Four questions about the CPTPP answered

Posted on : 2021-12-26 08:43 KST Modified on : 2021-12-26 08:43 KST
Is Korea trapped between the US and China? Will Japan oppose Korea’s bid?
Minister of Economy and Finance Hong Nam-ki reveals that South Korea will be moving forward with its application process to the CPTPP during a ministerial meeting on international economic affairs at the Government Complex in Seoul on Dec. 13. (Yonhap News)
Minister of Economy and Finance Hong Nam-ki reveals that South Korea will be moving forward with its application process to the CPTPP during a ministerial meeting on international economic affairs at the Government Complex in Seoul on Dec. 13. (Yonhap News)

Typing out the name of the agreement in full without error in one go is practically impossible — the task a tongue-twister for fingers that fills the person typing with quiet rage at the inconsiderate people who came up with such a long, convoluted name for one of the largest free trade deals in the world covering the Asia-Pacific: The Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP).

Aside from its peculiarly high-flown, lengthy name, the agreement boasts a peculiar history as well. Originally spearheaded by the US as the Trans-Pacific Partnership (TPP), it has since been cold-shouldered by the North American country, which withdrew from the CPTPP’s past incarnation during the Trump administration. Meanwhile, China — previously considered to be the unpronounced enemy of the TPP — recently placed its bid to join the CPTPP in an unexpected move that took place this past September.

At this, South Korea officially announced its intention to submit an application to the CPTPP as well on Dec. 13. One of the gatekeepers of the trade deal is none other than Japan, a major signatory of the agreement with whom South Korea has traditionally had a strained relationship.

Both China and South Korea must jump through the hoop of receiving a unanimous vote from the 11 member states of the CPTPP — including Japan — in order to win final accession to the multilateral trade pact. This final decision-making process is reason for concern for the South Korean government hoping to gain membership to the mega Asia-Pacific trade agreement, considering its uneasy relationship with Japan.

Did the US hold off on CPTPP membership because of domestic politics?

Though a pro-CPTPP consensus formed within government and financial circles in South Korea early on, whether the country should apply for a membership for the trade deal was still largely up for debate. On the one hand, some argued that South Korea should wait for the US to reenter the agreement, while others argued that it should push for an accession regardless of the US position.

Born out of the conflict between the US and China and the unique relations between South Korea and the US, the two sides nevertheless had one thing in common: they both took for granted that one day, the US would rejoin the trade deal it once pulled out of.

This view still remains in South Korea. Some have made the observation that the US will eventually turn around and take steps to reenter the CPTPP, a move it must put off for the time being due to next year’s midterm elections. The political schedule in South Korea makes it unfavorable for the country to enter into an international free trade agreement (FTA) like the CPTPP. This is because increasing market openness will engender disgruntled stakeholders. This also connects back to the analysis that the US is reluctant to give up on the CPTPP and is merely unable to make a final decision on the matter, being tied up currently due to its packed political calendar.

Park Cheon-il, director of the Institute for International Trade at the Korea International Trade Association, is skeptical of this interpretation. He believes that the US is no longer interested in the CPTPP and is more focused on creating alliances in the Indo-Pacific that will counterbalance Chinese hegemony. The launch of AUKUS — a trilateral security pact between the US, the UK, and Australia — as well as ongoing discussions concerning the expansion of the Five Eyes — an intelligence alliance comprising the US, the United Kingdom, Canada, Australia, and New Zealand — support his view.

One thing to note is that the US is powerful enough to achieve its objectives through a “defeat in detail” strategy through one bilateral negotiation after another — it doesn’t have to rely on multilateral trade agreements like the CPTPP. Its moves to revise the US-Korea Free Trade Agreement and transform the North American Free Trade Agreement (NAFTA) into the United States-Mexico-Canada Agreement (USMCA) are cases in point.

This leads to the analysis that the US is more interested in strengthening cooperative systems that can efficiently check China’s rise in global value chains and industries of the future like the semiconductor and battery industries. Considering this, one can easily conclude that the US has neither reason nor time or space to waste energy on the CPTPP.

This lines up with US Trade Representative Katherine Tai’s statement during an interview with Japan’s NHK prior to her visit to South Korea in November. Tai said in the interview, “[The CPTPP is] an agreement that was negotiated now five, six, seven, eight years ago [. . .] [A]s of right now, we really need to focus on the challenges that we are facing, and be responsive to the needs of our economies and our people right now.”

US President Joe Biden (center), in the White House, is joined virtually by Australian Prime Minister Scott Morrison (left) and British Prime Minister Boris Johnson (right) to announce the establishment of a new security partnership called AUKUS on Sept. 15. (EPA/Yonhap News)
US President Joe Biden (center), in the White House, is joined virtually by Australian Prime Minister Scott Morrison (left) and British Prime Minister Boris Johnson (right) to announce the establishment of a new security partnership called AUKUS on Sept. 15. (EPA/Yonhap News)
Is China calling sour grapes on CPTPP?

