Why Didn't FTAs Reduce the Price of Some Imports?

      June 22, 2012 13:40

      The price of goods from Europe and the U.S. is generally going down thanks to free trade agreements, but some things like electric toothbrushes, whiskey and beer either cost the same or have become more expensive.

      The Fair Trade Commission on Thursday said it monitored the price of 22 imported goods over the last 100 days and found that 15 of them got cheaper but the price of the rest either stayed the same or went up. The 22 items were those where tariffs were either scrapped or considerably reduced under the FTAs.

      In some cases there was a special reason why the price did not go down. They include walnuts from the U.S., which saw a 21 percent price hike due to a poor harvest.

      But in other cases there was no apparent reason. An FTC official said the price of electric toothbrushes, whiskey and beer did not go down even though tariffs were cut by over 4 percent or scrapped.

      A Braun Oral-B electric toothbrush cost W148,000 (US$1=W1,152) before the Korea-EU FTA went to effect last July but now costs W159,000. Importers said the model has been "upgraded" and logistics and distribution cost went up due to rising oil prices.

      But the price of similar products went down. Philips electric shavers and Tefal irons are also imported from Europe and they are improved versions, but the price decreased by W15,000 to W30,000 in the same period.

      The government also believes that there is no good reason why whiskey and beer prices did not drop. Importers cite increased logistics and distribution costs, but an official from the FTC said, "The industry believes that headquarters in Europe or the U.S. set the price without considering the decrease in tariffs."

      Certain brands of whiskey and beer that Korean consumers prefer take advantage of their strong market position to maintain their high prices.

      In cooperation with the Korea Consumer Agency, the FTC plans to provide comparative price information next month. It vowed to sniff out price-fixing, resale price maintenance and obstruction of online sales.

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