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Hong Nam-ki, Korea’s minister of economy and finance and deputy prime minister, presides over a meeting on economic security and strategy at the Government Complex Seoul on April 8. (provided by the MEF)

The South Korean government is moving toward joining the US-led Indo-Pacific Economic Framework (IPEF). This comes at a time when it is also making preparations to submit an application to join the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP).

Alongside the Regional Comprehensive Economic Partnership (RCEP) that went into effect in February, the CPTPP and IPEF are considered leading examples of the so-called mega-FTAs that have recently emerged as one of the biggest trade-related issues in South Korea and overseas.

While attending an economy and security strategy meeting last Friday, Minister of Economy and Finance Hong Nam-ki said the date of South Korea’s CPTPP application would come “before the end of this administration.”

Despite falling in the transitional period ahead of a new administration taking office, the date is roughly in line with the previously announced schedule within “March or April.”

Regarding South Korea’s participation in the IPEF, Hong said the administration would be “discussing its position and future plans in a favorable direction.”

The move toward joining the IPEF had already been predicted by observers. In a spokesperson’s briefing on March 24, the Ministry of Foreign Affairs said the administration “actively welcomes the IPEF,” adding that this position had also been communicated to Washington by means of diplomatic channels.

With President-elect Yoon Suk-yeol placing a relatively greater emphasis on South Korea’s relationship with the US, the move toward joining the IPEF has been gaining further momentum.

The concept behind the IPEF emerged out of an October 2021 proposal by the Joe Biden administration. It is an attempt to achieve regional comprehensive economic cooperation on new trade issues that have come to the fore since the COVID-19 pandemic began in areas such as digital technology, supply chains and clean energy.

With elements of an economic and security partnership under US leadership to unite allies in the Indo-Pacific region, the framework has often been pointed to as part of the US strategy to contain and hem in China.

Analysts say that the emphasis on mega-FTAs stems in large part from the multilateral system of the World Trade Organization (WTO) becoming undermined.

“With decisions [under the WTO system] being made on a ‘consensus-building’ basis that’s akin to unanimous voting, we’ve long since reached the stage where it has become difficult to produce new agreements and outputs to suit the times,” said Ahn Seong-il, director of the new trade order strategy office for the Ministry of Trade, Industry and Energy.

The conclusion of bilateral FTAs had been a new kind of path emerging out of that situation. But many such bilateral FTAs already existed, and the approach has been limited by its narrow scope. It is this context that has contributed to the waning of WTO-based multilateralism and the rise of the “mega-FTA” vision.

Park Chun-il, the City Airport, Logis & Travel CEO who previously headed the Institute for International Trade (IIT) under the Korea International Trade Association, commented, “These mega-FTAs bringing together large economic regions have been emerging as global value chains have gotten more complex and difficult to respond to with bilateral FTA frameworks.”

The need for mega-FTAs has been further underscored by supply chain issues — the impact of which has been felt in issues such as semiconductor and urea water solution shortages.

According to this analysis, the lowering of barriers through bilateral FTAs runs into limits in a global economic environment where more and more businesses are venturing overseas and various countries are involved in complex ways in the production of certain items.

The CPTPP follows on the heels of RCEP, which is considered the “original” mega-FTA — but it has also drawn notice for its even greater levels of openness. It has 11 member countries participating from the Asia-Pacific region, including Australia, Canada and Japan. China has already taken action ahead of South Korea by submitting its application to join last year.

The US had previously played a guiding role in the CPTPP’s previous incarnation, the Trans-Pacific Partnership (TPP), but ended up bowing out during the Donald Trump presidency. At the time, the TPP was seen as part of a strategy to contain and constrain China.

The IPEF concept has a stronger orientation toward security and global politics than the TPP. It’s also distinguished by its focus on establishing new trade norms — in contrast with traditional FTAs, which have emphasized the liberalization of trade in products.

“[WTO-based] multilateralism has run into limits in terms of new norms, where it has been able not only to effectively legislate on various issues — such as digital trade, carbon neutrality, labor environment improvements, China’s infringements on intellectual property rights and subsidies to state-run enterprises, technology theft, and industry spying — but also to properly manage the various countries’ trade policies,” said Heo Yoon, a professor of international trade at Sogang University.

“With these mega-FTAs, we’re at least seeing the potential to take a leading role in hastening trade liberalization among multiple countries,” he suggested.

According to this analysis, mega-FTAs are strongly informed by the goal of preventing supply chain disruptions through the formation of homogeneous networks. Heo explained, “Whereas past FTAs were about supply chains that emphasized ‘efficiency’ in terms of making money or cutting costs, the focus is now shifting toward ‘stability,’ as like-minded countries form agreements to ensure stable supply chains.”

IIT Director Cho Sang-hyun said, “While the CPTPP has drawn concerns about agricultural and fishing product [market] openness and the IPEF concerns about trying to hem in China, South Korea is obliged to develop a strategy for seizing the agenda and protect its interests through participation at the early stages as a country that aspired to be an open trading power.”

According to this perspective, the time needed between participation in negotiations and the agreements actually going into force means that South Korea would be better off making a priority of taking part and actively sharing its opinions, rather than joining late in the game when the environment has already taken shape.

Ahead of the CPTPP application, farmers and fishers spoke out vehemently during a hearing at the Sejong Government Complex on March 25. The outcry continues, with concerns rooted in the fact that the CPTPP not only boasts a high level of openness but also includes members that are major agriculture powers, such as Australia and Canada. Domestic negotiations to win over farmers and fishers will pose as much of a challenge as external negotiations to join the partnership.

In the case of the IPEF, an even bigger issue concerns South Korea’s relationship with China. That partnership is focused less on an additional reduction of trade barriers than on establishing new norms that are seen as being intended to rein in Beijing — which means it has more potential to spark issues in foreign relations rather than a domestic outcry.

By Kim Young-bae, senior staff writer

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