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Korea's FTAs and their implications for the Korean wine market. Tim Beal Visiting Fellow, KIEP Victoria University of Wellington, NZ Lecture at Hankuk University of Foreign Studies, Seoul, 19 October 2010. Outline. Free Trade Agreements Korean wine market Effect of FTA – Case of Chile

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korea s ftas and their implications for the korean wine market

Korea's FTAs and their implications for the Korean wine market

Tim Beal

Visiting Fellow, KIEP

Victoria University of Wellington, NZ

Lecture at Hankuk University of Foreign Studies, Seoul, 19 October 2010

outline
Outline
  • Free Trade Agreements
  • Korean wine market
  • Effect of FTA – Case of Chile
  • Implications

Tim Beal: Korea’s FTAs and wine market

but first
But first...
  • Something about me
  • Something about you
    • Or your parents..........

Tim Beal: Korea’s FTAs and wine market

cluttered alcohol market
Cluttered alcohol market

Tim Beal: Korea’s FTAs and wine market

country of origin very important but sometimes they get it wrong
Country of origin very importantBut sometimes they get it wrong!

Tim Beal: Korea’s FTAs and wine market

infuencers
Infuencers
  • Customers are influenced by
    • Media
    • (specialist) retailers
    • Distributors
    • Importers
    • Sommeliers (wine waiters)
  • In countries where wine is not traditional these are cultural intermediaries

Tim Beal: Korea’s FTAs and wine market

media kami no shizuku les gouttes de dieu drops of god
Media: Kami no Shizuku,/Les Gouttes de Dieu/Drops of God

Tim Beal: Korea’s FTAs and wine market

specialist retail
Specialist retail

Tim Beal: Korea’s FTAs and wine market

distribution channels are key
Distribution channels are key

Tim Beal: Korea’s FTAs and wine market

role of importers
Role of importers

Tim Beal: Korea’s FTAs and wine market

sommeliers cultural intermediaries
Sommeliers – cultural intermediaries

Tim Beal: Korea’s FTAs and wine market

slide13
Michel Rod (Carleton University, Canada)

Tim Beal (Victoria University of Wellington, NZ)

Nick Ellis (University of Leicester, UK)

Conference – Budapest, Hungary, September 2010

26th IMP Conference 2010Business Networks – Globality, Regionality, LocalityAGENTS OF GLOBALITY: THE ROLE OF CULTURAL INTERMEDIARIES IN THE WINE MARKETS OF JAPAN AND SINGAPORE

customers seek knowledge
Customers seek knowledge

Tim Beal: Korea’s FTAs and wine market

researchers seek knowledge
Researchers seek knowledge

Tim Beal: Korea’s FTAs and wine market

analysing wine can be hard work
Analysing wine can be hard work

Tim Beal: Korea’s FTAs and wine market

but sometimes we have fun
But sometimes we have fun

Tim Beal: Korea’s FTAs and wine market

slide18
FTAs
  • Free trade area is a type of trade bloc, a designated group of countries that have agreed to eliminate tariffs, quotas and preferences on most (if not all) goods and services traded between them. Countries choose this kind of economic integration form if their economical structures are complementary.

Tim Beal: Korea’s FTAs and wine market

multilateral ftas
Multilateral FTAs
  • ASEAN Free Trade Area (AFTA)
  • Central American Integration System (SICA)
  • Central European Free Trade Agreement (CEFTA)[1]
  • Common Market for Eastern and Southern Africa (COMESA)
  • G-3 Free Trade Agreement (G-3)
  • Greater Arab Free Trade Area (GAFTA) - June 1957[2]
  • Gulf Cooperation Council (GCC)
  • North American Free Trade Agreement (NAFTA)[3]
  • Southern African Development Community (SADC)
  • South Asia Free Trade Agreement (SAFTA)[4]
  • Trans-Pacific Strategic Economic Partnership (TPP)[5]

Tim Beal: Korea’s FTAs and wine market

bilateral ftas
Bilateral FTAs
  • Many hundreds, eg
  • People's Republic of China has bilateral agreements with the following SARs, countries and blocs:
    • ASEANASEAN–China Free Trade Area
    • Chile
    • Hong KongMainland and Hong Kong Closer Economic Partnership Arrangement (CEPA)
    • MacauMainland and Macau Closer Economic Partnership Arrangement (CEPA)
    • PakistanChina – Pakistan Free Trade Agreement
    • PeruChina–Peru Free Trade Agreement
    • New ZealandNew Zealand – China Free Trade Agreement
    • Thailand
    • Singapore
    • TaiwanEconomic Cooperation Framework Agreement

