Bracing for the TPP
The details of the world’s biggest multilateral free trade deal were revealed for the first time after the Trans-Pacific Partnership (TPP) was concluded last month. The TPP will be formally launched once it wins parliamentary approval in more than half of its 12 Pacific Rim members. It is expected to kick off in the first half of next year. Members of the trade bloc account for 40 percent of global gross domestic product.
According to the text first released by New Zealand, the 30-chapter agreement is designed to eliminate tariffs on 95 percent to 100 percent of exported products over 30 years. Except for a few exceptions in farm goods, everything from beef, dairy products, wine, manufactured goods and energy resources will be tariff-free among the members. A rule of origin provision gives exclusive rights to TPP countries to share preferential tariff benefits by considering all inputs - from raw materials to finished goods - of TPP parties treated as the same.
This would be a boon for our export rival Japan, which already has a matured supply chain in Southeast Asia. Korea, which had trade advantages over Japan through its bilateral free trade agreements, would lose competitiveness in trade with TPP members. The TPP has set new standards in market liberalization and free trading.
Tougher regulations also could work unfavorably for Korea. TPP members can sue and penalize state-owned or invested companies if they export with public subsidies and support. Korea’s 30 state enterprises and companies like Daewoo Shipbuilding & Marine Engineering, which are under state bank control, could be affected. Subsidies in fisheries are banned. Korea won’t be able to sustain exports through loan guarantees and assistance to zombie companies.
But Korea cannot avoid joining the TPP. The government must find a strategy to get on the bandwagon without increased cost for being a latecomer. The government and corporate sector must accelerate reforms and restructuring to be better fit into the TPP framework. We must use some momentum to upgrade our economic and trading standards for the future’s sake.
JoongAng Ilbo, Nov. 6, Page 34