Fresh Fruits, Nuts, and Vegetables
South Korea's production of fruits, vegetables, and nuts is large,
the harvest coincides with peak U.S. production, and import barriers
are high. Nevertheless, U.S. fruits and nuts are finding increasing
markets in South Korea because of their quality, low cost, and variety.
U.S. exports of fresh fruits, vegetables, and nuts to South Korea
have grown strongly over the last 15 years, and exceeded $170
million
in 2005. Oranges are the largest item in this trade. Strong growth
is likely to continue over the next decade, but significant trade
will be largely confined to several commodities, rather than all
fruits and vegetables. This is because South Korea produces an
abundance
of vegetables and many fruits (apples, pears, persimmons, and peaches).
Production is relatively profitable compared to other parts of
South
Korean agriculture. The fruit and vegetable share of total agricultural
output value is almost one-third. The U.S. season for many fruits
and vegetables is the same as South Korea's, implying head-to-head
competition. South Korea's tariff-rate
quota barriers are quite high in this sector. However, citrus
fruits, nuts, and certain noncitrus fruits and vegetables have
very
favorable import prospects.
Fruits. The United States exports
oranges, grapefruit, lemons, grapes, sweet cherries, and kiwi fruit
to South Korea. Raisins lead in dried fruit exports. Tariffs range
from 30 percent for raisins to 50 percent for oranges, and there is
a tariff-rate quota on orange imports. The ban on grape imports ended
January 1, 1996 and the absolute quota on oranges July 1, 1997, allowing
South Korea's imports to grow more quickly.
Under the orange tariff-rate quota that began in 1997, tariffs
of 50 percent apply within the quota. The size of the quota increased
each year until 2004. The tariff on imports over the quota amounts
declined from 84.3 percent in 1997 to 50 percent in 2004. Thus,
the quota was effectively removed in 2004, because tarriffs are
the same for imports within and above it. South Korea produces few
true oranges but harvests a large crop of tangerines, almost all
from the southern island of Cheju. Imported navel oranges are extremely
popular. Government-mandated markups of 50 percent or more at both
the wholesale and retail levels, in addition to the 50-percent tariff,
were typical during the period of the absolute quota. Compared to
those levies, the current tariffs represent lower barriers. Imports
of grapefruit and lemons have been aided by tariff reductions, from
44 percent in 1997 to 30 percent in 2004, and raisin tariffs fell
from 30 percent to 21 percent. The tariff on kiwis and fresh grapes
has dropped very little, but both fruits are favored by South Korean
consumers. U.S. kiwifruit are valued for their size and appearance,
while U.S. grapes mature over a longer season than South Korea's,
so that they can be sold before and after South Korean grapes.
Nuts. Almonds constitute over
half of U.S. nut shipments to South Korea, and only oranges are
a more important horticultural export. South Korea produces virtually
no almonds, and they are popular with consumers. The tariff on
shelled almonds fell to 21 percent in 2004. Walnuts are the second most
important U.S. nut export. Unlike almonds, they are produced in
South Korea. The tariff on shelled walnuts dropped to 30 percent in 2004. U.S.
exports of pistachios and pecans should have good prospects. U.S.
exports of mixtures of nuts and mixtures of nuts and fruits could
grow, but face high tariffs—45 percent in 2004.
Vegetables. South Koreans
have always eaten large amounts of vegetables, and vegetable consumption
is expected to remain high. While the labor force in agriculture in
South Korea is declining, it is also shifting away from work on rice
production and into vegetable production. For the next decade, it
is likely that South Korea's farmers, with financial assistance in
infrastructure, buildings, and equipment from the government, will
continue to become more efficient vegetable growers. Extensive use
of vinyl greenhouses extends the vegetable season and boosts yield
and quality above that in open-field operations, although at a cost.
In general, tariffs on fresh vegetables were 27 percent in 2004.
Exceptions are onions, garlic, peppers, and potatoes (50-percent
tariffs under a tariff-rate quota), sweet potatoes (20 percent,
under a tariff-rate quota) and lettuce (45 percent in 2004). In
years of normal weather, tariff-rate quotas on the five major vegetables
(potatoes, sweet potatoes, onions, garlic, and peppers) constrain
trade, with extremely high tariffs prohibiting imports above the
quotas. However, in the case of a weather-caused production shortfall,
South Korea is likely to import large quantities at the in-quota
rate.
The main source of fresh vegetable imports is China, which dominates
most subcategories of the trade and supplies over two thirds of
the total value of vegetable imports each year. U.S. exports of
fresh vegetables are usually relatively small. However, in some
years, South
Korea imports significant amounts of U.S. onions, to make up for
production shortfalls.
For sustained growth in trade, uncertainty over delays in port
clearance needs to be addressed. Bilateral negotiations between
the United States and South Korea in 1995-97 made progress in ending
or reducing practices that lengthen the time it takes to clear the
ports, although problems remain in implementing agreements. Opportunities
for sustained growth in U.S. exports are best for vegetables which
grow better, or in more varieties, in the United States than in
South Korea. Examples include fresh beans, carrots, asparagus, lettuce,
broccoli, and cauliflower.
The Foreign Agriculture Service product brief on the Fresh
Fruits and Vegetables Market (August 2000) contains a statement
of phytosanitary barriers and concerns.
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