TPP Would Provide 'Significant Gains' For South Korea

Participating in the Trans-Pacific Partnership (TPP) would present significant gains for South Korea within its overall policy of negotiating free trade agreements (FTAs) with its major trading partners, according to a policy brief from the Peterson Institute for International Economics (PIIE).

South Korea now has nine FTAs in effect, covering over one-quarter of its total trade, including the "flagship" agreements with the United States and the European Union (EU), and it already has trade agreements in force with seven of the TPP countries – Chile, Peru, Singapore and the US, and also Brunei, Malaysia and Vietnam within its FTA with the Association of Southeast Asian Nations (ASEAN).

FTAs have also, more recently, been signed with Australia and Canada, and South Korea has pursued trade talks with the remaining TPP countries – Japan, Mexico and New Zealand.

Apart from the increased benefits arising out of better market access with those countries within a higher-level TPP agreement, it is noted in addition that TPP participation would complement a number of other current trade initiatives in which South Korea is engaged, such as its FTA negotiations with China, the tripartite FTA with both China and Japan, and the Regional Comprehensive Economic Partnership, being negotiated between ASEAN and its single FTA counterparties – South Korea, Australia, New Zealand, China, India and Japan.

The PIIE points out that, "if successful, these pacts would establish important precedents for economic integration in the Asia-Pacific region. Indeed, a stated goal of South Korea's trade policy for the next decade is to play an active role in promoting regional integration and serve as a 'linchpin' between the TPP and the RCEP." It would also "be well positioned to bridge Asia-Pacific and intra-Asian regionalism into an overarching Free Trade Area of the Asia-Pacific."

South Korea first began an analysis of joining the TPP after its negotiation was begun in 2010, and then, towards the end of 2013, it expressed a definite interest and began its consultations with all TPP countries. It is expected to decide shortly whether and when it would like to participate.

The PIIE considers that South Korea "would face a limited-cost entry (into the TPP), since it is already pursuing many of the policy reforms likely to be required by the TPP as it implements its trade pacts with the US and the EU."

Although "the ongoing TPP discussions between the US and Japan on agriculture will be instructive," it concludes that "South Korea is unlikely to face demands to improve tariffs that go significantly beyond what it already has undertaken in its existing pacts."

The PIIE concludes that, if South Korea joined with the present TPP countries, it would have significant annual gross domestic product and export gains of USD46bn and USD89bn, respectively, or 2.2 percent and 12.4 percent, once the deal is fully implemented.

"In large measure," it adds, "these significant gains derive from the impact of closer integration with Japan, though South Korea would also gain from increased trade with Vietnam, Mexico, and Malaysia. … In short, the TPP is much more valuable to South Korea (and the US) because Japan is part of the deal."

Source: Tax News