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| Choi Kyung-hwan Finance minister |
By Lee Hyo-sik
Korea is considering joining the Trans-Pacific Partnership (TPP) to maintain its export competitiveness against archrival Japan, the country's top economic policymaker said Tuesday.
Deputy Prime Minister and Strategy and Finance Minister Choi Kyung-hwan said the government will find ways to be part of the mega trade bloc, which accounts for more than 40 percent of the global gross domestic product (GDP).
"We will actively consider joining the TPP," Choi told lawmakers during a National Assembly audit of the finance ministry. "After holding public hearings and following other necessary steps, we will decide on whether and when to be part of the trade bloc."
His remarks came a day after the United States, Japan and 10 other nations struck a deal to create the multilateral trade liberalization regime. The 10 countries are Canada, Australia, Mexico, Vietnam, Malaysia, New Zealand, Chile, Peru, Singapore and Brunei.
Korea has signed free trade agreements (FTAs) with 10 of the 12 TPP members, including the United States.
The U.S-led talks began in 2010, but it took longer than previously expected as members were unable to iron out their differences over a range of trade issues.
Korea expressed its intention to join the TPP in 2013 but was unable to do so because it had to get consent from all 12 negotiating countries. In particular, Japan, which competes fiercely with Korea in automobile, electronics and other areas, has been openly opposing Korea's participation.
"The government will closely study the details of the TPP agreement and will contact its members. But we cannot publically say when and how we will conduct negotiations, given the sensitivity of its nature," the finance minister said.
The Ministry of Trade, Industry and Energy also said Korea will positively consider joining the TPP in order to maximize its national interest.
"We will analyze the TPP's impact on the Korean economy. Based on this analysis, we will take necessary steps and finalize our stance on whether to become a TPP member," a trade ministry official said.
The ministry expects that Korea's GDP will increase about 2.5 percent annually over the decade after joining the TPP.
The Korea International Trade Associations (KITA) and other business associations are calling on the government to take prompt measures to become a TPP member.
"Trade with TPP members reached $355.3 billion in 2014, accounting for 32.4 percent of Korea's cross-border trade. They are all important trade partners," a KITA official said. "The trade bloc will write new rules and set new standards concerning the cross-border trade of goods and services. Korea should take all possible steps to be part of it."
KITA then said Korea should be well prepared to negotiate with Japan, which has showed reluctance to let the country into the TPP.
"Domestic companies will be in a better position to bolster their outbound shipments and strengthen their competitiveness if Korea joins the TPP," the official said.
US welcomes Korea's move to join TPP
Meanwhile, U.S. Deputy Secretary of State Tony Blinken said his country "would welcome the opportunity to discuss the TPP with South Korea." He arrived in Seoul, Tuesday, for a three-day visit.
Blinken underscored that the U.S.-led multinational trade deal would enhance Washington's role in the region while changing the landscape of the international trade market.
Analysts say that local automakers, electronics makers and other manufacturers, which fiercely compete with Japanese rivals in overseas markets, may be impacted by the TPP if Korea fails to be part of the trade bloc.
However, textiles, apparel and other sectors, which are not directly engaged in competition with Japan and operate plants in TPP nations, could benefit from the trade pact.
"We believe that carmakers and auto parts producers here, in particular, will be adversely affected by the TPP as they face stiffer competition from Japanese rivals," said Daniel Cho, head of research at Daishin Securities.
The U.S. tariffs on made-in-Korea vehicles will be abolished next year, from the current 2.5 percent, under the Korea-U.S. FTA. But when the TPP goes into effect, Japanese automakers will get the same benefit, chipping away at Korean firms' price competitiveness in the world's largest consumer market.
Cho then said the TPP will do more harm than good to electronics, machinery and agricultural sectors.
However, local textile and apparel companies, most of whom have an extensive presence in Vietnam, will benefit from the trade deal because they will be able to ship more products to the United States and other TPP member countries.
"When the TPP goes into effect, local textile manufacturers running plants in Vietnam can boost their price competitiveness on lower tariffs," Cho said. "Korea‘s TPP participation will significantly benefit its economy."
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