South Korea’s finance minister said the country would begin an application to join a massive Asia-Pacific free trade deal before the end of President Moon Jae-in’s term in office. The trade deal could boost South Korea’s multilateral trade within the region and reduce its import reliance on China.
The “Comprehensive and Progressive Trans-Pacific Partnership Agreement” (CPTPP) is the renegotiated version of the Trans-Pacific Partnership (TPP) after former President Donald Trump withdrew from the TPP in 2017. According to South Korea’s Yonhap News Agency, Trump’s move was widely seen as a key counterweight to China’s growing economic influence.
The new multilateral free trade deal was launched in 2018 by 11 member nations in the Asia-Pacific region. All members include Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, Peru, New Zealand, Singapore, and Vietnam. Currently, Japan is chairing the pact, with China and Taiwan having applied for membership in September this year.
South Korean Finance Minister Hong Nam-ki, who doubles as deputy prime minister, said on Dec. 13 that its government would begin the application process to join CPTPP, seeking not to be left behind on a critical economic treaty in the region, according to the Japanese-based newspaper Nikkei Aisa.
“We cannot keep [CPTPP] talks inside the government anymore, as the economic order is changing quickly in the Asia-Pacific region,” Hong said in a meeting with economic ministers. “We should consider our status as an open trade country, as well as the economic and strategic value of the expansion of trade and investment.” He emphasized the regional and strategic importance of CPTPP to South Korea in the global economy.
According to a Yonhap report citing a South Korean state-run think tank, trade volume by the 11 nations participating in the CPTPP had reached $5.7 trillion as of 2019, accounting for 15.2 percent of total global trade.
“The [Moon Jae-in] government has an aim to submit the application to join the CPTPP before its five-year term ends,” Hong told foreign correspondents according to a Yonhap report. South Korea will hold its presidential election in March next year.
In November 2020, South Korea entered the Regional Comprehensive Economic Partnership (RECEP) that goes into effect in February next year. RECEP covers the 10-member Association of Southeast Asian Nations (ASEAN), South Korea, China, Japan, Australia, and New Zealand. The trade pact is known as the world’s biggest FTA, as its 15 member countries combine to account for around 30 percent of the global GDP.
South Korea’s potential accession to the CPTPP could be a significant boost for its trade expansion in addition to its planned implementation of RECEP.
However, given the additional procedures before joining the pact as well as strong opposition from its farming and fishing professionals concerned about intensified competition with foreign rivals, it could take several years to complete the membership process. A final accession requires a unanimous vote from all member states, including Japan, which has yet to voice support for South Korea’s bid, citing the Korea Economic Daily.
South Korea had been hesitant about joining the pact, partly because of concerns about damaging relations with Beijing. However, South Korea renewed its interest after China submitted its application to the CPTPP in September, and Taiwan followed suit a week later.
The CPTPP boasts a high level of market openness, with a maximum 96 percent tariff abolition rate. Analysts say it could be Seoul’s move to lower its trade dependency on China and diversify export markets by joining the CPTPP, citing the South Korean newspaper Dong-A Ilbo.
According to South Morning China Post, the 11 economies in CPTPP imported a combined $126 billion of South Korean goods, corresponding to 23.2 percent of the country’s total exports in 2019. They also sold $124.9 billion of goods and services to South Korea, accounting for 24.8 percent of its imports that year.
South Korea has been heavily reliant on China for raw material imports. In November, the country experienced a severe shortage in urea—a chemical used to lower emissions in diesel cars—after China restricted exports of the substance in recent months. The sudden drop in urea triggered the South Korean government to assemble a task force aiming to diversify its imports away from China by finding a new set of suppliers, according to a Reuters report.
Amid the rising tension between China and Australia, South Korean President Moon traveled to Australia on Dec. 13 for a four-day state visit. The two countries agreed to secure stable supply chains and enhance defense ties. According to the Yonhap report, Moon is the first South Korean president to pay a state visit to Australia in 12 years and the first foreign leader to visit the country since the COVID-19 pandemic.
South Korea also secured a nearly $700 million defense deal during the visit. Under the agreement, Australia will purchase K-9 Thunder self-propelled howitzer from South Korean arms manufacturer Hanwha Defense, according to Reuters.
According to Korea JoongAng Daily, a joint statement issued by Moon and Australian Prime Minister Scott Morrison during the summit stated that the two countries recognize “that the stability of the Indo-Pacific depends on adherence to international law in the maritime domain, including in the South China Sea,” underscoring that disputes must be resolved peacefully, in accordance with international law, and reaffirmed the importance of upholding freedom of navigation and overflight.
The statement did not directly call out China, but the issue of rising U.S.-China tensions was looming throughout the summit as South Korea tried to maintain balanced diplomacy.
In a press conference during the visit, Moon said that South Korea “is not considering a diplomatic boycott of the Beijing Olympics, nor have we have received any request from the United States or any other country to take part.”