Free Trade to Stir Up Wine Competition
Korea agreed it would immediately eliminate a 15-percent tax on European wine if the FTA with its second biggest trading partner is ratified. That would add to the FTA with Chile, which went into effect in 2004 and will allow Chilean wine to land in Korea duty-free beginning next month.
A tax on wine from the United States would be immediately removed if Korea’s FTA with that country is ever ratified. Experts say the abolition of tax on foreign wine will ignite a price war as it will lower the costs of wine by 10 to 20 percent on average.
According to the Korea International Trade Association, French brands account for the highest revenue in Korea with a market share of almost 40 percent last year. Chile is the second biggest exporter in terms of sales with a market share of 18 percent, followed by Italy and the U.S.
But in terms of volume, Korea imported the most from Chile, totaling 6.6 billion tons in 2008 backed by the bilateral accord, surpassing France’s 5.5 billion tons. This means Korean consumers were more attracted to Chilean wine because of its low price. U.S. and Australian brands have been targeting Korean consumers with low prices as well.
Korea’s foreign wine market reached more than US$166 million last year, up 11 percent from 2007.