[Op-Ed] Free Trade That Benefits Both Producers and Consumers... Fresh Fruit Import Regulations Should Be Eased

As of March this year, apple prices rose 88.2% from the same month last year

Based on fruit and vegetable prices, Korea’s food inflation has surpassed the OECD average

Agriculture should adopt the logic of competition, not the logic of protection

“Apples have become as expensive as gold.”

Consumers’ worries over inflation are deepening as apple prices continue their steep climb. To state the conclusion first, this is largely due to import restrictions on fresh fruit. Unlike ordinary crops, fresh fruit is, in principle, banned from import. Only 76 fresh fruit items are allowed to be imported into Korea, including persimmons, grapes, and cherries. As a result, for fruits such as apples, pears, and watermelons, only domestic products are permitted. In the name of protecting Korea’s agricultural industry, the supply of affordable and delicious foreign fruit is being restricted.

Because of these import restrictions, consumers pay high prices for a limited range of fruit. According to Statistics Korea, as of March this year, apple prices had soared by as much as 88.2% compared with the same month last year. Based on fruit and vegetable prices, Korea’s food inflation rate has ultimately surpassed the OECD average.

In this way, restrictions on fresh fruit imports raise fruit prices and increase consumers’ overall cost of living. They also reduce the variety of fruit available, infringing on consumers’ freedom of choice. Therefore, opening fruit imports would protect consumers by providing cheaper and more diverse products.

Producers, on the other hand, must move beyond the view that they are objects of protection. There is generally a strong perception that farmers are the weaker party. This perception leads people to treat farmers as subjects to be protected. But is agriculture really something that should be protected? It is not. Rather, because of the unique uncertainty of harvest conditions, it is an industry that needs an inflow of capital to ensure a stable supply of agricultural products.

Once freed from regulatory protection, farmers will strive, together with capital, to secure agricultural competitiveness. Only then can agriculture encounter innovation and development. Ultimately, agriculture too must adopt the logic of competition rather than the logic of protection. Even so, if there are concerns about backlash from farmers, one possible approach would be to introduce a temporary import quota system first. An import quota system is a non-tariff barrier that sets a total import volume and approves imports only within that limit.

In a free market, appropriate prices and production levels can be achieved without import restrictions. At present, fruit prices in Korea are very high compared with international market prices. If affordable and delicious fruit is supplied through import liberalization, prices will settle at an appropriate level in line with international prices. Producers, too, will naturally shift to more profitable crops depending on the success or failure of the apple business. In this way, the principles of supply and demand based on competition are upheld.

The usefulness of free trade has been recognized throughout history. British economist David Ricardo had already demonstrated the benefits of free trade in the 18th century. Suppose there are countries A and B, each producing mobile phones and clothing on their own without trade. Even if country B is less productive than country A in producing both goods, both can still benefit mutually by specializing in the good with the lower opportunity cost and trading. In other words, regardless of the actual level of productivity in each country, trade benefits all participating countries.

Now is the time to support the easing of trade regulations. What we must prioritize is maximizing consumer welfare. No longer should agriculture, including fruit, be seen only as something to protect; instead, let us realize free trade by entrusting it to a free market so that both producers and consumers can benefit mutually.

Daeun Kim, Intern Researcher, Center for Free Enterprise (CFE)

---

Original title: [칼럼] 생산자·소비자 모두 이익 보는 자유무역 필요... 생과일 수입규제 완화해야

Author: Da-eun Kim

Date: 2024-06-14

Source: https://www.cfe.org/bbs/bbsDetail.php?cid=free_opinion&pn=4&idx=26720