Korea should seek both TPP and FTA with China

The Korean government announced at an external economy-related ministers’ meeting last Friday, “(We) decided to express our interest in joining the Trans-Pacific Partnership (TPP) trade agreement.” “Expression of interest” is the first step of joining the negotiations of TPP, a multilateral free trade agreement in the Asia Pacific region. The Korean government will proclaim its participation in the negotiations late this year or early next year.

The Trans-Pacific Partnership negotiations led by the United States are participated in by 12 nations in the region, including Japan, Canada and Australia. The negotiations started with only four nations in the region including New Zealand and Singapore in 2005. With the participation of the U.S. in 2008 and Japan this March, the partnership has emerged as a remarkable pillar of the global trade. The total GDP of participating 12 nations accounts for 38.4 percent of the global GDP. Once signed, TPP will become the world’s largest free trade agreement. Therefore, it is a must for Korea to join the partnership in the national interest.

Korea has already signed a bilateral FTA or the Korea-ASEAN FTA with seven of the TPP participating nations, namely, the U.S., Chile, Peru, Singapore, Vietnam, Malaysia and Brunei. If Korea joins TPP, it can have the effects of signing a free trade agreement with the remaining five nations as well – Japan, Canada, Australia, New Zealand and Mexico. Some observers are negative about Korea’s participation in TPP. But if Korea does not join this partnership, of which Japan is a member, it will weaken the comparative advantage over Japan, which Korea has maintained through bilateral FTAs. The Korean government will only have to be careful about the impact on the agricultural industry during negotiations.

The Korean government’s announcement on TPP is attributed not only to its economic benefits but also to the rapid restructuring of security order in northeast Asia. The U.S. has urged Japan and Korea to join the negotiations in order to heighten the effects of TPP. Korea’s participation in TPP will also contribute to a stronger alliance between Korea and the U.S.

The Korean and Chinese governments completed the first round of FTA negotiations in September and embarked on the second round last month. China, the largest trading partner of Korea, is a very important economic partner to Korea along with the U.S. and Japan. Thus, Korea should pursue the bilateral FTA with China and TPP with regional nations at the same time to maximize the national interest. In the midst of the power struggle between the U.S. and China in northeast Asia, Korea needs to take a sophisticated and balanced approach for its economic diplomacy.