Published : 2013-03-19 19:36
Updated : 2013-03-19 19:36
Recent months have seen the world’s major countries making fresh moves to reshape the global trade landscape. As these developments pose serious challenges to Korea, the new Seoul government needs to assess their implications carefully and draw up countermeasures.
Among the latest developments, the most notable one may be Japan’s decision to participate in Trans-Pacific Partnership free trade negotiations. Prime Minister Shinzo Abe announced his bold decision on March 15.
The TPP is a comprehensive trade agreement promoted by the United States and 10 other Asia-Pacific countries, including Canada, Mexico, Australia and Singapore. Japan’s participation would boost the grouping’s share of global output to 40 percent.
Washington is rushing to effectuate the agreement as early as possible to counter China’s dominance in the Asia-Pacific, which is widely seen as the new growth engine of the global economy.
In February, the United States and European Union announced another surprising initiative. In his annual State of the Union speech on Feb. 12, U.S. President Barack Obama declared that the U.S. would soon begin talks on the Transatlantic Trade and Investment Partnership, or TTIP, with the EU.
Combined, the U.S. and EU account for half of global economic output and one-third of the global trade volume. The two sides plan to start negotiations in June and finalize them by the end of 2014.
The TTIP is not just about tariff reductions. Through the partnership agreement, the two sides seek to rewrite a wide range of regulations and technical standards to remove nontariff barriers to global trade and investment.
The TTP and TTIP are emblematic of the recent tendency among leading trading nations to create new regional trade blocs. As the global economic slowdown continues, they increasingly use trade blocs as a vehicle to secure a stable export market.
Other examples include the Regional Comprehensive Economic Partnership, a multilateral agreement pushed by the ASEAN Plus Six; the Pacific Alliance, an agreement concluded last June by Mexico, Chile, Colombia and Peru; and the Eurasian Union, a project promoted by Russia to integrate former member states of the Soviet Union in a fashion similar to the European Union.
Among these and other regional trade agreements, the TTP and TTIP deserve attention as they would, if effectuated as planned, seriously erode the advantages that Korea has secured through its free trade agreements with the U.S. and EU.
The challenges facing Korea are basically twofold ― to expand its network of FTAs to offset the adverse effects of new regional trade agreements, while at the same time minimizing the negative impact of new FTAs on domestic market-oriented sectors.
During a recent workshop with ministers and presidential secretaries, President Park Geun-hye stressed the need to maximize synergy between external trade and domestic industries. Her remark implied that preceding Korean governments tended to promote FTAs without due regard for non-exporting sectors.
Yoon Sang-jik, minister of industry, trade and resources, said he would pursue negotiations on new FTAs based on national consensus and in consideration of their effects on non-exporting small and medium-sized companies and farmers.
It is absolutely right for the government to heed the interests of domestic-oriented industries when negotiating new FTAs. Yet this should not hinder in any way the government’s efforts to expand the nation’s FTA network.
The government should not lose sight of the rapid changes taking place in the global trade environment. As the global trend is toward creating new trade blocs, Korea has to respond to it by promoting FTAs with new trade partners.
On the one hand, the nation needs to speed up negotiations on the Korea-Japan-China FTA, which will start in Seoul this month. It is also advised to effectuate the FTAs with Turkey and Colombia as early as possible and resume the stalled negotiations with Australia, Canada and Mexico.
At the same time, it needs to promote FTAs with countries in Latin America, eastern Europe, Africa and the Commonwealth of Independent States that hold great promise.
While promoting new FTAs, the government also needs to raise the utilization rates of existing ones by helping SMEs use preferential tariff schemes in exporting goods and services.