China announced its application to accede to the CPTPP very suddenly, on the evening of Sep. 16. In hindsight, the timing was quite opportune. Right before, on Sep. 15, an agreement to launch AUKUS had been reached by the US, the United Kingdom, and Australia. AUKUS is a trilateral security partnership through which the three member states will share state-of-the-art defense technologies in order to counter China’s influence in the Indo-Pacific.

China’s announcement that it would join the CPTPP at that time could be interpreted as a reflexive response that was a product of the international political context. Taiwan’s bid to join the CPTPP immediately following China’s should be interpreted in the same vein. The ensuing delicate circumstance in addition to the high level of market openness and the unique decision-making process characteristic of the CPTPP call into question whether China’s bid to accede to the trade agreement is sincere.

The CPTPP is second in size only to the Regional Comprehensive Economic Partnership (RCEP) and boasts a tariff abolition rate of 96%, indicating an extremely high level of market openness. The trade deal also demands member states to meet strict requirements concerning government subsidies, digital commerce, labor and human rights.

These prerequisites may be too rigorous for China to meet. A single objection from any one of the 11 member states of the trade deal will be detrimental to China’s bid to join the CPTPP, and Japan in particular has balked at China’s membership application. China’s hostile relationship with Australia adds another hurdle to the country’s bid to join the trade agreement.

It’s difficult to fathom with any certainty the real intention behind China’s application to join the CPTPP, but some say it’s rash to predict that China won’t be able to meet the preconditions put forth by the trade pact for potential members. This is because China’s political system, considered backward by Western standards, actually allows for more flexibility for the implementation of the CPTPP’s preconditions.

Because the decisions of the Chinese Communist Party are absolute, China may be able to institute the demands of the CPTPP much more quickly than other countries. Plus, CPTPP member states Malaysia and Singapore have demonstrated a welcoming attitude towards China’s potential participation in the trade agreement, adding to the favorability of China’s bid. Considering that the CPTPP may seem extra attractive to China as an economic alliance without US participation, China’s application to accede to the CPTPP should not be considered a half-hearted, strategic move made just for show.

Will Japan take steps to block Korea from joining?

There’s little chance of the CPTPP application that Korean officials are apparently working on being rejected for failing to meet the requirements laid out by the CPTPP. Korea has developed into a major trading country and has opened up its markets to a level unreached by most countries.

To offer one striking example, next year will mark the 10th anniversary of Korea’s FTA with the US. And this year is the 10th anniversary of Korea’s FTA with the EU.

The problem lies in the CPTPP’s decision-making mechanism — which requires approval from all member states before another member can be admitted — and in the fact that Korea’s diplomatic relations with Japan are currently strained. Japan has been chilly to Korea, and a dispute over Korea’s ban on imports of marine products from the area around Fukushima, Japan, is currently pending at the World Trade Organization.

There’s reason to think that Japan will block Korea’s admission to the CPTPP or will exact a steep price for allowing it. Such speculation is reinforced by gossip passed along by trade officials that the Japanese might be willing to help Korea join the agreement if Korea lifts the ban on marine products.

Is Korea trapped between the US and China?

To get right to the point, I don’t think so, though that was the case during negotiations about the TPP, the forerunner of the CPTPP. When an agreement was reached in the US-led TPP negotiations in 2015, Korea was negotiating an FTA of its own with China.

Since the TPP was openly acknowledged as being part of the US’ strategy of encircling China, Korea joining the TPP would certainly have sabotaged its FTA negotiations with China. That’s why Korea’s business community and trade officials couldn’t build up momentum despite their support for joining and their argument that Korea, if it was going to join, should be one of the founding members.

But this aspect of the agreement was altered radically along with its name. It’s no wonder that China has submitted a membership application, while the US remains on the fence.

That reversal itself may create a liability for Korea, some suggest. But the argument that Korea joining the CPTPP would rub the US the wrong way in its conflict with China isn’t that convincing. For one thing, it doesn’t square with the fact that Japan and Australia — both of which are joining forces with the US in several areas — are both members of the CPTPP.

More worrisome for Korea’s trade officials than the larger geopolitical context of the US-China conflict is the possibility that each of the CPTPP member states will seize this as an opportunity to hash out pending issues with Korea. That scenario could become a reality because of how decisions are made about CPTPP applications.

Those issues could eventually lead to pushback from stakeholders in Korea. Ending the ban on Japanese marine products could eat into the profits of the Korean fishing industry, for example.

Another issue is that the potential benefits of CPTPP membership would vary with each industry. For now, at least, it’s domestic politics, rather than geopolitics, that seems to pose a greater challenge to the prospect of Korea joining the CPTPP.

By Kim Young-bae, senior staff writer

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