South Korea’s move to join the Comprehensive and Progressive Agreement for the Trans-Pacific Partnership next year will work in favor of Asia’s fourth-largest economy’s trade, experts from the US and the UK said.
“We believe that South Korea will succeed in joining the CPTPP in the coming years,” Fei Xue, an Asia analyst at the Economist Intelligence Unit, told The Korea Herald in an email interview earlier this month.
“Inclusion in that regional trade agreement will facilitate trade and investment between Korea and other signatory countries, including Japan, with which it does not have a bilateral free trade agreement, by lowering non-tariff trade barriers and integrating rules of origin and intellectual property protection,” he added.
Finance Minister Hong Nam-ki, the nation’s top economic policymaker, said Monday that Korea will work towards submitting an official application to join a mega Asia-Pacific free trade agreement in April next year. The CPTPP, launched in December 2018, is renewed version of the TPP led by the former US President Barack Obama administration. The trade bloc currently involves 11 nations including Japan, Canada, Australia and New Zealand.
Obama’s successor President Donald Trump withdrew the US from TPP in 2017, which left the 11 nations scrambling to find balance and resorting to the temporary pact of CPTPP for the moment. If the US decides to rejoin, the pact will return to the form of TPP, and many of the suspended provisions will be reborn.
“South Korea having already negotiated a deep free trade agreement with the US was never particularly focused on Trans-Pacific Partnership,” Jacob Kirkegaard, a nonresident senior fellow at the Peterson Institute for International Economics said via email.
“But now that CPTPP progresses with the US participating and may even be joined by countries like the UK or more importantly China, it makes sense for Korea to join CPTPP as soon as possible to avoid trade diversion with the CPTPP members,” he added.
China in September formally applied to join the CPTPP. While some say the move will work as a game changer for the pact, skeptics say China it will ultimately not be able to become part of the bloc, due to the stringent conditions of the agreement surrounding market access, labor rights and government procurement. The UK earlier this year began talks to join the CPTPP.
“Given that South Korea already has deep FTAs with a number of important trading partners, noticeably the United States and the EU, it is unlikely that it will be particularly difficult for SK to join CPTPP, nor that it should take too long, once the SK government applies,” Kirkegaard explained. “CPTPP, which is a considerably deeper and “high quality” FTA than the alternative Regional Comprehensive Economic Partnership (something also highlighted by China‘s application), will offer South Korean exporters a lot more opportunity than RCEP membership.”
The RCEP is a free trade agreement that covers ASEAN and four countries -- China, Japan, Australia and New Zealand. The RCEP, which was inked in November 2020, will take effect in February 2022, as Korea’s legislative body ratified the trade deal early this month.
Trade volume by the 11 nations in the CPTPP had amounted to $5.7 trillion as of 2019, accounting for 15.2 percent of the total global trade amount, a report by the Korea Institute for Industrial Economics and Trade showed.
While anticipations surrounding the possibility of Korea’s new trade partnership has been growing, local experts have been divided on the matter. The government needs to tread cautiously, as the CPTPP could deal a blow to the nation’s agricultural industry, skeptics say.
“The CPTPP will eliminate or reduce several of the existing tariffs related to agricultural goods and processed foods,” Seo Ji-yong, a business professor at Sangmyung University said.
“If foreign agricultural goods enter Korea in such a manner, it will affect the nation’s agricultural industry. The CPTPP also eliminates more tariffs compared with the RCEP,” he added.