With the U.S. tariff regime and the rise of protectionism, as well as supply chain disruptions stemming from the conflict in the Middle East, regional and plurilateral trade agreements like the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) are gaining more steam and importance in keeping free trade flowing, diversifying trade, supporting growth and maintaining economic resilience. Countries such as Costa Rica, the Philippines, Indonesia and Thailand either have started the accession process or are considering it, following the United Kingdom's successful entry in 2024.
Business leaders of Korea and Japan have also expressed their collective view on the significance of Korea joining the 12-member CPTPP at the annual Korea-Japan Business Council on May 20 in Tokyo.
Amid this new trade environment, media reports last week indicating that the Korean government is set to apply for membership in the CPTPP in late June are encouraging. Equally encouraging is that Japan will reportedly support Korea’s accession to the CPTPP without requiring Seoul to lift the import ban on seafood from the Fukushima area as a prerequisite to joining.
However, Korea’s Ministry of Trade, Industry and Resources denied the reports, claiming that no decision has yet been made regarding its accession to the CPTPP and that a final decision will be reached only after a careful and thorough review in consultation with relevant stakeholders.
Regardless of the trade ministry’s position, Korea joining the CPTPP at the earliest possible time is critical for several reasons.
Owing to the current geopolitical and geoeconomic shifts, the CPTPP is increasingly viewed as a strategic framework for supply chain security that goes well beyond a traditional free trade agreement. Joining the CPTPP will lay the foundation for Korea to have better access to CPTPP members that account for about 15 percent of global gross domestic product (GDP), while improving its supply chain stability and resilience. According to the Korea Institute for International Economic Policy, joining the CPTPP is estimated to increase Korea’s GDP by 0.33 to 0.35 percent. It is also projected to generate roughly 3 billion dollars in consumer welfare gains.
In pursuit of high-level economic integration in the Asia-Pacific region, the CPTPP eliminates tariffs on nearly all items and liberalizes nontariff barriers, including government procurement, e-commerce, intellectual property rights, labor regulations and finance. Export-oriented manufacturing sectors such as automobiles, semiconductors, batteries and chemicals, along with the digital industry, are projected to reap significant benefits from this high-level tariff elimination. Because the CPTPP fully allows for the cumulation of the rules of origin, products that incorporate intermediate inputs from member countries qualify as originating within the trade zone. Consequently, this offers Korea an opportunity to integrate more deeply into the Asia-Pacific supply chain.
CPTPP members also stand to benefit from Korea’s entry. Integrating Korea’s advanced manufacturing capabilities such as semiconductors, shipbuilding and digital technology would dramatically increase the CPTPP’s collective economic weight and supply chain resilience.
Despite these significant economic gains, several hurdles must be addressed prior to joining the agreement. With a tariff elimination rate of 96.1 percent, the CPTPP far exceeds Korea’s historical free trade agreement average of 79.1 percent. Hence, strong resistance is highly likely from the agriculture and fisheries sectors where a reduction in domestic output seems inevitable. The Korea Rural Economic Institute projected that annual production losses in the agricultural sector will range from 85.3 billion won ($56 million) to 440 billion won over the 15 years following accession. Annual production losses in the fisheries sector are estimated to reach up to 72.4 billion won for the next 15 years.
Therefore, a practical and concrete support package must be prepared for farmers and fishers. This should include measures aimed at boosting low agricultural productivity, assistance for the adoption of smart farming and initiatives to ensure stable livelihoods for farmers and fishers, among others.
Source: Korea Times News
