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

Korea's FTAs and their implications for the Korean wine market Tim BealVisiting Fellow, KIEPVictoria University of Wellington, NZLecture at Hankuk University of Foreign Studies, Seoul, 19 October 2010OutlineFree Trade AgreementsKorean wine marketEffect of FTA Case of ChileImplications2Tim Beal: Koreas FTAs and wine marketBut first...Something about meSomething about youOr your parents..........3Tim Beal: Koreas FTAs and wine market

4Tim Beal: Koreas FTAs and wine market

Cluttered alcohol market5Tim Beal: Koreas FTAs and wine market

Country of origin very importantBut sometimes they get it wrong!Tim Beal: Koreas FTAs and wine market6InfuencersCustomers are influenced byMedia(specialist) retailersDistributorsImportersSommeliers (wine waiters)In countries where wine is not traditional these are cultural intermediaries

Tim Beal: Koreas FTAs and wine market7

Media: Kami no Shizuku,/Les Gouttes de Dieu/Drops of God8Tim Beal: Koreas FTAs and wine marketSpecialist retail

9Tim Beal: Koreas FTAs and wine marketDistribution channels are key

10Tim Beal: Koreas FTAs and wine marketRole of importers

11Tim Beal: Koreas FTAs and wine marketSommeliers cultural intermediaries

12Tim Beal: Koreas FTAs and wine market

Conference Budapest, Hungary, September 2010

Michel Rod (Carleton University, Canada)Tim Beal (Victoria University of Wellington, NZ) Nick Ellis (University of Leicester, UK)

26th IMP Conference 2010Business Networks Globality, Regionality, Locality

AGENTS OF GLOBALITY: THE ROLE OF CULTURAL INTERMEDIARIES IN THE WINE MARKETS OF JAPAN AND SINGAPORE Customers seek knowledge

14Tim Beal: Koreas FTAs and wine marketResearchers seek knowledge

15Tim Beal: Koreas FTAs and wine marketAnalysing wine can be hard work

16Tim Beal: Koreas FTAs and wine marketBut sometimes we have fun

17Tim Beal: Koreas FTAs and wine marketFTAsFree 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.18Tim Beal: Koreas FTAs and wine marketMultilateral FTAsASEAN 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]

19Tim Beal: Koreas FTAs and wine marketBilateral FTAsMany hundreds, egPeople's Republic of China has bilateral agreements with the following SARs, countries and blocs: ASEAN ASEANChina Free Trade AreaChileHong Kong Mainland and Hong Kong Closer Economic Partnership Arrangement (CEPA)Macau Mainland and Macau Closer Economic Partnership Arrangement (CEPA)Pakistan China Pakistan Free Trade AgreementPeru ChinaPeru Free Trade AgreementNew Zealand New Zealand China Free Trade AgreementThailandSingaporeTaiwan Economic Cooperation Framework Agreement

20Tim Beal: Koreas FTAs and wine marketKoreas FTAsFTAs 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 FTAFTAs 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 FTA21Tim Beal: Koreas FTAs and wine marketWine source countries in Koreas FTA pipeline22Tim Beal: Koreas FTAs and wine marketWine and Koreas FTAsTariff on wine is 15%Liquor tax: 30%Education tax:10%Value added tax: 10%ComplementarityNo substantial domestic wine production so no opposition to imports

23Tim Beal: Koreas FTAs and wine marketYou and wine(Grape) wine is new to KoreaWhat is your experience/ perception?What about your parents, grandparents?24Tim Beal: Koreas FTAs and wine marketWine where it comes fromOriginally the Mediterranean>>Old World wineTransplanted with European settlement to the New World>>>New World wineAlso Emerging World wineChina, India, and other places where wine can be made

25Tim Beal: Koreas FTAs and wine marketWorld of wine Old and New

26Tim Beal: Koreas FTAs and wine market

Old World versus New WorldWorld wine production 200827Tim Beal: Koreas FTAs and wine marketKorean wine marketMain source countries in import profileWine in Korean alcohol marketWine as imported alcoholImports of wineWhere does it come from?Chile28Tim Beal: Koreas FTAs and wine market

Main wine source countries in Koreas total imports,200929Tim Beal: Koreas FTAs and wine marketShares of main types in Korean alcohol market, 2006-830Tim Beal: Koreas FTAs and wine marketImported wines and spirits, 2004-9

31Tim Beal: Koreas FTAs and wine marketWines share of imported alcohols, 2004-2009

32Tim Beal: Koreas FTAs and wine marketKoreas imports of wine, 1990-2009

33Tim Beal: Koreas FTAs and wine marketWhere does the wine come from?Highly concentratedSeven countries = 60%Ten countries= 95-98%All in the FTA pipeline34Tim Beal: Koreas FTAs and wine marketShares of top seven wine source countries, 1990-2009

35Tim Beal: Koreas FTAs and wine marketFrench and German shares of Koreas wine imports, 1990-2009

36Tim Beal: Koreas FTAs and wine marketKoreas wine imports from selected source countries, 1990-2009, by share

37Tim Beal: Koreas FTAs and wine marketKoreas wine imports, by type, 2003-9

38Tim Beal: Koreas FTAs and wine marketChiles share of Koreas wine imports, 1990-2009

39Tim Beal: Koreas FTAs and wine marketChile conundrumFTA did not bring about a drop in prices of Chilean wineBut imports went upWhat is happening?Tariff reduction over five yearsNo great incentive for importers/ trade to lower prices

40Tim Beal: Koreas FTAs and wine marketGovernment and industryChilean government and industry target KoreaHeavy promotion of Chilean wineKorean wine importers get better returns from Chilean winesPush Chilean winesKorean government happy that wine is a success story41Tim Beal: Koreas FTAs and wine marketCustomer perceptionChilean wines perceived to be better value for money because no tariffEndorsement effect Korea is endorsing Chilean productsWine becomes representative product of Chile42Tim Beal: Koreas FTAs and wine marketEffect of future FTAsEU comes in July 2010US when?Will increase competition, pressure on pricesEffects uncertainChile cannot be repeatedWine industry is complex, future difficult to predictBut...........43Tim Beal: Koreas FTAs and wine marketWine is about enjoyment

44Tim Beal: Koreas FTAs and wine market