Korea should join the TPP
On Oct. 5, 2015, the 12 negotiating parties of the Trans-Pacific Partnership (TPP) announced they had reached a final deal on the agreement. In the wake of the announcement, Korea reiterated the view it had expressed since November 2013 - that it is interested in joining the deal, but would need to thoroughly analyze the impact of joining the TPP on the Korean economy.
Korea has good reason to take a cautious approach. Korea currently has free trade agreements with 10 of the 12 TPP founding members, including the U.S. Because of the advanced level of trade liberalization that Korea has achieved through these bilateral agreements, many have argued the positive economic impact of joining the TPP would not be significant for Korea. Many have also voiced concerns that joining the TPP would require Korea to make concessions and cope with demands that exceed its existing FTAs.
Despite these well-placed concerns, there remain compelling reasons for Korea to join the TPP, even as an acceding member. As an initial matter, while there have been mixed assessments regarding the scale of the impact that joining the TPP would have on the Korean economy, there is no doubt that the overall economic effect would be a positive one, with some studies estimating that the agreement would result in a GDP increase of over 4 percent.
Moreover, although it is true that Korea is already engaged in bilateral FTAs with nearly all of the TPP negotiating countries, most of these agreements are less comprehensive than the TPP, which has been touted as the “gold standard in trade agreements.” Therefore, despite the overlaps, the TPP would offer Korea broader access into global markets that are not accorded under Korea’s bilateral agreements with the individual TPP members.
More importantly, the TPP is as much a political agreement as it is an economic one. As Korea knows, the TPP is widely viewed as a counterweight to the rise of China. It is a crucial element to the Obama administration’s “pivot to Asia” strategy of rebalancing U.S. foreign, economic and military policy to the Asia-Pacific. Thus, the TPP’s passage is a top foreign policy objective for President Obama and will arguably be the most important foreign policy legacy of his presidency.
In this respect, the intangible benefits of joining the TPP from a foreign policy perspective may be even greater than the economic benefits the agreement would bring to Korea. In addition to the geopolitical implications of being one of the largest economies in an economic bloc that accounts for 40 percent of global output and 25 percent of global exports, TPP membership would provide an important forum for Korea to further strengthen its longstanding alliance with the U.S. and solidify its position as a hub for Asia-Pacific economic integration.
Indeed, the geopolitical fallout of not joining the TPP would be highly undesirable. If Korea remains absent, its participation in the rival Regional Comprehensive Economic Partnership (RCEP) under China’s leadership would strongly suggest, rightly or wrongly, a notable reorientation of Korea’s foreign and economic policy away from the U.S. And, the United States will inevitably look to Japan to play a leadership role among the Asian economies of the TPP. This will only reinforce the perception of Japan as America’s principal economic ally and the linchpin in East Asia.
Now that the TPP negotiations have been concluded, I believe Korea should make concerted efforts to become one of the first, if not the first, acceding members to the TPP agreement. The advantage of seeking accession sooner would include potentially negotiating country-specific terms with individual countries. For example, Korea could have flexibility to negotiate the “positive list” of entities and activities that are covered by the government procurement chapter which is specific to each country. Korea could also have flexibility with country-specific lists regarding investment and cross-border trade in services and e-commerce. Korea stands to benefit from seeking accession early, as the areas in which flexibility exist may reduce with the passage of time.
Fortunately for Korea, there is a window of opportunity, as the TPP will not enter into force until the original members, including the United States, have approved and ratified the deal. This will give Korea time to engage the original members and gain early consensus regarding its accession. For example, in the case of the United States, President Obama is required by law to give Congress 90 days’ notice before signing the agreement. Even after the President signs the TPP agreement after this waiting period, the U.S. Congress must then engage in a series of procedures to negotiate, draft and vote on implementing legislation, a process that can take months and well into 2016.
Korea should take full advantage of this period to begin finalizing negotiations regarding the terms of its accession with the original TPP members. Korea is in a good position to do so, as it positioned itself to date as a strong contender for the next tranche of countries to join since it first expressed interest in joining the agreement in 2013. Indeed, Korea should not miss out on an opportunity to join the TPP as an acceding member under the best terms possible by utilizing this window for negotiating those country-specific commitments with other signatories.
*The author is a partner at the law firm of Arnold & Porter LLP in Washington, D.C.
by Sukhan Kim