South Korea has begun the process of entering a mega free trade agreement comprising 11 Asia-Pacific nations. It has been proactively reviewing joining the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) in consideration of the “economic and strategic values,” according to Economy and Finance Minister Hong Nam-ki. The government will begin discussions with the relevant parties soon, Hong said during a ministerial meeting Monday.
Such move, albeit belated, is encouraging as the envisaged accession will help the nation expand its trade and investment, and boost its status as a key player in global trade. The CPTPP is a super FTA, launched in 2018. In 2019, it accounted for 12.8 percent of the global gross domestic product (GDP) and 15.2 percent of the total global trade volume. The 11 member countries account for 23.2 percent of South Korea's entire exports and 24.8 percent of its imports.
Despite this significance, the country had stayed away from the trade bloc after the administration of former U.S. President Donald Trump withdrew from it, in an about-face from its leading role in establishing it as the Trans-Pacific Partnership. Japan assumed the major role, prompting South Korea to remain lukewarm over the pact. But such an attitude has invited criticism for its short-sighted perspective as Korea is a country with a heavy reliance on external trade.
Worse still, there are diverse signs that the trade environment is evolving unfavorably for the country as major trading nations such as the United States are taking protectionist measures. Conflicts between the U.S. and China, the two main trading partners for Korea, are also ever intensifying. What is worrisome is the recent move to use trading items as a means of retaliation as seen in China's restrictive exports of urea, used as an additive to reduce carbon emissions from diesel trucks. Japan has yet to ease export curbs of key materials needed for Korean firms to manufacture semiconductors and display panels.
Against this backdrop, it is necessary for South Korea to hasten efforts to join the mega FTA. The prospect of the country joining the CPTPP will likely help expand its export portfolio coupled with its planned ratification of the Regional Comprehensive Economic Partnership (RCEP), which will take effect next February.
Entering the CPTPP will help boost the economy. The state-run Korea Development Institute foresaw in a report that the nation will be able to lower its reliance on China in trade and increase exports by small- and medium-sized enterprises. However, CPTPP membership will likely deal a blow to the domestic farming and fisheries industries as the agreement includes giants such as Australia and Chile.
The government needs to take preemptive measures to minimize any potential damage to households and industries that are vulnerable to market opening. If needed, it should also prepare due compensations for potential losses. As the CPTPP membership needs unanimous approval from the current member countries, South Korea should maintain amicable relations with them. It needs to mend ties with Japan as bilateral relations have remained at their lowest due to disputes over wartime sex slavery and forced labor.