How the EU-Korea FTA Impacts Korea’s Agriculture and Labour

Many of the European problems essentially boil down to the conflict between intergovernmentalism (the member states wanting to maintain their sovereignty) and supranationalism (the EU’s tendency towards a higher level of political integration). Churchill’s big-bang approach for a United States of Europe failed, and Monnet’s proposal for a limited economic integration prevailed instead. The Constitutional Treaty failed to be ratified, and a compromise had to be made with the Lisbon Treaty. The EU still does not have an army of its own, but it remains the largest economy in the world.

Concerning these issues, Spolaore (2015) explains that high heterogeneity costs have been preventing a complete political union of the EU. Instead, Europeans have used a ‘gradual strategy of pooling and delegating functions and policies’, allowing EU institutions to perform supranational functions only within limited fields. Spolaore also describes how intergovernmentalists and functionalists understand the European situation. According to him, intergovernmentalists view the EU as a complex structure of international organisations, only allowed to work for the member states’ national interests. On the other hand, functionalists believe that incomplete and partial integration could always be overcome with further integration.

Although South Korea is not a member state of the EU, the EU-Korea relations exhibit both intergovernmental and functional characteristics. The EU-Korea diplomatic tie was first established in 1963 when the EU was not yet a single market. While the bilateral relations remained focused on economic and trade issues, political cooperation began to attain greater importance as the EU developed its Common Foreign Security Policy (CFSP). The Framework Agreement for Trade and Cooperation and the Joint Declaration on the Political Dialogue, both signed in 1996, were upgraded in 2010 to the EU-Korea Framework Agreement and the EU-Korea Free Trade Agreement, respectively.

The FTA not only aims to eliminate virtually all tariffs and quotas but also constitutes a transnational regulatory network that fosters harmonisation of economic and industrial regulations. The Framework Agreement addresses cooperation in various fields, such as human rights, counter-terrorism, and the fight against the proliferation of weapons of mass destruction, to name a few. Also, the EU-Korea Crisis Management Participation Agreement (signed in 2014) serves as the security pillar of the EU-Korea relationship. In particular, it states that South Korea may, upon invitation by the EU, choose to participate in EU international peace-keeping missions.

It should be noted that the scope of EU-Korea relations expanded from economic issues to an array of sociopolitical policy areas, as the EU institutional setup grew in competence and legitimacy over the years. The relationship is mutually beneficial: the EU wants to gain a springboard into other parts of Asia, and South Korea wants to become a global voice by becoming the EU’s indispensable partner. Both the intergovernmental and functional interpretations fit in the picture. While there is no formal supranational structure between the EU and South Korea, the unique nature of the EU’s institutional framework permeates into the EU-Korea bilateral tie. The EU’s institutional agenda, such as security, are more and more incorporated into its relations with Korea. At the same time, Korea readily accommodates the EU’s policy priorities because a stronger relationship with the EU would lead to economic benefits, security in the East Asian region, and Korea’s prominence in the global society.

Being mindful of this high-impact bilateral relationship, let us now consider how the EU’s Common Agricultural Policy (CAP) and labour regulations continue to impact Korea, yielding both intergovernmental and functional results.

Introduced in 1962 to implement a system of agricultural subsidies and other rural development programmes, the CAP has impacted Korea in two crucial aspects. First, the CAP’s effects are directly transferred to Korea through the EU-Korea FTA. Korea has long been a net food importer due to its lack of agricultural land, fragmented farmland ownership and rapid industrialisation. The chart below (Chafea 2019, p. 25) shows that Korea has been importing more agri-food products from the EU compared to its exports to the EU.

The chart below (Copenhagen Economics 2016, p. 91) further illustrates that the EU-Korea FTA has contributed to 15% additional EU agri-food exports to Korea in 2015.

As far as agri-food trade is concerned, the FTA is more favourable to the EU than Korea because of Korea’s status as a net food importer. Further reinforcing this European advantage is the fact that Koreans are increasing their appetite for European products such as wine, cheese, ham and olive oil while European consumers are remaining mostly ignorant of Korean agri-food products. (Think about it, when was the last time you consumed a Korean agri-food product, apart from kimchi at a popular Korean restaurant?) Moreover, of the 165 EU geographical indications protected in the EU-Korea FTA, only 63 are Korean.

However, above all, the fundamentally overarching factor in favour of the EU is the CAP. The table below (Zolin & Andreosso-O’Callaghan 2012, p. 136) shows 2000-2009 TSE trends for Korea and EU-27. The Total Support Estimate (TSE), measuring the overall transfers associated with agricultural support (transfers from taxpayers and consumers to agricultural producers individually and collectively and subsidies to consumers), is an essential indication of the CAP in action. In 2009, the total TSE value for EU-27 was roughly seven times greater than that of Korea. This means that European agri-food products are heavily subsidised, European farmers can produce without worrying about overproduction, and the surplus is adequately marketed to Korea and other counties under favourable terms and conditions.

Second, the CAP serves as an essential benchmark and reference for Korea’s agricultural policies. Korean authorities are actively studying the EU CAP for possible adaptation in the Korean context. When Allan Buckwell, a prominent British agricultural economist who contributed much to the CAP, visited Korea in 2019, he received much media coverage. Buckwell cautiously explained the history of the CAP and its implications for Korea, saying that Korea should not repeat the same mistakes (Kim 2019, in Korean). Learning from the European experience, the Korean government is aiming to increase the direct payment budget and expand decoupled direct payments to farmers. However, the National Assembly is yet to approve the decoupled direct payment scheme.

Now, regarding labour and migration, South Korea’s Ministry of Foreign Affairs reports that 687,059 South Koreans are living in Europe as of 2019. This figure represents 9.17% of all South Koreans living overseas. European countries with the largest Korean ex-pat populations include Germany (44,864), the UK (40,770), France (29,167), Sweden (12,721) and Denmark (9,581).

Given Korea’s level of economic development, the EU’s labour market impacts Korea fundamentally differently than it affects the countries neighbouring the EU. In fact, due to the high cost of living, Europe is not quite a popular destination for Korean job-seekers, who would instead prefer much cheaper China or Vietnam. Today, the EU-Korea FTA sets the primary arena in which the EU’s labour market impacts Korea. Ironically, the EU is currently undertaking administrative measures against Korean authorities for breach of obligations under the EU-Korea FTA. The EU has filed a request for the establishment of a panel of experts to investigate Korea’s non-compliance in four areas, as shown below.

The EU’s official stance is that correcting these issues would be essential not only for liberalising Korean regulations for better protection of workers’ rights but also for narrowing the points of incompatibility between EU law and Korean law. Korea has been undergoing rapid liberalisation and reformation in labour law in recent decades. However, liberalisation—particularly in the labour union context—has always been met with severe resistance and the issues brought up by the EU are no exception. Some Korean experts also argue that the EU’s real intention is not in giving more rights to Korean workers but undermining the existing order in the Korean labour market so that the EU can gain a cutting edge in competition.

Perhaps the biggest mistake distant observers make of the EU is perceiving it only as a market power. The EU’s economic importance is needless to mention. It remains the largest economy in the world with a GDP per head of €25,000 for its 500 million consumers. However, one must be reminded of the functional and normative influence the EU exercises over its trade partners. The supranational policy framework is the backbone of the EU, and its influence extends far beyond the European borders.

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