Korean beef in Global Commerce Policy
In this regard, a definition of this issue is as follows: three separate cases launched against the Republic of Korea by Australia, New Zealand and the United States in 1988 concerning its beef import restrictions. The facts, common to all three cases, were that since Korea’s accession to the GATT in 1967 it had maintained import restrictions for balance-of-payments reasons on a wide range of products, including beef. Korean imports of beef had risen rapidly since 1979, partly as the result of a tariff reduction that year from 25% to 20%, bound at the lower level. This led to pressures from Korean beef farmers for protection from the adverse effects of beef imports. The entries on trade policy are here. In October 1984 Korea halted issuing tenders for commercial imports of beef into the general market, and in May 1985 imports of high-quality beef for the hotel market were also stopped. No further commercial imports of beef took place until August 1988 when the market was partly reopened. These actions had not been reported to the GATT Balance-of-Payments Committee. Beef imports were made under a domestic licensing mechanism, and they were subject to a certain base price level which applied both to wholesale auctions and direct sales. The base price was at first announced, but later it was assumed to be implicit under the conditions for these imports. The entries on trade policy are here. At a meeting of the Balance-of-Payments Committee in December 1987 the prevailing view among participants, except Korea, was that Korea’s current situation and the outlook for its balance of payments could no longer justify import restrictions under GATT Article XVIII:B (Governmental Assistance to Economic Development). This Article allows developing countries to institute and maintain import restrictions to conserve their foreign exchange and to promote their economic development. The entries on trade policy are here. All three complainants argued that the Korean import restrictions on beef had been based solely on domestic supply and demand and the need for industry protection. The United States noted that Korean restrictions on the import of beef appeared to bear an inverse relationship to its balance-of-payments situation. Therefore, the restrictions had to be judged under the provisions of Article XI (General Elimination of Quantitative Restrictions). New Zealand argued that although Korea was entitled to maintain its tariff on beef, it retained a web of additional restrictions that severely depressed the level of imports beyond what would be the case if there was a tariff-only regime. These restrictions were clearly contrary to Article XI:1. The entries on trade policy are here. Australia, New Zealand and the United States also argued that the Korean import system acted as a price equalization mechanism resulting in an excessive monopoly return which effectively increased protection beyond that available through the bound tariff rate. The sole importer was in their view an authorized import monopoly in terms of GATT Article II:4 (Schedules of Concessions), and its price mark-up on imports was in contravention of that Article and in excess of the tariff bound at 20%. The entries on trade policy are here. Article II:4 stipulates that import monopolies must not operate so as to afford protection in excess of the amount provided for in that country’s tariff schedule. The United States also argued that the Korean imposition of import surcharges was inconsistent with Article II:1(b) which prohibits all import charges other than those set out in schedules of concessions. New Zealand considered that there had been a noticeable lack of transparency in the administration of Korean measures affecting beef imports, and that this violated Article X (Publication and Administration of Trade Regulations) of the GATT. The entries on trade policy are here. Australia and the United States made subsidiary claims concerning the lack of transparency, and they questioned, as did New Zealand, the extent to which the import restrictions had been applied in a non-discriminatory manner. The entries on trade policy are here. Each of the three separate cases was supported by third-country submissions from the other two complainants. The gist of the Korean response was that as long as it was permitted to maintain quantitative restrictions justified under Article XVIII:B, these had to be administered as laid down in Article XIII (Non-discriminatory Administration of Quantitative Restrictions). The regular consultations under Article XVIII:B in any case blocked a challenge of the GATT compatibility of its restrictions, and it supported its claim in this regard with detailed procedural argument. The panel considered that Korea maintained two sets of import restrictions on beef: (a) the measures taken in 1984 and 1985, subsequently relaxed, and (b) restrictions based on Article XVIII:B since 1967. The entries on trade policy are here. It found that the first set of restrictions had been taken for reasons of protecting domestic suppliers, and they were therefore contrary to Article XI:1 which did not permit either import restrictions or import prohibitions. The entries on trade policy are here. As far as Korea’s defence of its import restrictions under Article XVIII:B was concerned, the panel noted that all the available information showed that Korea’s balance-of-payments position continued to improve at a good pace, and that the current economic indicators for Korea were very favourable. The entries on trade policy are here. It therefore found that there was a need for the prompt establishment of a timetable for the phasing-out of Korea’s balance- of-payments restrictions on beef. Concerning the Korean import monopoly under the provisions of GATT Article II, the panel considered that it would be inappropriate to apply Articles II:1(b) and II:4 to this case in view of the existence of quantitative restrictions. The price premium would disappear once the restrictions had been removed. The panel did not consider further whether Korea had applied the import restrictions in a discriminatory manner or whether there had been insufficient transparency since it had already found against the restrictions themselves. The entries on trade policy are here. Its recommendations were that (a) that Korea eliminate or otherwise bring into conformity with the provisions of the GATT the import measures introduced in 1984-85 and amended in 1988, and (b) that Korea hold consultations with Australia, New Zealand and the United States to work out a timetable for the removal of import restrictions on beef justified since 1967 by the use of the GATT balance-of-payments provisions. See also balance-of-payments consultations.
Korean beefin the wold Encyclopedia
For an introductory overview on international trade policy, see this entry.
Notes and References
- Dictionary of Trade Policy, “Korean beef” entry (OAS)