'Failure to join TPP would result in big export losses'
By Choi Sung-jin
If Korea fails to join the Trans-Pacific Partnership, the nation will suffer losses of 15.5 trillion won ($13.3 billion) in its export of parts and materials over 10 years, a think tank said Thursday.
“If the U.S.-led free trade agreement abolishes all import duties among its signatories, Korea’s exports of parts and materials to the United States are estimated to fall $11.3 billion in terms of added value, for 10 years after the TPP goes into effect,” said a report by the Korea Economic Research Institute. Exports to Japan will also likely drop $1.96 billion, it said.
Korean companies’ exports to 12 member nations of the TPP, made from their manufacturing bases in Vietnam, are expected to drop $620 million a year and their shipments via global supply networks in Mexico are also to fall $290 million, the report said.
By industry, the estimated export losses are $4.37 billion for transportation machinery, $1.91 billion for steel, $1.71 billion for chemical, $1.45 billion for electronics, $710 million each for machinery and electric, and $420 million for textile industries.
“These industries’ reliance on global value chains has increased since 2008,” said Professor Choi Nam-seok of Chonbuk National University. “If, therefore, Korea is excluded from Asia-Pacific global supply networks to be created by the conclusion of the TPP, it would adversely affect the nation’s export of parts and materials, directly and indirectly.”
Although Korea has already signed FTAs with 10 of the 12 TPP members, besides Japan and Mexico, the price competitiveness of Korean exporters, applied by complicated rules of origin, cannot help but lag behind those of their counterparts in member nations, which are applied by a uniform set of completely cumulative rules of origin, he said.
“Considering the large export losses resulting from Korea’s exclusion from the regional supply networks of the TPP, the nation should hurry joining the mega-FTA to help Korean exporters make the most of its supply networks and set up new business models,” Prof. Choi said.