Biden Emphasizes Multilateral Trade and Hints at Xi Jinping's Membership... Our Government Also Takes Proactive Measures

Mun "Continued Review of CPTPP Accession"... Harmonizing with RCEP is Key
US Withdrawn from Agreement in 2017... New Biden Administration Considering Rejoining
President Xi Also Willing to Join CPTPP... Government Gains Justification for Accession
CPTPP Aims for 100% Tariff Elimination... Difficult to Apply Uniformly by Country
Concerns over Direct Impact on Agricultural and Automobile Industries... Experts Call for Thorough Review

[Asia Economy Reporter Moon Chaeseok] President Moon Jae-in stated on the 8th at the 57th Trade Day Commemoration Ceremony held at COEX in Seoul that "We will continue to review joining the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP)," signaling that the government is expected to accelerate its pace of joining the CPTPP. This reflects the government's intention to actively respond to the Biden administration's reconsideration of rejoining and China's indication of willingness to join.

Amid the trade conflicts between the U.S. and China, how to harmonize the recently signed Regional Comprehensive Economic Partnership (RCEP) last month with the CPTPP will likely become a key issue going forward.

Following the U.S. and China’s successive reviews, South Korea also speeds up

President Moon Jae-in delivering a congratulatory speech on the morning of the 8th at the '57th Trade Day Ceremony' held at COEX in Gangnam-gu, Seoul. (Image source=Yonhap News)

The CPTPP is an economic alliance led by Japan, involving 11 Asia-Pacific countries. The participating countries are Japan, Australia, New Zealand, Malaysia, Singapore, Brunei, Vietnam (the above seven countries are also members of RCEP), Canada, Mexico, Chile, and Peru. During former President Barack Obama's administration in February 2016, the U.S. launched the Trans-Pacific Partnership (TPP) with Japan, but after President Donald Trump withdrew from the agreement in 2017, Japan, along with Canada and Australia, enacted the CPTPP in 2018. The Biden administration is currently reviewing rejoining the agreement under the banner of "restoring the multilateral trade order."

Until now, South Korea has focused on joining RCEP and maintained a cautious stance toward the CPTPP. Concerns were high that the readjustment of export tariffs with Japan (abolishing 0% tariffs from Korea to Japan and 8% tariffs from Japan to Korea) would severely impact Korea's automobile industry. Additionally, since China exerts considerable influence in RCEP, it was diplomatically burdensome for Korea to approach the U.S.-led CPTPP. The inclusion of regulations on state-owned enterprises in the CPTPP was also a concern.

However, with Chinese President Xi Jinping expressing willingness to join the CPTPP, South Korea now has justification to actively pursue CPTPP membership. President Moon reportedly mentioned that "our government needs to develop a more progressive trade strategy" in response to President Xi's announcement. President Xi had expressed his intention to join the CPTPP at the recent G20 summit last month.

Virtually 100% tariff elimination, "careful review needed"

On the 1st, an export cargo transport vehicle arriving at Incheon International Airport Cargo Terminal. (Image source=Yonhap News)

The CPTPP aims for virtually 100% tariff elimination, representing a much higher level of openness compared to RCEP, which applies different tariff elimination rates by country. Generally, a tariff elimination rate above 90% is considered "high openness," but RCEP did not achieve "high-level openness" with countries such as Japan (76% tariff elimination from Korea to Japan, 78% from Japan to Korea), Myanmar, and Cambodia. Joining the CPTPP could make it difficult to maintain such trade strategies.

This could directly impact the agricultural and automobile industries. Accordingly, trade experts emphasize the need for a thorough review not only by product but also considering national interests. Analysts suggest that China's swift expression of willingness to join the CPTPP is a strategic move to preempt discussions.

Because the CPTPP has a higher level of openness than RCEP, it becomes difficult to exclude major sensitive items such as automobiles and machinery from concessions or to employ strategies like long-term (10-20 years) tariff elimination. A government official explained just before signing RCEP, "We excluded major sensitive items such as automobiles and machinery from concessions to Japan, and for open items, we used many long-term (10-20 years) and nonlinear tariff eliminations for protection. Our proportion of long-term tariff elimination (over 10 years) was 41.6%, higher than Japan's 17.1%, and we also used many 20-year and nonlinear eliminations." Whether such measures can be enforced under the CPTPP remains uncertain.

Additionally, upon joining the CPTPP, challenges include ▲preparing in advance for the possibility that the U.S. may demand high-level digital trade provisions comparable to the United States-Mexico-Canada Agreement (USMCA), ▲the risk of renewed U.S.-China conflicts given China's unwavering commitment to its "dual circulation strategy" to stimulate the domestic market, ▲concerns over expanding trade deficits with Japan amounting to $16.56 billion from January to October this year, and ▲worries about the influx of low- and mid-priced agricultural and livestock products from Mexico if the CPTPP is concluded without buffer agreements such as Mercosur or the Pacific Alliance.

Meanwhile, despite the expressed intentions of the U.S. and China, there are forecasts that actual CPTPP membership may be difficult. The U.S. faces domestic issues such as COVID-19 response and healing a divided public, making immediate CPTPP discussions challenging. There are also concerns that China, with many state-owned enterprises, may find it difficult to comply with CPTPP norms.

Professor Jeong In-gyo of Inha University's Department of International Trade said, "The U.S.'s interests can differ significantly depending on whether it joins or not. If the U.S. enters the CPTPP, it will considerably affect our interests, so preemptive responses will become important."

This content was produced with the assistance of AI translation services.