South Korea and the Trans-Pacific Partnership
On Oct. 5, 12 countries, making up 40 percent of the world economy and including Japan and the United States finally agreed after years of negotiation on the Trans-Pacific Partnership, the omnibus free trade bill being pushed by Washington, DC.
The agreement was seven years in the making after the administration of US President Barack Obama joined in the negotiations in January 2008, and two years after the government of Japanese Prime Minister Shinzo Abe formally announced that it would take part.
The negotiation process was arduous, reflecting the partnership’s complicated issues. The US, as could be expected, held the keys. Washington was the only directly involved party in the issues that presented the final hurdles, including government procurement, intellectual property rights of new pharmaceutical products, tariffs, and quotas on dairy products and rules of origins. IPR for new pharmaceutical products, especially, was an issue where the interests of participating countries acutely collided and hampered negotiations up until the end.
What’s in it for Seoul?
For South Korea, the trade pact has now become a current problem rather than a prospective one. The South Korean government has to thoroughly review not only the TPP, but also the changing direction of the world trade order and regional architecture after the conclusion of the negotiations.
First of all, the government of President Park Guen-hye seems to have decided to participate in the trade pact. The important point is not the participation itself, but the timing and conditions of participation. The economic gains and losses from participation or non-participation should be the basis of such a decision, and are a combination of tangible issues such as tariff elimination and intangible aspects such as reflecting the position of South Korea in the process of establishing new regulations. The claim that the influence of the TPP can be minimized by focusing on the effects of tariff liberalization is only half-true.
Secondly, the South Korean government should review what method of participation can maximize its national interests. In order for South Korea to become the 13th participating member, it may pursue negotiations independently, or instead consider forming a group with other countries, including Indonesia, Thailand and the Philippines, who have shown interest in participation.
Noodle Bowl of Trade Pacts
Thirdly, the systematic prospect of the trend toward mega-FTA negotiations unfolding in the East Asian region, and a strategic approach to that prospect, should be closely examined. After conclusion of the TPP, much attention has been focused on the Regional Comprehensive Economic Partnership, or RCEP, an FTA negotiation that has been developed among 16 countries – the 10 members of the Association of Southeast Asian Nations and the six countries with which ASEAN has existing free trade agreements.
Depending on the perspective, the TPP and RCEP can be seen as either contradictory or complementary. From South Korea’s point of view, focus should be put not on their contradictory nature, but on a realistic way to harmonize the two. In reality, the number of countries participating in both the TPP and RCEP amount to seven, so there is no need to prematurely conclude that the two will contradict each other. Considering that, these countries should cooperate and work to harmonize the two.
Where does South Korea fit in?
Fourth, it is clear that the conclusion of the TPP would greatly influence US-China relations. Some expect that since the TPP is indirectly connected to the response strategy of the US and Japan towards China, the US and China will redouble their efforts to independently design the regional architecture, each focusing on the TPP and RCEP, respectively.
Although it is difficult to completely deny the possibility of a US or China-led architecture, various routes toward a regional architecture are being proposed, triggered by China’s suggestion to form a Free Trade Area of the Asia-Pacific (FTAAP) at the 2014 Asia-Pacific Economic Cooperation summit. South Korea should suggest a persuasive course in which the TPP and RCEP can be harmonized and, based on this, exercise a level of diplomacy that can garner cooperation from countries in the region.
Lastly, systematic process management in the dimension of domestic politics is needed. Considering the US presidential election schedule, it is expected to take two to three years for the TPP to come into effect. For South Korea, this means that there is time to prepare. One reason for South Korea’s wariness in participating in the TPP negotiations was the domestic political burden regarding the sectors that may be harmed by the TPP.
The time needed for the trade pact to come into effect may allow the South Korean government to not only alter its foreign policy strategy but also to prepare to handle the domestic policy dimensions. In order to establish a domestic and foreign strategy that makes the most of the TPP, a variety of thoughts and ideas should be considered.
Seung Joo Lee is currently a Professor in Chung-Ang University’s Department of Political Science and International Relations. This is excerpted from a study written for the Seoul-based East Asia Foundation, a think tank maintained by the Hyundai Corporation.