TPP in the perspective of South Korea

Choi, YesleKim, Kwangryu

Table of contents

1. Introduction 2. Current situation

2-1. Current Situation of South Korea

2-2. South Korea’s Strategy to TPP

3. TPP in perspective of Korea3-1. Necessities to participate

4. Pros & cons for participating in TPP 5. Conclusion

5.1 . Policy Recommendation

5-2. What Should Korea Do?

Introduction 1-1. What is TPP?1-2. Negotiating Issues of TPP

1-1. What is TPP?Trans-Pacific Partnership

• The most comprehensive FTA under negotiation• 12 nations • Responsible for 40% of global GDP

• Aim: establish an high-quality agreement encompassing issues that are not part of a FTA • IPRs, environmental protection regulations..

 

1-2. Negotiating issues

Core Negotiating Issues• Trade Liberalization in

goods & services• IPRs• Labour• Environmental

protection• Technical barriers to

trade• Financial services

New Cross-Cutting Issues• State-Owned

Enterprises• E-Commerce• Small and Medium

Sized Companies

Current situation of South Korea 2-1. Current Situation of South Korea2-2. South Korea’s strategy to TPP

2-1. Current Situation of South Korea• Korean Economy• Heavily depends on Trade• Government is pushed to open up to foreign markets through

FTAs • helped the resource-scarce country rise to rank as the world’s 9th

largest trading nation

• New Trade Road map:• From a Policy Direction Perspective

• Pursue mutually beneficial FTA externally while also pursuing communication-based FTA internally.

• From the other Perspective• Change of policy objective from becoming an FTA hub country to

becoming a linchpin in regional economic integration.

2-1. Current Situation of South Korea

In the beginning of year 2014, President Park announced that

• South Korea seeks to join the TPP • & wants progressive commercial

deal with China

Obama’s official visit to South Korea in late May 2014• Pending a decision to participate in

TPP

2-1. Current Situation of South Korea

Korea has bilateral FTA with; Australia, Brunei, Canada, Chile, Malaysia, Singapore, U.S., Vietnam

- Japan, Mexico, New Zealand

2-2. South Korea’s TPP Strategy

• 2 ImplicationsAttached utmost priority to negotiations with ChinaExpressed its intention to cautiously study the implications of TPP

membership

• Trade between South Korea – China grew 7.4% from a year earlier to US $250bil, and is expected to exceed US$300bil in 2015 making South Korea the mainland’s 2nd biggest trading partner.

• Korean Won has appreciated against the Japanese Yen to a nearly 5 year high, hurting exports severely.

Political point Economic point

KORUS FTA Transformed from “made in China” model to “made for China”

TPP in the Perspective of Korea3.1. Necessity of Korea to join TPP

3-1. Necessities to participate TPP

• Synergy effects of acting as a “bridge” in mega trade negotiation can be substantial• Chance to improve the market access• Participation in the TPP will:• Strengthen the bargaining leverage

1. Synergy Effect

3-1. Necessities to participate TPP

•Participation in TPP would help achieve both these offensive and defensive goals in Korean Trade Policy.

2. Impact from Japan’s participation in TPPJapan: • Accepted to partake agricultural liberalization & NTB

elimination• Japan’s participation in TPP prompted growing interest

in Korea in the TPP- Possibility of trade & investment diversion- The strong rivalry among Japanese and Korean

enterprises in sectors such as automobiles and electronics

Pros & Cons4.1 Pros for participating TPP4.2 Cons for participating TPP

4-1. Pros

• “Korea’s joining TPP means 3 FTAs with new

trading partners in a single undertaking. It saves

a lot of resources related with negotiations

including political ones”.

• Greater market access (2.5% to 2.6% of GDP)

but also through harmonized trading rules

such as ROO.

4-1. Pros

• The earlier, the better.

• Later it joins, the higher shares of free market

access

• Minimal entrance fee for South Korea

• the negotiated outcome of TPP will be “KORUS

FTA+” at most.

• South Korea can free ride it, saving much

negotiation resources

4-2. Cons

• Potential benefits but the damages will be real and

immediate

• No Major Benefits

• Korea already has FTAs with 9participants of TPP and

has been negotiating FTAs with the rest of 3.

• No major benefits in terms of market access could be

expected

• Weakening international competitiveness

• Automobiles & Machinery industries

• Agricultural industry

4-2. Cons

• The Japan Factor

• TPP could be bilateral FTA with Japan

• Worsen the bilateral imbalance and turn them into

structural imbalance

• Damages to Korea’s industrial bases, most noticeably

to Korea’s SMEs

• The China Factor with RCEP

• a neighbor country with influence on North Korea’s

decision-making

• the TPP may have a negative impact on future FTA

and RCEP negotiations with China.

Conclusion5-1. Policy Suggestion5-2. What Should Korea Do?

Policy Recommendations for the South Korea • Early conclusion of Korea- China FTA• Strengthen South Korea`s bargaining leverage when South

Korea starts to consult with other TPP partner.

• Start of bilateral consultation with TPP members• the faster Korea joins the TPP the smaller the entrance fees

Korea should pay.

Policy Recommendations for the South Korea • Acceleration of the CJK FTA• CJK FTA could be a stepping stone to reach a successful

conclusion of the RCEP negotiations

• Creating a Reduced Form of the RCEP• RCEP, less ambitious than TPP, prospect of development assistance

for adjustment for developing countries with soft commitment • Large countries may be reluctant to respect the central role of ASEAN

in the RCEP • Korea could play a balanced role among China, Japan, and ASEAN

nations

What should Korea Do?

Both need to proceed through due processes,Thus compelling Korea to immediately

and simultaneously embarking on both tracks.

On the domestic front ,It should not hesitate to find

domestic consensus for joining TPP negotiation.

On the international front,Korea should begin consultations with TPP 12 partners for ‘Pre-Nuptial Agreement while pursuing competitive FTA negotiations with Non-TPP partners (CK FTA, CJK FTA or RCEP) with the same intensify and sincerity to its participation in TPP.

Thank youany Questions?