Opening the Door to CPTPP, Yet Slashing the Budget for Farm Damage Compensation by One-Third

[Financial News] As the government considers joining the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) and recalculates the potential damage to South Korea’s agricultural sector, next year’s budget for direct payments compensating farms affected by free trade agreements (FTAs) has been reduced by more than 30% from this year. The government also expects the need for support to farmers to grow as market access expands through CPTPP and other agreements. However, the 2027 budget proposal includes no separate compensation funds in preparation for CPTPP accession.
According to the government’s 2027 budget proposal released on the 14th, the Ministry of Agriculture, Food and Rural Affairs (MAFRA) allocated 12.2 billion won for FTA damage compensation direct payments, down 5.8 billion won, or 32.2%, from this year’s 18 billion won.
The damage compensation direct payment program provides partial compensation for price declines suffered by farmers when imports increase following the implementation of an FTA. It operates under a post-settlement system, with eligible recipients and payment amounts determined after actual damage occurs.
In recent years, actual spending on damage compensation direct payments has fallen well short of the amounts budgeted. According to a report published last year by the National Assembly Budget Office (NABO), the average execution rate for such payments over the past decade was only about 37%. Budget allocations repeatedly went unused because actual economic conditions, trade volumes and domestic supply and demand differed from the projections made when the FTAs were concluded.
At the same time, the government is reassessing the potential impact on agriculture while keeping open the possibility of joining CPTPP. MAFRA is recalculating the potential damage to 122 agricultural, livestock and fishery products through the Korea Rural Economic Institute (KREI) and other institutions. The assessment is expected to be completed by the end of this year.
The government also acknowledges that the need to support farmers could grow as additional market opening takes place. In a related performance plan, MAFRA assessed that the need for direct compensation would increase as market access expands through CPTPP and other agreements.
Nevertheless, because the government has not yet decided whether to join CPTPP, the 2027 budget proposal contains no separate funds for compensating farmers in preparation for accession. Depending on the results of the reassessment and whether the government proceeds with CPTPP membership, it will need to establish new measures for affected farmers or strengthen existing support programs.
Members of the National Assembly have also argued that measures to compensate farmers must be prepared before CPTPP accession efforts move forward. Yoon Joon-byung of the Democratic Party of Korea, the ruling-party secretary of the National Assembly Agriculture, Food, Rural Affairs, Oceans and Fisheries Committee, told Financial News, "Sufficient compensation for damage to the agricultural sector must come first for the National Assembly to approve ratification if the government is to pursue CPTPP accession."
Joining CPTPP requires parliamentary approval for ratification even after the government completes intergovernmental negotiations and signs the agreement. The extent to which the government strengthens compensation measures in line with its newly calculated estimate of agricultural damage is therefore expected to be a key factor in the future of the CPTPP accession process.
[email protected] Song Ji-won Reporter