Can an extremely trade-dependent country afford to remain outside the most important free trade agreement in its region? Unfortunately, that is what South Korea appears to be trying to do.
President Lee Jae Myung recently announced that his government is unlikely to join the Comprehensive and Progressive Agreement for Trans-Pacific Partnership during his term, which ends in 2030. Citing concerns about the agreement's harmful effects on agriculture and other sectors, he said Korea would not apply for CPTPP membership for the time being, while acknowledging that joining would be "unavoidable" in the future because of the enormous strategic and economic benefits it would bring to the country as a whole.
Given Lee's declining approval ratings, his decision to avoid the political costs is understandable. Yet it could cost the country dearly in economic and diplomatic terms over the long run.
A government estimate indicates that CPTPP membership would raise Korea's gross domestic product by 0.4 percent annually after 10 years. Korea's major manufacturing sectors, including semiconductors, automobiles and shipbuilding, would benefit substantially from reduced tariffs and other trade barriers under the CPTPP. The 12-member pact would also enhance the resilience of the Korean economy by stabilizing supply chains and reducing geopolitical risks in the Asia-Pacific region.
More importantly, joining the pact would enable Korea to participate in shaping regional trade rules. At a time when global trade rules are being bent and shattered by the predatory policies of superpowers such as the United States, having a seat at the rule-making table of the world's most dynamic economic region is essential for Korea's survival, let alone its prosperity. Working with like-minded member countries such as Japan, Canada and Australia through a coalition of middle powers would significantly reduce Korea's reliance on the United States and China while reinforcing a rules-based regional order.
Korea, of course, would have to pay substantial costs for these benefits. By joining the CPTPP, it would have to open its vulnerable agricultural and fisheries markets much more widely. Due to an expected surge in low-priced imports, the agricultural sector is projected to lose 710 billion won ($529 million) over 15 years, while the fisheries sector would lose 82 billion won and the forestry sector 61 billion won. Income inequality between rural and urban areas would likely worsen, placing a serious political burden on the Lee government.
Lee is already under considerable political pressure after upsetting many farmers with an attempt to raise taxes on farmland being used for profit-seeking land speculation rather than farming. He was forced to withdraw much of the measure amid criticism that such a distinction was impossible to enforce. Analysts believe the decision to delay the CPTPP application was intended in part to calm angry farmers.
Some critics also point out that the benefits for the manufacturing sector would be limited because Korea already has free trade agreements with many CPTPP members, including Canada and Australia. Korea might also face backlash from China, its largest trading partner, as Beijing increasingly views the CPTPP as an attempt to contain China.
The United States, Korea's most important ally, is also opposed to the pact. The US was an original member of the agreement's predecessor, the Trans-Pacific Partnership, but withdrew in 2017 under President Donald Trump because he preferred bilateral trade negotiations in which Washington could exercise greater leverage.
Precisely for these reasons, Korea needs to join the pact.
Membership would significantly reduce Seoul's dependence on Washington and Beijing. Losses incurred by agriculture and other vulnerable industries could be offset by the enormous profits generated by key manufacturing sectors, particularly semiconductor producers.
The government recently created the 162 trillion won Future Response Fund to support strategic growth sectors and the struggling younger generation, using surplus tax revenues generated by semiconductor companies. A portion of those funds could be used to assist sectors and communities negatively affected by the trade pact. Rather than focusing exclusively on short-term challenges, the government needs to consider the long-term opportunities.
In this regard, one historical example is worth revisiting. In 2000, the Korean government imposed a punitive safeguard tariff of 315 percent on Chinese garlic after imports flooded the domestic market and hurt Korean garlic farmers. In retaliation, Beijing abruptly banned imports of Korean mobile phones and polyethylene, two of Korea's strongest export products.
The result was devastating damage to two strategic Korean industries, eventually forcing Seoul to withdraw the tariff. The lesson is clear: A short-sighted measure based on political calculations can bring much greater harm in the long run.
Lee appears to understand this well. While postponing an official application for the trade pact, he acknowledged that Seoul would eventually have to join after conducting thorough and careful studies of its impact on the country. Yet the problem is timing.
The CPTPP is rapidly becoming a premier multilateral trade agreement in the Asia-Pacific region and is attracting new heavyweight members. Although it is not part of the region, the United Kingdom joined the pact in 2024 because of its enormous potential and promising prospects.
As more countries seek to join, admission requirements are likely to become stricter. Because the admission of a new member requires the consensus of all existing members, the longer Korea waits, the more demanding the conditions for entry may become.
For Korea, the clock is ticking.
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Lee Byung-jong
Lee Byung-jong is a former Seoul correspondent for Newsweek, The Associated Press and Bloomberg News. He is a professor at the School of Global Service at Sookmyung Women’s University in Seoul. The views expressed here are the writer’s own. -- Ed.
khnews@heraldcorp.com
