'Protectionism'·'CPTPP'·'WTO'..."No Significant Improvement in Next Year's International Trade Environment"

Possibility of Deepening 'Protectionist Trade Policies' in the Process of Overcoming COVID-19
Global Trade Likely to Shrink Further Due to Major Countries' Import Substitution and Domestic Industry Protection Policies
Strengthening of China-Centered Supply Chains After RCEP Signing... US Choices Depend on US-China Conflict Dynamics
"South Korea's New Southern Policy Expected to Gain Momentum"

▲ As the Trump administration strengthened its protectionist stance and showed signs of imposing high tariffs on Korean steel products, the domestic steel industry began seeking survival strategies.

[Asia Economy Reporter Lim Cheol-young] Amid the clear rise of protectionism in major countries due to the COVID-19 pandemic, it is forecasted that the international trade environment will not significantly improve next year during the process of overcoming the COVID-19 crisis. With the signing of the Regional Comprehensive Economic Partnership (RCEP), there is a high possibility that the China-centered regional supply chain will be strengthened, drawing attention to whether the United States will join the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) and the potential launch of a new U.S.-led multilateral coalition.

The Institute of Foreign Affairs and National Security at the Korea National Diplomatic Academy analyzed in its '2021 International Situation Outlook' report that major countries worldwide are pursuing import substitution policies aimed at protecting and fostering domestic industries to overcome the economic crisis caused by COVID-19. They recognize supply chain instability for essential goods as a problem and are actively introducing policies to increase domestic production self-sufficiency rates in key manufacturing sectors.

In particular, major countries such as the United States are providing various benefits, including tax reductions and subsidies, to promote corporate reshoring in order to restore domestic manufacturing competitiveness and create jobs.

Accordingly, it is expected that global trade will contract further due to import substitution and domestic industry protection policies. The international trade environment is forecasted to continue deteriorating. The institute explained, "While the policies of major countries seem to be legitimate measures to respond to the global crisis, they are fundamentally protectionist in nature," adding, "Since the inauguration of the Donald Trump administration, the protectionist trend has rapidly spread not only in developed countries but also in developing countries."

As the global supply chain is being reorganized due to COVID-19, and with the signing of RCEP increasing the likelihood of a China-centered regional supply chain, attention is expected to focus on the United States' actions next year. RCEP, involving 15 countries including the 10 ASEAN nations, South Korea, China, and Japan, was signed on November 15.

The institute stated, "With RCEP, China has an opportunity to diversify and expand its access to the ASEAN market amid deteriorating trade relations with the West, including the United States," and explained, "China is likely to participate in high value-added intra-regional production activities and reorganize the Asian regional value chain centered on its vast domestic market."

Attention is on whether the United States will join the CPTPP. President-elect Joe Biden has expressed that he will focus on domestic economic issues amid the COVID-19 spread and will not engage in new trade negotiations for some time. However, the U.S. is expected to consider joining the CPTPP to curb China's rise.

However, depending on U.S.-China tensions, there is also an analysis that the U.S. may pursue a new form of multilateral coalition instead of joining the CPTPP. The institute diagnosed, "From next year onward, the U.S.'s hardline stance toward China is expected to be maintained at least at the current level or even intensify," adding, "If the U.S. cannot lead negotiations, it is highly likely to pursue a more effective new form of 'multilateral coalition' instead of the long-delayed CPTPP."

Meanwhile, the South Korean government's New Southern Policy is expected to gain momentum. The institute evaluated, "South Korea has raised the level of liberalization through agreements such as the Korea-Indonesia Comprehensive Economic Partnership Agreement, Korea-Vietnam FTA, and Korea-ASEAN FTA, and has laid the foundation to deepen production and supply chain integration among Asian countries by reviewing cumulative rules of origin," explaining, "South Korea's New Southern Policy will gain further momentum."

On the other hand, the paralysis of multilateral trade systems such as the World Trade Organization (WTO), caused by the Trump administration, is expected to continue. The institute analyzed, "The possibility of visible achievements through the 12th WTO Ministerial Conference scheduled for June next year is very uncertain," and added, "WTO reform discussions are closely linked to U.S.-China conflicts, and the paralysis of the multilateral trade system is expected to persist for some time."

[Image source=Yonhap News]

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