Korea's FTAs and their implications for the Korean
Korea's FTAs and their implications for the Korean wine market Tim Beal Visiting Fellow, KIEP Victoria University of Wellington, NZ Seminar at KIEP, 25 October 2010 Perspective and Objectives Marketing perspective Not economist Focus on wine market rather than FTA Examine impact Chile-Korea FTA on wine market Identify differences between Chile and EU FTAs Consider implications for future of Korean wine market Outline Wine countries in FTA pipeline
Korean wine market Impact of Chile FTA Differences between Chile and EU FTAs KORUS? Whence to for Korean wine market? ........but first, some background Wine research Cultural intermediaries those individuals who serve to provide a bridge between different cultures; as cultural intermediaries - how they influence taste and the process of foreign culture assimilation/incorporation. Cultural intermediary usually people But also media Kami no shizuku>>Korea Conference Budapest, Hungary, September 2010
26th IMP Conference 2010 Business Networks Globality, Regionality, Locality AGENTS OF GLOBALITY: THE ROLE OF CULTURAL INTERMEDIARIES IN THE WINE MARKETS OF JAPAN AND SINGAPORE Michel Rod (Carleton University, Canada) Tim Beal (Victoria University of Wellington, NZ) Nick Ellis (University of Leicester, UK) FTA research Complements micro research on customers, cultural intermediaries, etc Macroeconomic environment in which actors play their roles in markets KIEP Working Paper Reports, government websites, media articles, etc Statistics KIEP library (Jeong YeunJu) Interviews Industry players (importers, distributors)
Trade officials KIEP experts Dr Kitae Sohn, Dr Nakkyun Choi Wine source countries in Koreas FTA pipeline D: Under consideration Argentina C:Under negotiation Australia New Zealand B: Concluded EU - France, Italy, Germany, etc. US Tim Beal: Koreas FTAs and wine market A: In effect Chile
11 Wine and Koreas FTAs Tariff on wine is 15% Liquor tax: 30% Education tax:10% Value added tax: 10% Complementarity No substantial domestic wine production so no opposition to imports Government sees it as a benefit with which to sell FTAs Tim Beal: Koreas FTAs and wine market 12 World of wine Old and New Tim Beal: Koreas FTAs and wine market 13 Old World versus New World World wine production 2008
Tim Beal: Koreas FTAs and wine market 14 Korean wine market Main source countries in import profile Wine in Korean alcohol market Wine as imported alcohol Imports of wine Where does it come from? Chile Tim Beal: Koreas FTAs and wine market 15 Main wine source countries in Koreas total
imports,2009 Main wine source countries in Korea's total imports, 2009 United States Australia Germany France FTA Status Status A: Chile Status B: US, Germany, France, Italy Status C: Australia, New Zealand Status D: South Africa, Argentina Chile Italy South Africa New Zealand
2002 2003 Tim Beal: Koreas FTAs and wine market 2004 2005 2006 2007 2008 2009 24 Koreas wine imports, by type, 2003-9 Korea's wine imports, by type, 2003-9 140 120
Red US$millions 100 80 60 40 White 20 0 2003 2004 2005 2006
Tim Beal: Koreas FTAs and wine market 2007 2008 2009 25 Chiles share of Koreas wine imports, 19902009 Chile's share of Korea's wine imports, 1990-2009 25 December 1999: negotiations begin October 2002: negotiations completed February 2003; FTA signed 1 April 2004: FTA becomes effective; wine tariffs to be phased out over five years 2009: Tariffon Chilean wine finally abolished 20 15
2000 2001 2002 Tim Beal: Koreas FTAs and wine market 2003 2004 2005 2006 2007 2008 2009 26 Chile conundrum
FTA did not bring about a drop in prices of Chilean wine But imports went up What is happening? Tariff reduction over five years No great incentive for importers/ trade to lower prices Tim Beal: Koreas FTAs and wine market 27 Government and industry Chilean government and industry target Korea Heavy promotion of Chilean wine Korean wine importers get better returns from Chilean wines Push Chilean wines Korean government happy that wine is a success story Tim Beal: Koreas FTAs and wine market
28 Customer perception Chilean wines perceived to be better value for money because no tariff Endorsement effect Korea is endorsing Chilean products Wine becomes representative product of Chile Attention effect much publicity Positive image effect Chile v China Tim Beal: Koreas FTAs and wine market 29 Effect of future FTAs EU comes in July 2010 US when? Will increase competition, pressure on prices Because of recession, industry (and customers) are used to discounted prices Effects uncertain Chile cannot be repeated
Wine industry is complex, future difficult to predict Tim Beal: Koreas FTAs and wine market 30 Whence the Korean wine market? Will wine market move to a new stage with the stimulus of EU FTA, and economic recovery? Will wine become a normal product? Not just for celebrations, foreign meals, etc Not to be dumped in hard times Will it become indigenised? Will wine become indigenised? Precedents Is beer thought of as un-Korean? Other countries have gone through this process Eg Britain, Australia, New Zealand......... Unanswered question for discussion Appreciate your views
One final thought, to cheer up economists Thomas Carlyle Described economics as the dismal science But there is one consolation....... Wine is about enjoyment Tim Beal: Koreas FTAs and wine market 34
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