Free trade agreement choices

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Free trade agreement choices

I once asked a former South Korean trade negotiator what would be the next accomplishment his government would seek after passage of the Korea-U.S. free trade agreement (Korus FTA), which was the largest and most commercially significant FTA for Korea. His response was one word, “China.” When I asked him about Korean interest in the Trans-Pacific Partnership, or TPP - a proposed free trade agreement involving Australia, Brunei Darussalam, Chile, Canada, Malaysia, Mexico, New Zealand, Peru, Singapore, the United States and Vietnam - he was decidedly less enthusiastic.

Ask any American official about Korea and TPP, and she will tell you that Korea (and Japan) would be a coveted partner in the agreement. It would not be hard for Seoul to join, moreover, since much of the structure of TPP is borrowed from the Korus FTA. But Seoul expressed little interest under Lee Myung-bak, and there are no signs yet of significant interest in TPP from the incoming Park government.

Why the lukewarm Korean attitude? Part of the reason has to do with Korean desires to “balance” their trade relationships. As we now approach the one-year anniversary of the FTA next month, Seoul would like to complement this new, successful element of its relationship with the United States with a similar accomplishment with China, its most significant trading partner. There is also a strategic element to South Korean hesitance. With the U.S. “pivot” to Asia, Seoul has concerns about being perceived by Beijing as falling too far into the American orbit. Indeed, the pivot has created a paranoia of sorts in Beijing that the TPP is designed to exclude China.

Finally for South Koreans, the prospect of an FTA with China would help to reorient Beijing’s views about its equities on the Korean peninsula. That is, a Korea-China FTA would highlight for Beijing’s leadership the prosperous trading relationship with the South, in contrast to the black hole of endless assistance it provides to the North.

But the relationship between a Korea-China FTA and TPP is not as zero-sum as some may be led to believe. First, the terms of any bilateral FTA between Seoul and Beijing would eventually be subsumed under the terms of TPP. This is because TPP is a “high-quality” proposed FTA (like the Korus FTA), which would reduce trade barriers across a wide-range of goods and create uniform standards and regulations across economies in ways that a more superficial FTA - covering a smaller range of goods and services - negotiated by China would not.

Second, both agreements are part of an effort eventually to achieve something called FTAAP, or a free trade area of the Asia-Pacific. As the negotiations for a global free trade order have stalled, individual regional trade agreements like TPP, the Korus FTA and a Korea-China FTA constitute building blocks that could be stacked together to achieve FTAAP.

Finally, it should be the goal of both the South and United States to bring China into TPP. Why? Because one of the best ways to integrate a rising China into the existing international order is through TPP. As noted earlier, TPP would contain regulations that would transform the way China did business at home, its rule of law, its standards of transparency, its treatment of intellectual property, its labor rights, and its environmental protection - all in ways that would be supported by Seoul and Washington. Moreover, China would be doing this not because others told it to, but because it would allow them to reap maximum benefits from being part of this new free trading arrangement in Asia.

So what is the best way to get China to consider TPP? Have Korea join. Korea’s membership in the negotiations would give even greater momentum to the talks, after the recent memberships of Canada and Mexico. Korean membership would put a great deal of pressure on the new government in Japan to join. While TPP membership would be domestically difficult for the Abe government, Korea’s joining would afford Tokyo little chance to allow itself to be excluded. Finally, if Korea and Japan joined TPP, this would in turn put pressure on China to join.

Of course, calculations about trade negotiations are much more complicated than this, but as we approach the 16th round of these talks in Singapore in March 2013, it would be worthwhile for Seoul to at least consider its free trade negotiation options.

*The author is a professor at Georgetown University and senior adviser for Asia at CSIS. His book, “The Impossible State: North Korea, Past and Future” was a Foreign Affairs 2012 Best Book on Asia.

by Victor Cha
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