As UK joins CPTPP hopefuls, S. Korea hurries to prepare application

Posted on : 2021-02-05 17:34 KST Modified on : 2021-02-05 17:34 KST
With approval of all 11 current member states needed, final deal could take years to reach
Minister for Trade Yoo Myung-hee holds a roundtable with experts at the Korea International Trade Association (KITA) office in Seoul on Dec. 29, 2020, to discuss how to respond to the new trade order, including the CPTPP and WTO reforms. (South Korean Ministry of Trade, Industry and Energy)
Minister for Trade Yoo Myung-hee holds a roundtable with experts at the Korea International Trade Association (KITA) office in Seoul on Dec. 29, 2020, to discuss how to respond to the new trade order, including the CPTPP and WTO reforms. (South Korean Ministry of Trade, Industry and Energy)

The South Korean government is speeding up its preparations to apply for membership in the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) after effectively making official its plans for negotiations to join.

Its efforts include commissioning an analysis of the macroeconomic effects of membership. The CPTPP is a Japanese-led framework with 11 countries currently participating in the Asia-Pacific region.

Analysts said South Korea’s decision appeared to have been heavily influenced by the UK’s formal application to join CPTPP on Feb. 1.

Preemptive resolution process underway

On Feb. 4, a senior trade official said, “We’re currently preparing for a government-commissioned research effort to estimate and analyze the macroeconomic effects of joining the CPTPP, taking into account the content of the Regional Comprehensive Economic Partnership, which was signed in November of last year.”

Fifteen countries are participating in the RCEP agreement, including South Korea and Japan.

In addition, different government agencies have reportedly embarked on a full-scale overhaul of domestic trade-related institutions and laws to meet the CPTPP’s standards.

This includes reworking commerce and competition laws to meet the norms specified in the CPTPP, which amounts to a large-scale free trade agreement (FTA). In effect, the government has gone beyond simply showing an “active interest” in joining and begun procedures to preemptively resolve issues to ensure its request to join is accepted.

In particular, trade authorities have reportedly entered unofficial discussions with CPTPP Depositary New Zealand, which is in charge of ratification and admission for the agreement, and with Japan, which is this year’s CPTPP Chair. Additional countries hoping to join the agreement must hold individual discussions with each of the 11 current members before formally requesting to join.

A trade official explained, “Despite rapid changes to the global trade environment, including the growth of digital e-commerce and issues with government export subsidies, the World Trade Organization (WTO) hasn’t created any new trade norms since its launch in 1995, so there’s been a trend of major economies establishing and substituting new trade norms using super-FTAs as a framework.”

“As the world’s seventh-ranked export power, South Korea needs to hurry up and take part in establishing new trade norms,” the official stressed. Taiwan and Thailand have also indicated their intent of joining the CPTPP.

If South Korea does enter negotiations to join, it is expected to be several years before a final deal is reached. The key question for now is whether the 11 current members will pursue market openness negotiations all at once with aspiring new members such as South Korea and the UK or follow an approach where each of them has to negotiate individually with all 11.

South Korea needs to come up with a concession schedule for opening up markets — including reducing or abolishing tariffs — for around 6,000 items (based on the six-digit HS code standard), including sensitive farming, fishing and livestock items.

In contrast, the market openness levels of the 11 current members are not subject to negotiation. With liberalization levels of 95-100% for goods in the CPTPP framework (based on the number of items, ranging from immediate abolition of tariffs to a 21-year time frame), additional countries hoping to join are obligated to provide the highest possible level of market access (openness).

Xi’s remarks about China’s stance on CPTPP hold “different strategic significance” from joining

Some of the variables with direct bearing on South Korea and the UK’s moves to join the CPTPP include the US’s timeline for returning after the launch of the Joe Biden administration and the battle for trade dominance between the US and China, which has been taking on a complex dynamic in the Asia-Pacific region.

The 11 current CPTPP members figure they can induce the US to return to the framework as the world’s largest market if they can first get South Korea, the UK and Taiwan on board.

“Most of the existing members — including Japan, New Zealand, Australia, Canada and Singapore — are in favor of expanding membership,” a South Korean government official said.

Meanwhile, Chinese President Xi Jinping said at an Asia-Pacific Economic Cooperation (APEC) summit last November that China would also “actively consider” joining the CPTPP. In response, trade experts interpreted China’s position as having a “different strategic significance” from an actual intent to join.

Their analysis is that China aims to keep the US from joining and delay the CPTPP’s expansion into a larger-scale framework.

James Kane, a researcher with the UK’s Institute for Government, recently told Reuters that the CPTPP has a political purpose, as well as an economic one, in the sense that it aims to present a bloc as a common front — representing 13.5% of the global market economy — in order to create new rules countering China’s practices of disrupting global trade norms, including its subsidies to state enterprises.

Analysts also predicted that the existing members would be very likely to exercise veto powers if China does apply later on to join the CPTPP. The agreement of all 11 members is required for additional members to join.

By Cho Kye-wan, staff reporter

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