Altering our trade policy
Trade blocs serve them well in the tug-of-war for regional dominance. On one side stands the United States waving the banner of the Trans-Pacific Partnership while China stands on the other side with its Regional Comprehensive Economic Partnership. Both teams are busy trying to recruit as many members as possible. Both are eager to wrap up negotiations and strike deals within the next year.
South Korea has joined the Beijing-led RCEP negotiations and is in separate bilateral free trade agreement talks with China. It also already struck an FTA deal with the United States and is mulling joining the TPP. Seoul appears to be stuck in an awkward position. It cannot choose outright one over the other without risking being excluded from a new regional economic order.
Seoul may have found a solution to its problem during a recent strategic dialogue between Korea and the U.S. in Washington. U.S. officials were of the opinion that Korea could play a valuable intermediary role for stronger U.S.-China economic cooperation. Washington does not desire to position itself at odds with China on the economic front in Asia and hopes Seoul can mediate between the two countries. If Washington means well, the TPP and RCEP can each play a constructive role in accelerating free trade and regional economic integration instead of being mere political leverage in a sphere of influence contest between the United States and China. If Korea can work towards bringing the two trade frameworks together, it will not only get itself out of an awkward position but also contribute to creating a single regional economic bloc.
Chinese President Xi Jinping paid a state visit to South Korea at this transitional period in the regional geopolitical order. He arrived with the largest-ever business entourage - over 200 corporate executives - to highlight China’s interest in a stronger business relationship with Korea. Xi and President Park Geun-hye agreed to deepen and broaden their strategic cooperative partnership and work to conclude FTA talks within the year. The two economies have become indispensible to one another in both trade and investment. Korea cannot afford to lose its economic partnership with China.
The TPP initiative led by the U.S. since 2009 has already recruited 12 countries - Canada, Chile, Mexico, Peru, Australia, New Zealand, Japan, Malaysia, Singapore, Vietnam and Brunei. Those countries make up 38 percent of world gross domestic product and 26 percent of global commerce. Washington wants to establish new trade guidelines on intellectual property rights, the environment, labor, state enterprises and foreign exchange rates.
Seoul has been deferring Washington’s invitation on grounds that the economic gains for it would not be that big because it already has bilateral FTA pacts with many of the member countries. In truth, it does not want to upset Beijing, which has been excluded from the U.S.-led initiative. Seoul began to take an interest in the TPP, which has made headway in negotiations since late last year. It has been engaged in talks with individual countries as preliminary steps for joining. It must actively join the talks to bring a Korean voice to the multi-national trade initiative.
The RCEP, which was launched in 2012 with all 10 Association of Southeast Asian Nations and six countries with which the group has free-trade agreements - China, India, Japan, South Korea, Australia and New Zealand - also envisions being the world’s largest free-trade bloc. The group accounts for 29 percent of the world’s GDP and 28 percent of international trade. China has invested heavily in the regional bloc.
The RCEP is open to other countries and allows members to join other free-trade platforms like the TPP. Beijing is not entirely shunning the TPP. China has become the world’s second largest economy. Trade is its primary growth engine. Beijing, which previously snubbed the Washington-led TPP, is looking at the bigger regional trade bloc with a new eye.
We, therefore, need not decide between the TPP and RCEP. We must first join the TPP and try to campaign for an eventual merger of the two trade frameworks. We must get a head start in China by signing an FTA with the country. We should dramatically change our external trade policy using the momentum of Xi’s visit.
Translation by the Korea JoongAng Daily staff.
JoongAng Ilbo, July 4, Page 31
*The author is a chair professor at Chung-Ang University and Foreign Investment Ombusdman at Korea Trade-Investment Promotion Agency.
BY Ahn Choong-yong