Doing Business in KoreaOctober 22, 2008

Ken Nye, Commodity Specialist Michigan Farm Bureau

Why trade is important to agriculture?American agriculture is very trade dependent

We sell one-quarter of our production overseas.

Agricultural productivity is increasing nearly twice as fast as domestic demand.

Most of our new opportunities are with the 96% of consumers who live beyond our borders.

Source: USDA/FAS

Foreign Population Gains

2.0%

9.0%

36.0%

53.0%0.2%

Consider These:The Chinese fast food sector will grow from

$52 bil. in 2007 to $66 bil. in 2009.Per capita consumption of dairy products in

the U.S. continues to decline, but they are jumping in China and India; up 50 bil. pounds since 2002.

China’s middle class is currently 250 million strong and projected to hit 400 million in 2010.

Why trade is important to agriculture?

Agriculture receives far more than its’ share of recognition in trade discussions.Food is unique & politically sensitive

Everyone eats, Many countries desire to be self sufficient, What about the poor subsistent farmer?

Even in the U.S. some farm products are sensitive.

Why trade is important to agriculture?The benefits of expanding trade opportunities in

agricultural products tend to flow to all domestic producers and handlers, irrespective of their actual involvement in any international sales.“The rising tide of trade tends to lift all ships.”Examples:

Corn is corn regardless where it is grown or used for, Intra-commodity impact, Inter-commodity impact.

In spite of the importance of trade there are anti-trade sentiments within agricultural circles.

Current U.S. Agricultural TradeAgricultural exports in 2008 are projected

to reached a record high of $114 billion, up form $62.4 billion in 2005.Much of the increase is in high value

products.

Agricultural imports will also set a record in 2008, expected to be $79 billion, up from $57.7 billion in 2005.Includes both competitive and

complementary products.

Major U.S. Export Markets2008 Billion $

Canada 16.1Mexico 15.2China & Hong Kong 14.0EU 27 10.8South Korea 5.6Taiwan 3.6Egypt 2.2

A Look at KoreaMajor economic power; an Asian Tiger;Slightly larger than Indiana, but with 48 mil.

people;GDP: 75 % services, 17% industry and 7.5%

agricultureRelatively large importer of agricultural products;

Cereals, root crops, sugar and sweeteners, vegetable oils, meat products;

Not much of an agricultural export player;Korea’s agricultural sector is still important;Attitudes regarding international trade are highly

charged and carried out for public display.

What do we sell to Korea?Jan-Aug 2008 (Mil.

$)Coarse Grains 1,788Wheat 404Red Meat 255Hides & Skins 217Feed & Fodder 204Fish & Seafood 195Soybeans 143Fresh Fruit 131 Cotton 95

Korea – US Free Trade AgreementEliminates and phases out tariffs and quotas;2/3 of our agricultural exports will enter duty

free at beginning of agreement;Restrictions on many other products phased

out in first 10 years;Primary opportunities for Michigan are:

Dairy, feed grains, soybeans, beef, vegetables and dry beans;

Some concerns with Korean restrictions on beef.

A Few Policy ConsiderationsHow will today’s financial problems affect

worldwide supply and demand for agricultural products?

Will we have a successful conclusion to the Doha Round, and will changes be require in U.S. domestic farm programs as a result of Doha?

Will other countries continue to attack our current farm programs through the WTO?

Will the new administration in D.C. continue to pursue bi-lateral trade agreements and will they receive support in the new Congress?