WTO Dispute Settlement - Korea Beef
Delivering trade liberalisation from the border to the butcher's shop
Korea is Australia's third largest market for beef. As a result of a GATT challenge in 1988, Korea undertook limited import liberalisation, but maintained a range of restrictions on imported beef.
In 1999, Australia and the United States initiated WTO dispute settlement proceedings against a range of Korean measures affecting the import and sale of beef from Australia and the United States.
In December 2000, the WTO complaint by Australia and the United States was upheld. The adverse WTO findings against Korea involved some 12 measures, ranging from quantitative controls and other forms of discrimination at the border, through almost the entire wholesale and retail distribution chain, including discrimination at the level of supermarkets and small butchers shops. Those measures are listed at the end of this paper.
The complaint - that required the marshalling of extensive documentary evidence - would not have succeeded without the committed support and input from the Australian beef industry.
Korea has since eliminated the majority of those restrictions, which will serve to free up imports at the border and the wholesale distribution chain. However, two key areas of discrimination remain:
- discriminatory retail conditions (including the dual retail system for domestic and imported beef)
- discriminatory record keeping requirements
Australia, the United States and Korea have agreed on an implementing period, expiring on 10 September 2001. The agreement provides for a consultation clause. Both Australia and the United States have forcibly registered concerns that new forms of discrimination should not replace the existing WTO-inconsistent measures. Australia reserves the right to challenge any new forms of discrimination through special accelerated WTO legal proceedings.
Because of a substantial public stock overhang and also because of falls in beef consumption - linked to "mad cow" and foot and mouth disease, together with a slow down in the Korean economy - the WTO-driven liberalisation of the Korean beef market may not immediately translate to commercial opportunities for Australian beef exporters.
However, removal of the restrictions is estimated to provide increased opportunities for Australia of an additional 20,000 tonnes by 2002 (up from 70,000 tonnes a year) valued at around $200 million.
The WTO-inconsistent measures
As an outcome of WTO legal proceedings ending in December 2000, some 12 Korean measures were found to be WTO-inconsistent. Those measures included:
- The price mark-up applied additional to the tariff;
- The limitations on participation in the "Simultaneous Buy and Sell" (SBS) system; including a `super-group' membership requirement; the restriction on the range of end-users; the prohibition on cross-trading between end-users and super-groups; the quotas and sub-quotas allocated to super-groups according to annual plans rather than demand; and the recording requirements;
- The requirement that the beef imported through the Livestock Products Marketing Organisation (LPMO) be distributed only through the wholesale market;
- The LPMO's minimum wholesale price;
- A discretionary licensing system;
- The dual retail system for beef (including the obligation for department stores and supermarkets authorised to sell imported beef to hold a separate display, and the obligation for foreign beef shops to bear a sign "Specialized Imported Beef Stores");
- The requirement that the supply of beef from the LPMO 's wholesale market be limited to specialised imported beef stores;
- The more stringent record-keeping requirements imposed on purchasers of foreign beef imported by the LPMO than on purchasers of domestic beef;
- The prohibition against cross-trading between end-users of the SBS system;
- Additional labelling requirements imposed on foreign beef imported through the SBS system;
- LPMO delays in calling tenders and discharge practices;
- Discrimination against grass-fed beef in tenders.