[why&next] 'Safe Freight Rate System' Sunset D-15... Divergent Views Amid Abolition Trend

Ministry of Land 'Safety' vs Cargo Solidarity 'Freight Rates'
1st and 2nd Strikes Cause 10.4 Trillion Won Loss
Prolonged Government-Labor Conflict
3-Year Extension Bill Uncertain in Parliament

[Asia Economy Reporters Kim Min-young, Lee Hyun-joo] The sunset deadline for the Safe Freight Rate System, known as the "minimum wage on the road," is just over two weeks away. However, it is understood that the government has decided to abolish the system rather than extend it, and the National Assembly, which should untangle the complicated situation, remains divided along party lines, making the "3-year extension plan" likely to be scrapped. Ultimately, if things continue as they are, the Safe Freight Rate System, once considered a product of tripartite negotiations, will disappear into history after three years, leaving only scars such as the longest strike record and economic losses exceeding 10 trillion won amid a strong confrontation between the government and the Cargo Solidarity.

◆ Guaranteed minimum freight for ‘safety’... but accidents increased = In the early 2000s, South Korea’s freight truck market was operated under a registration system. However, as demand for freight transportation surged rapidly due to the growth of the courier business and the activation of online shopping, supply-demand imbalance problems began to arise. Seeing the booming courier market, many people took out loans to purchase freight trucks, which caused freight transportation costs to plummet rapidly and the market to become saturated. This eventually led to a logistics crisis in 2003. As the situation worsened, the government decided in 2004 to implement a permit system instead of the registration system for freight trucks. To operate a freight truck business, one had to be assigned a kind of license plate, similar to a private taxi. Freight truck owners began transporting more cargo to recoup the cost of their license plates. The result was drowsy driving, speeding, and overloading, which accumulated and led to major accidents.

In 2020, during the Moon Jae-in administration, the Safe Freight Rate System was introduced with a three-year sunset clause, aiming to create a safer driving environment in conjunction with the introduction of the minimum wage. However, as a result of implementing the Safe Freight Rate System, which was created to guarantee "safety," freight truck-related traffic accidents actually increased by 3.5% from 2017 to 2021. During the same period, the number of fatalities decreased by 17%, but the fatality rate remained at 3-4%. However, the income and working conditions of freight truck owners were found to have improved. According to the Korea Transport Institute’s "Freight Truck Performance Analysis Service" report, the average monthly net income of container freight truck owners increased from 3 million won in 2019 to 3.73 million won in 2021, and the net income of cement freight truck owners rose from 3.01 million won in 2019 to 4.24 million won in 2021.

◆ 10.4 trillion won loss and longest strike... withdrawn empty-handed leaving only scars = Given this situation, the current government announced a policy not to extend the Safe Freight Rate System, stating that the system’s original purpose was not achieved. This was the starting point of the first strike by the Cargo Solidarity in June. Although the first strike, which lasted eight days, ended with a dramatic agreement between the government and the Cargo Solidarity, there was a mismatch in understanding of the agreement. The government claimed that only a 3-year extension of the Safe Freight Rate System was agreed upon, while the Cargo Solidarity emphasized the right to survival and demanded not only an extension of the period but also an expansion of applicable items. At a closed negotiation on November 15, the government and labor failed to narrow their differences, and the Cargo Solidarity began a second strike on November 24, refusing transportation for a total of 16 days. As logistics disruptions spread across all industries including cement, steel, petrochemicals, and refining, the government issued a work commencement order card for the first time in history. Following the first order on the 29th of last month, a second order was issued on the 8th of this month. During this process, problems such as intensified conflicts between labor and government and the absence of a communication body to mediate were exposed. As pressure increased, the Cargo Solidarity held a general vote among its members on the 9th and eventually withdrew the strike.

The Korea Economic Research Institute estimated on the 15th that the Cargo Solidarity strike this year caused direct and indirect economic losses of 10.4 trillion won. As a result, the Cargo Solidarity not only earned the stigma of causing losses exceeding 10 trillion won through two strikes but also failed to secure a promise to extend the Safe Freight Rate System or open discussions on alternative measures in case of its abolition.

◆ National Assembly fails to find compromise... government leans toward no extension = Now, the fate of the Safe Freight Rate System lies in the hands of the National Assembly. However, the Land, Infrastructure and Transport Committee, which oversees the system, still cannot narrow its differences. The Democratic Party passed the "3-year extension plan" for the Safe Freight Rate System through a sole review on the 9th, but it is highly likely that the bill will not even be referred to the Legislation and Judiciary Committee, which usually submits bills agreed upon by both ruling and opposition parties first.

Kim Jeong-jae, the ruling party’s secretary of the Land Committee and a member of the People Power Party, said in an interview with Asia Economy, "I think it is unfair to grant a 3-year extension as if nothing happened despite the Cargo Solidarity strike causing losses worth trillions of won," adding, "Shippers, transport operators, truck owners, and the government should all gather to re-examine the Safe Freight Rate System from scratch."

The Democratic Party maintains that even if the extension bill is stalled in the Legislation and Judiciary Committee, it can still be approved in the standing committee and sent to the plenary session, so they intend to push it through to the end. However, even in this case, the president can exercise a veto. If the president vetoes the bill, it must return to the plenary session and gain approval from two-thirds of the members present, making the likelihood of passage even lower.

In fact, the government is known to oppose the extension of the Safe Freight Rate System. On the 9th, when the Cargo Solidarity withdrew the strike, the Ministry of Land, Infrastructure and Transport stated, "A review of the extension of the Safe Freight Rate System is necessary." Minister of Land, Infrastructure and Transport Won Hee-ryong also posted on social media that "the proposal for a 3-year extension of the Safe Freight Rate System became invalid due to the refusal to transport."

Additionally, at a press conference on the 12th, Minister Won clearly stated, "Given that the Cargo Solidarity caused great pain to the public and economic losses to the nation through the strike, it is not respectful to the people to simply restore the Safe Freight Rate System," and expressed his position that the system, which ends at the end of this year, will not be simply extended.