A new challenge and opportunity
Turning points come at hard times. The United States and the European Union, both struggling to lift their sagging economies, have announced that they will accelerate the process of creating the world’s biggest free trade zone. President Barack Obama in his State of Union Address said Washington will soon finalize talks on the Trans-Pacific Partnership (TPP) to “level the playing field in the growing markets of Asia.” He also said his country would initiate negotiations on the comprehensive Transatlantic Trade and Investment Partnership with the European Union “because trade that is fair and free across the Atlantic supports millions of good-paying American jobs.” The effect of lower tariffs won’t suddenly lead to a surge in bilateral trade as the U.S. and EU have already brought down average duties to the negligible 3 percent range. Korea, which has free trade pacts with both regions, won’t be hit overly hard by the creation of a new supersized trade bloc. But the fact that the two economies have entered negotiations to remove tariffs and impose sweeping deregulation on free trade is in itself meaningful. The two make up nearly half of the world economy and 30 percent of global trade. They have primarily relied on multilateral global bodies like the World Trade Organization, but are now shifting their trade focus to bilateral arrangements. The U.S. initiatives on separate trade agreements with countries in the Pacific and Atlantic regions have been seen by some as a creation of economic constraints against China. But whether there is a hidden motive or not, free trade networking is an irreversible global trend. It can contain signs of protectionist and nationalistic trade amid financial troubles worldwide. As a country that primarily runs on exports, Korea should welcome the winds of free and fair trade in the global market. We should use the momentum to accelerate our own efforts toward a tripartite trade agreement with China and Japan that have hit a wall over territorial disputes. The U.S.-EU free trade deal would be unprecedented in the history of the world. Their agreements on everything from state subsidies to environmental standards could set the global standard. The agreements could reshape the global trade order. Other WTO-led multilateral trade talks will likely follow their lead. Our earlier agreements with the U.S. and EU will lose expected gains. But if we ride the current wave, we can gain immeasurable access across the Atlantic and Pacific. These new agreements pose new challenges and opportunities for Korea.