Friday, April 11th, 2014
SEOUL, KOREA - Despite a series of free trade agreements with major economies, Korea's exorbitantly high import prices are still frustrating consumers who expect better deals for import goods. On April 8, the Korean government signed an FTA deal with Australia, expanding the number of countries with which it has FTA relationships to 11 covering 61 percent of the global GDP.
Nonetheless, most of the goods originating from countries and regions such as the United States, Europe, ASEAN, and Chile are still sold at "rip-off" price levels without any FTA effect reflected.
According to data released by the Korea Customs Service on April 9, the lipsticks imported from France were sold on average 9.2 times higher than the customs clearance price. In some cases, a lipstick whose customs clearance price was 1,400 won each was sold at 21,000 won at retail level. For wines, the average mark-up was 4.8 times. Other items such as mountain hiking boots (4.4 times), vacuum cleaners (3.8), baby strollers (3.6), mineral water (3.5), electric irons (3.0), timers (2.9), electric shavers (2.9), and processed cheeses (2.7) also showed wide mark-up.
In particular, the prices of wine, the single item widely expected to benefit most from FTAs, are still far from seeing any price-cut effect. For example, a Chilean wine imported at the price of 3,828 won a bottle was sold at 20,450 won, or 5.3 times higher, at retail level. An American wine at the cost of 19,000 won was sold at 110,000 won in a department store.
The government sees this discrepancy largely due to the oligopolistic structure of the import goods retail industry that keeps the price-reduction effect from FTAs from spilling over to consumers. On the same day, Deputy Prime Minister and Minister of Strategy & Finance Hyun Oh-seok held a meeting of economic ministers and decided that the government would relax customs regulations on direct online purchases of import goods by final consumers and allow importers to buy goods from discount distributors to break the monopoly of exclusive importers.