, it releases the reserve.44 Restructuring of the beef cattle industry: a long-term policy goal Korean policy makers may in the long run seek to eliminate the dual price structure and gradually introduce a more competitive environment into the beef cattle industry. One National Assemblyman (Chin-Young Kim) made this relevant summary, after having completed his investigation of the Livestock Bureau’s operation: Our livestock industry is far from competitive in the world market. Yet, we cannot continue to refuse to open our markets at a time when this nation plays increasingly an important role in the global society. We cannot continue to conduct our business as usual. The Roh administration and relevant bureaux must investigate the current state of the livestock industry, and study its strengths and weaknesses from which to bring about structural and technological changes and to make the industry competitive internationally. A fundamental policy shift is in order so that farmers can raise and sell livestock at a profit.45

43The

Korean Ministry of Agriculture, Fisheries and Forestry, The Sixth FiveYear Long Range Socio-Economic Developmenf Plan: the Agricultural Sector (in Korean), MAFF, Seoul, Korea, 1987. 44 Daily Economist, Seoul, 9 May 1988, p

” Chin-Young Kim, ‘Special Report of the Legislative Oiersight on Lives&k Policy: policy inconsistencies’, Unified Livesfock Reports, Seoul, Korea, December 1988, pp 50-52.

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1990

Given the existing domestic agricultural politics, one possible alternative is for Korean policy makers to restructure the domestic cattle industry with the aim of improving efficiency. The likely outcome would forsake use of cows as ‘second income’ for farmers, accepting the concentration of cattle production in large operations. Given limited land for cattle pasturage and the need to import feed, the beef industry might in the end be rather small. There is evidence that a transition may already have begun among cattle producers. The total number of cattle has declined from 2.55 million head following the cattle purchase programme in 1985, to 1.6 million head in 1988. Further evidence supports a hvpothesis that the Korean beef cattle industry is shifting fro-m small tdiarge operations. In 1981, 92.7% of beef cattle were concentrated in family farms with less than 10 head as indicated in Table 3; in 1986, only 78.3% were concentrated in these

431

Agricultural policy making under international pressures Table 3. Beef cattle number by herd sizea over selected years, 197547 brackets).

Selected years

(1-9 units)

1975

1 521 (97.8) 1 605 (97.2) 1215 (92.7) 2 077 (89.6) 2110 (82.6) 1 856 (78.3) 1 501 (78.0)

1978 1981 1984 1985

a One unit equals 1000 head. Source: Adapted from a report by the Ministry of Agriculture, Forestry and Fisheries, Agricultural Statistical Yearbook, 1988.

1986 1987

(IQ-49

units)

(percentage

of total in

Large (50 plus units)

1 555 (100) 1 651 (100) 1312 (100) 2318

(694 (12; (46:) 176 Vh6$ (13.6) 379 (16.0) 307 (16.0)

Total

(100) 2 553 (100) 2 370 (100) 1 923 (100)

(3.6) 135 (5.7)

115

(6.0)

farms. The share of beef cattle in large farms between these years increased correspondingly - from 4.5% to 16% for medium-size farms, and from 2.8% to 5.7% for large farms. Large farms achieve some advantage in pricing and distribution of imported feedgrain, which accounts for 70% of all production costs.46 Furthermore, specialized producers may develop their own pastures and other herbage land for hay production. A close examination of the Korean livestock industry reveals that large farms are already turning in this direction, and that the government has for some time been encouraging investment to improve grazing land. Rural industrialization Small beef cattle producers may not find it difficult to leave their uncertain cattle business, should there be opportunities for off-farm employment. In this connection, the Roh administration is currently experimenting with ‘rural industrial parks’ which would include small industrial firms such as food processing factories, road construction firms and other small-scale manufacturing firms built in rural areas. For the first time, the 1989 budget plan designated more than 100 rural industrial sites for such development. The total package spread over the next three years is estimated at US $1.76 billion. While the primary objective of the plan is rural economic development, the parks, if successful, should certainly serve as an important source of rural income.

Conclusion

46Korea Economisf, 47 D. Gale Johnson, St Martin’s 1972, p 20.

Disarray,

432

15 July 1988, p 3. World Agriculture in

Press, London,

UK,

In Korea now as well as in the USA, trade decisions are in part an extension of domestic agricultural politics. Two decades ago, in the context of a US-European Community trade conflict, economist D. Gale Johnson lamented that in most industrial countries it is the domestic farm policies that determine trade policies; trade policies are accommodated to farm policies not vice versa.47 Although the Korean policy-making environment has been described generally as an authoritarian-bureaucratic elitist type, that characterization is being challenged by the dynamics of electoral and protest politics in recent Korea. If control of the national cooperatives is formally given over to their members, farm sector interests even as pursued within the Ministry of Agriculture might be supported through wider participation. Meanwhile specialized producers too are gaining representation

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1990

Agricultural policy making under international pressures

through independent commodity organizations. Domestic farm interests will hereafter be accorded respect by those determining Korean trade policy. Korea’s farmers can sustain a policy of national food self-sufficiency, especially in rice, the basic foodgrain, because farm votes and protests provide a mandate for high support prices, and because earlier development programmes have created an efficient and abundant small farm agriculture. Over the short run, agricultural interests will also be accommodated by protecting beef production on small farms, though this system has resulted in a fiasco of debt-burdened farmers and high beef prices. The beneficiaries of supported meat prices will be the larger, specialized producers, so policy makers must look for more effective ways to generate rural income during rapid industrialization. US pressure on Korea will remain a major factor. However, US producers, although successful in protecting their domestic markets and in subsidizing their exports, cannot claim much previous success in influencing other nations’ agricultural trade policies. For example, US producers were unable to maintain satisfactory access to the European market after the European Economic Community came into being. (Rather, the European Community spectacularly demonstrated how one nation’s agricultural groups can influence other nations’ policies by creating a mutually supportive customs union.) Korea’s agricultural dilemma can be resolved, as revealed by a closer look at the beef import controversy. Korea’s agriculture appears to be largely compatible with that of the USA and some other agricultural trading partners. Indeed, as Korean industrialization builds consumer purchasing power while subtracting labour and other resources from agriculture, the Korean market may provide increasing opportunities not only for the USA, but also for Australia, New Zealand and other agricultural exporters. Agriculture will continue to play a major transitional role in Korea’s rural development. Korean decision makers appear to be fashioning this transition by using the short-range policy of beef protection as a bridge to a more efficient beef industry.

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433