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The economic landscape of the Asia-Pacific rim appears to be undergoing a rapid transition due to two ongoing, intra-regional, mega economic-bloc movements. One is the U.S.-anchored Trans-Pacific Partnership Agreement (TPP) with 11 other participating economies, including the initial member states of 2005 (Brunei, Chile, New Zealand and Singapore) and those that entered later (Australia, Canada, Japan, Malaysia, Mexico, Peru and Vietnam). The other free trade initiative is the Regional Comprehensive Economic Partnership (RCEP), which includes ASEAN and its six FTA partners (Australia, China, India, Japan, Korea and New Zealand).
The proposed TPP accounts for 38 percent of global GDP and 30 percent of global trade and aims to be concluded under President Obama's priority agenda within the year or by June 2014. On the other hand, the RCEP, with a combined GDP of about $17 billion, would create the world's largest trade bloc and account for 40 percent of global trade. Negotiations will maybe conclude by the end of 2015. China has recently been very enthusiastic about concluding the RCEP deal as soon as possible.
In a larger sense, all the negotiating members, except India, of both the TPP and RCEP, which are an intersection of seven economies, constitute the Asia-Pacific Economic Cooperation (APEC) entity. This body envisions a free trade-oriented Asia-Pacific community.
In 1994, all the APEC leaders at Bogor, Indonesia, adopted the Bogor goals, which aim for free and open trade and investment in the Asia-Pacific by 2010 for developed economies and by 2020 for developing economies. Although the APEC process has been slow, the U.S., China and Japan have been fully committed to APEC's Asia-Pacific community, specifically a Free Trade Area of the Asia-Pacific (FTAAP).
Some commentators view the TPP as a part of the U.S.' pivot policy to check the rapid rise of China's hegemonic power in Asia. Following the successful conclusion of the KORUS FTA, Korea began negotiating a bilateral FTA with China, to enter the second phase for a high-quality and comprehensive FTA.
Simultaneously, Korea was also invited to join the TPP negotiation rounds by the U.S. after the conclusion of the KORUS FTA.
Given these various integration paths, what position should Korea take? Above all, Korea should not hesitate to join the TPP negotiations for not only its own national interest, but also the eventual integration of the TPP and RCEP toward the FTAAP.
It is true that Korea became the first significant economy to have an effective FTA with the EU in 2011, the U.S. in 2012, ASEAN and many medium and smaller negotiating economies of the TPP, except Japan. So, it may be easy for Korea to join the TPP process.
But if we miss the chance to be a founding member of the TPP, which appears to focus on the next generation of trade rules, Korea will have to pay high entrance fees in the future and accept an agreed-upon framework without being able to negotiate for its best interest. In other words, Korea cannot afford to take a wait-and-see approach.
In contrast to its hitherto active pursuit of multi-track FTAs, Korea has been silent about mega trade deals in the Asia-Pacific. We have been concerned about China's response to our joining the TPP, as China is Korea's number one trading partner and most favored destination for outbound foreign direct investment. China is also a strategic and influential partner of Korea's for the prevention of North Korea's nuclear ambitions.
Recently, some Chinese scholars suggested that China needs to join the TPP or even establish a bilateral FTA with the U.S. for sustainable growth. In recent years, China and the U.S. have become increasingly interlocked in terms of trade and China's purchase of the lion's share of U.S. treasury bills.
The more the two countries play a zero-sum hostile game for the sake of hegemonic leadership, the more unlikely it is that the APEC goals in the Asia-Pacific rim economies will be realized. By actively joining the TPP and RCEP, and through Korea-China FTA negotiations, Korea could facilitate a convergence of the two mega trade deals by bringing China into a better market-disciplined economy with IPR and investor protection, global labor standards and more.
