By Michelle Kwon
President Obama attends TPP negotiations during the 2012 ASEAN Summit. (Image courtesy of Whitehouse.gov)
According to former Assistant United States Trade Representative for Congressional Affairs Luis Jimenez, the Korea-United States Free Trade Agreement (KORUS FTA) is the most sophisticated Free Trade Agreement signed by either country, not for its unprecedented expansion of market access for both countries, but for its significant advancement of bilateral cooperation in the professional service industries. The most notable of the final text, which successfully came into force on March 15, 2012, delineates cross-border trade in services, specifically in regards to legal entities and telecommunication corporations.
Korea is now looking to sign a bilateral free trade agreement with China: South Korea’s single-largest trading partner. Trade with China (ex-Hong Kong) consists of 21.8% of Korea’s overall trade according to 2012 statistics.
That number is only going to increase in the future even if trade patterns continue at the status quo; HSBC economist Ronald Man says that a China-Korea free trade agreement is aimed to benefit South Korea’s automobile, textile, and petrochemical sectors. However, some experts say Korea should hold-off on signing a bilateral trade agreement with China in favor of something else: the Trans-Pacific Partnership.
Korea has expressed its interest in joining the negotiations for the Trans-Pacific Partnership (TPP). The 12 member states that are currently party to the ongoing trade negotiations constitute 40% of the global economy.
Since the latter half of the 20th century, the greatest movement amongst state actors has been in the direction of regional integration; the world has moved towards a trading system that focuses both on regional blocs vis-à-vis a market place of rapid international transactions. With regional free trade agreements such as the North American Free Trade Agreement (NAFTA), the European Union (EU), and Mercosur already producing tangible economic gains, it is no surprise that the hottest topic in trade is the TPP. Though China may bring in 1/5 of all Korean trade, the TPP offers (possibly) more dynamic incentives such as sizable gains in trade compounded by membership to an institutional framework that can help Korea achieve long-term trade and strategic goals.
Though the TPP may demand a lot from Korea, it does gives Korea the opportunity to not only engage with its Asian neighbors, but to thrive and take on the position of a regional trade hub. Though its largest trading partners are China, Japan, and the United States (currently constituting 41.6% of overall Korean bilateral imports and exports), Korea has not fully capitalized on trade with its other Asian partners. Exports to ASEAN countries decreased in 2013 according to a December 2013 press release issued by the Korean Ministry of Trade, Industry & Energy. Though the Korean government predicts increased trade between Korea and its ASEAN partners for the 2014 trade year, there must be active and considerate steps taken to make sure such trade does take place. The onus lies on Korea.
In this light, the question to ask is where does Korea stand? And what should its next move be? The active attendance of negotiating rounds and bilateral meetings by President Obama and his top trade representatives has been one of the catalyzing factors of the so-called Administration’s “Pivot to Asia.” However, Korea has an opportunity to make this moment Korea’s pivot to Asia; Korea has always focused a considerable amount of its foreign policy capital dealing with its northern neighbor and also engaging with the West. Korea has been, up until this point in time, a paradox: both extremely inwardly facing and extremely Western-centric.
Currently, as the trade deals stand, Korea is in a very comfortable negotiating position. Given the not-so-inconspicuous struggle for regional hegemony in the Asia Pacific between China and the United States, Korea can strategically play its two major trading partners against each other to gain more concessions in both the China-Korea free trade agreement and the TPP. On the other hand, further stalling negotiations for either agreement can cost Korea its seat at the TPP table (as schedules and tariffs are set along with substantive text on issues such as agriculture), and thus, lose its upper hand to China in regards to bilateral trade.
As of now, Korea stands at a critical, but exciting, juncture in regards to its trade and economic policy. 2014 can be an extremely productive year for Korea. Korea’s importance within the East Asian region will become more acute in the near future, and this Fulbright grant in Korea allows me to examine the changing dynamic within the country and the (positive) effect that could have on the international stage.
I hope this post, the first in a series that discusses Korea’s real-time trade policies and the benefits and/or tradeoffs that may emerge from such, was informative, and that you continue to check-in on Wireless Peninsula for more updates as trade negotiations continue. All questions and comments are welcome.
References
Depillis, Lydia. “Congress is considering whether to allow Obama to finish two massive trade deals.” The Washington Post, 9 January 2014, http://www.washingtonpost.com/blogs/wonkblog/wp/2014/01/09/congress-is-considering-whether-to-allow-obama-to-finish-two-massive-trade-deals/ (accessed January 22, 2014).
International Bilateral Trade: South Korea. http://www.keia.org/pagefullwidth/bilateral-trade-database (accessed January 26, 2014).
Jun, Kwanoo. “Seoul Eyes China Deal Before TPP.” Wall Street Journal, 13 January 2014, http://blogs.wsj.com/korearealtime/2014/01/13/seoul-affirms-interest-in-joining-tpp-but-says-china-deal-comes-first/ (accessed January 21, 2014).
Ministry of Trade, Industry & Energy. 2013 (December & Full Year) Trends and 2014 Outlooks for Exports and Imports. MOTIE. N.p., 14 Jan. 2014. Web. 22 Jan. 2014.
Solis, Mireya. “South Korea’s Fateful Decision on the Trans-Pacific Partnership.” Foreign Policy at Brookings, no. 31 (September 2013): 1-25.
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