The World

By Christian Oliver, FT South Korea bureau chief

Seoul’s Chosun Ilbo newspaper last week speculated on the most important question surrounding the South Korea leg of Barack Obama’s Asia tour: whether the presidential lunch would be accompanied by Korean rice liquor, or a fruity Californian red?

On the eve of Mr Obama’s arrival in Seoul on Wednesay, officials said it would most likely be an American wine. The South Koreans probably intend those bottles of Californian wine to deliver a none-too-subtle message about the importance of a trade agreement between Washington and Seoul, currently held up mainly by resistance from US automakers.

But that bottle – Zinfandel? – could also raise deeper questions about trade deals with South Korea.

On the surface, a trade agreement did wonders for Chile, which increased its share of the Korean wine market to 18 per cent from 7 per cent between 2003 and 2008. It gave Chile instant branding and many Koreans now know Chile exclusively as a source of Korea’s cheapest wines.

So far, so good. However, there is plenty of controversy about whether the deal with Chile actually has passed real benefits to the wine consumer, or just to a relatively small number of importers who are keeping the prices high regardless.

Chilean wines are certainly cheaper than European labels in Seoul, but they are still very expensive for plonk. Very ordinary wines can cost about $20 a bottle. Should the wine market not really be bigger and cheaper? Are all sorts of bizarre taxes and labelling costs still getting in the way?

A similar deal with the EU is promising to put genuinely cheap wine into the market, but one wonders whether Rioja and Chianti will also remain hugely overpriced, just like their Chilean cousins.

Such fears illustrate a key point raised by diplomats and businessmen. Cutting tariffs alone does not make a successful trade deal. Don’t forget non-tariff barriers, of which South Korea is a master.

A recent dispute over Apple’s iPhone, for example, showed how subtle the arguments can become. Whether a deal ultimately benefits consumers will come not in the letter of trade accords but in their spirit.

Mr Obama, who likes a Bud Light, should by all means take a hint from his hosts as they raise a toast in Seoul, and enjoy the Californian red. But only as long as the Koreans are paying.