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The Peninsula

Why Was South Korea Not an Original Member of the Trans Pacific Partnership?

Published August 11, 2016
Category: South Korea

By Jiwon Nam

Trans Pacific Partnership (TPP) is a trade agreement among twelve Pacific Rim countries. TPP originated with countries including Singapore, Brunei, New Zealand and Chile in 2005 as Trans-Pacific Strategic Economic Partnership Agreement, which were later joined by eight additional countries. The final agreement was signed by the twelve initial members on February 4th 2016 in Auckland, New Zealand. During and after the negotiations, significant debates took place in South Korea on why it did not join the TPP negotiations in the first round. In this blog, what has been achieved in TPP negotiations will be analyzed, as will the reason that South Korea did not join the TPP negotiation in the first round.

The biggest reason that South Korea did not join the initial TPP negotiation was because South Korea already had bilateral free trade agreements with most of the TPP member states except for Japan and Mexico. In order to join TPP, South Korea needs to have individual bilateral market access agreements with all the member states. Though, adding free trade agreements with Japan and Mexico through the TPP has positive benefits for South Korea, another positive side of joining TPP is the “high standards” of the agreement. According to Jeffrey Schott, TPP’s “high standards” would complement and promote domestic economic reforms and help boost productivity growth across the economy. This is where TPP is differentiated from many already existing FTAs. Therefore, arguing South Korea should not or rather not join TPP is not feasible and sufficient reason to not join.

The benefits of joining TPP are significant for South Korea. Through TPP,some   sectors such as the car industry and technology firms such as Google and Uber are expected to benefit. South Korea is one of the countries where automobile exports make up a great portion of its net income. Therefore, according to the BBC report, South Korea could potentially gain from the TPP. Jeffrey Schottalso suggests a few specific categories where South Korea can benefit. First, participation in the TPP would upgrade already existing trade agreements and result in new opportunities for more trade and investment. Through TPP, South Korea will be able to reassure and expand its trade deals with Chile, Peru, and ASEAN. Second, South Korea will engage in trade and investment liberalization and domestic reforms as part of joining TPP. This reform of national economy would create more import and export opportunities, as well as enhancing South Korea as a destination for foreign direct investment.

Despite concerns from its allies, South Korea expressed its interested in participating in the TPP negotiations. According to The Diplomat, on October 23, 2015, during the visit to Washington D.C., Park Geun-hye expressed South Korean support for the TPP. This is the first time that South Korea expressed its official interested in joining TPP.

What suddenly made South Korea interested? South Korea has been reluctant to join the TPP because it wanted to have balanced relationships with both China and the allies led by the United States. South Korea was also looking into establishing a bilateral free trade agreement with China. Even though joining TPP will potentially provide South Korea with economic benefits and contribute to the development of trade relationships, South Korea also needs to consider its diplomatic and political relationships with its neighboring countries. Because of the recent decision on the deployment of THAAD, South Korea and China’s relationship has become more fragile. Now Korea wants to join TPP instead of focusing on continuing to work with China on other regional trade initiatives. These two recent decisions may result in a potential uneasiness in the political relationship between South Korea and China.

It has been a long process for South Korea to find the right place to stand in the matter of participation in TPP. According to its previous plan of playing the role of linchpin, South Korea has been acting to maximize its benefits. It is largely known that South Korea is a natural participant given that it already has bilateral free trade agreements with most of the TPP member states and because of its geographic proximity to many of the participants. However, finding a balance between both pursuing economic benefits and diplomatic and political relationships with its neighboring countries is important for South Korea. Since South Korea cannot solely rely on TPP for trade agreements and it also needs to consider China as one of its biggest importers. Moving forward, the future of South Korea and its success depends on this balancing act and seeking the maximum benefits from trade while having a feasible diplomatic strategy in East Asia.

Jiwon Nam is currently an intern at the Korea Economic Institute of America and a graduate student at the University of Maine. The views expressed here are the author’s alone.

Photo from Andrew and Annemarie’s photostream on flickr Creative Commons.

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