Tim Beal: Korea’s FTAs and wine market

korea s ftas
Korea’s FTAs
  • FTAs in effect
  • - Korea-Chile FTA
  • - Korea-Singapore FTA
  • - Korea-EFTA FTA
  • - Korea-ASEAN FTA
  • - Korea-India CEPA
  • Concluded FTAs
  • - Korea-U.S. FTA
  • - Korea-EU FTA
  • - Korea-Peru FTA
  • FTAs under negotiation
  • - Korea-Canada FTA
  • - Korea-Mexico FTA
  • - Korea-GCC FTA
  • - Korea-Australia FTA
  • - Korea-New Zealand FTA
  • - Korea-Colombia FTA
  • - Korea-Turkey FTA
  • FTAs under consideration
  • - Korea-Japan FTA
  • - Korea-China FTA
  • - Korea-China-Japan FTA
  • - Korea-MERCOSUR TA
  • - Korea-Russia BEPA
  • - Korea-Israel FTA
  • - Korea-SACU FTA

Tim Beal: Korea’s FTAs and wine market

wine source countries in korea s fta pipeline
Wine source countries in Korea’s FTA pipeline

Tim Beal: Korea’s FTAs and wine market

wine and korea s ftas
Wine and Korea’s 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

Tim Beal: Korea’s FTAs and wine market

you and wine
You and wine
  • (Grape) wine is new to Korea
  • What is your experience/ perception?
  • What about your parents, grandparents?

Tim Beal: Korea’s FTAs and wine market

wine where it comes from
Wine – where it comes from
  • Originally the Mediterranean
  • >>Old World wine
  • Transplanted with European settlement to the New World
  • >>>New World wine
  • Also ‘Emerging World wine’
    • China, India, and other places where wine can be made

Tim Beal: Korea’s FTAs and wine market

world of wine old and new
World of wine – Old and New

Tim Beal: Korea’s FTAs and wine market

old world versus new world world wine production 2008
Old World versus New WorldWorld wine production 2008

Tim Beal: Korea’s FTAs and wine market

korean wine market
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: Korea’s FTAs and wine market

main wine source countries in korea s total imports 2009
Main wine source countries in Korea’s total imports,2009

Tim Beal: Korea’s FTAs and wine market

shares of main types in korean alcohol market 2006 8
Shares of main types in Korean alcohol market, 2006-8

Tim Beal: Korea’s FTAs and wine market

imported wines and spirits 2004 9
Imported wines and spirits, 2004-9

Tim Beal: Korea’s FTAs and wine market

wine s share of imported alcohols 2004 2009
Wine’s share of imported alcohols, 2004-2009

Tim Beal: Korea’s FTAs and wine market

korea s imports of wine 1990 2009
Korea’s imports of wine, 1990-2009

Tim Beal: Korea’s FTAs and wine market

where does the wine come from
Where does the wine come from?
  • Highly concentrated
  • Seven countries = 60%
  • Ten countries= 95-98%
  • All in the FTA pipeline

Tim Beal: Korea’s FTAs and wine market

shares of top seven wine source countries 1990 2009
Shares of top seven wine source countries, 1990-2009

Tim Beal: Korea’s FTAs and wine market

french and german shares of korea s wine imports 1990 2009
French and German shares of Korea’s wine imports, 1990-2009

Tim Beal: Korea’s FTAs and wine market

korea s wine imports from selected source countries 1990 2009 by share
Korea’s wine imports from selected source countries, 1990-2009, by share

Tim Beal: Korea’s FTAs and wine market

korea s wine imports by type 2003 9
Korea’s wine imports, by type, 2003-9

Tim Beal: Korea’s FTAs and wine market

chile s share of korea s wine imports 1990 2009
Chile’s share of Korea’s wine imports, 1990-2009

Tim Beal: Korea’s FTAs and wine market

chile conundrum
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: Korea’s FTAs and wine market

government and industry
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: Korea’s FTAs and wine market

customer perception
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’

Tim Beal: Korea’s FTAs and wine market

effect of future ftas
Effect of future FTAs
  • EU comes in July 2010
    • US when?
  • Will increase competition, pressure on prices
  • Effects uncertain
  • Chile cannot be repeated
  • Wine industry is complex, future difficult to predict
  • But...........

Tim Beal: Korea’s FTAs and wine market

wine is about enjoyment
Wine is about enjoyment

Tim Beal: Korea’s FTAs and wine market