FKCCI: Korea Should Actively Consider Joining CPTPP

Seminar on Economic Impact Analysis by Scenario of Korea-US-China Membership

The Federation of Korean Industries held the "CPTPP Membership Expansion and Korea's Response Seminar" on the 24th at the FKI Conference Center, with about 100 participants attending both online and offline.
[Photo by FKI]

[Asia Economy Reporter Kim Heung-soon] Despite the inauguration of the Biden administration, prospects suggest that the likelihood of the United States rejoining the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) early is low due to domestic and international political and social circumstances. To maximize the benefits of Korea joining the CPTPP, it is paramount that Korea, the U.S., and China all become members. It was also argued that even if only Korea joins the CPTPP without the U.S. and China, the economic benefits would still be greater than not joining at all.

At a seminar held on the morning of the 24th at the Federation of Korean Industries (FKI) Hall in Seoul, co-hosted by the FKI and the New Zealand Embassy in Korea under the theme "Prospects for CPTPP Membership Expansion and Korea’s Response," an analysis of the economic impacts of various CPTPP membership scenarios was presented.

Kwon Tae-shin, Vice Chairman of the FKI, emphasized in his opening remarks, "The hegemonic rivalry between the U.S. and China is expected to prolong, and the global supply chain transition is accelerating due to the COVID-19 pandemic, increasing uncertainty in the global trade environment. Korea, with its high trade dependence, must thoroughly examine the practical benefits of joining the CPTPP and seek ways to expand its trade territory."

"Korea Gains More Economically by Joining CPTPP than Not Joining"
Maximum Benefits When Korea, U.S., and China Join Together

Professor Jung Jae-won of Dankook University’s College of Business and Economics, who delivered the keynote presentation, analyzed the effects on average productivity in the manufacturing sector, the number of exporting firms in manufacturing, real Gross Domestic Product (GDP), and consumer welfare under four scenarios: Korea joining alone, Korea and the U.S. joining, Korea and China joining, and Korea, the U.S., and China joining together, focusing on tariff barrier removals.

The analysis showed that in all scenarios, Korea’s CPTPP membership yields greater economic benefits compared to not joining. Particularly, the greatest benefits were observed when both the U.S. and China joined alongside Korea. Specifically, it is expected that average productivity in manufacturing would increase by 1.29%, the number of exporting firms would rise by 80.55%, real GDP would grow by 6.39%, and consumer welfare would increase by $32 billion.

When Only Korea Joins CPTPP, Real GDP Increases by 0.59 Percentage Points Compared to Non-Membership
When Korea, U.S., and China All Join, Long-Term Real GDP Increases by 4.79 Percentage Points
U.S. Expected to Rejoin CPTPP with Two-Thirds Probability in Two Years

At the seminar, it was analyzed that from an economic perspective, CPTPP membership including both the U.S. and China would be most beneficial not only for Korea but also for existing CPTPP member countries. However, due to current domestic and international political conflicts and health issues in the U.S., an early U.S. return to the CPTPP is not expected.

Regarding the likelihood and timing of the U.S. rejoining the CPTPP, Peter Petri, Senior Fellow at the Brookings Institution who analyzed the economic effects of the TPP during the Obama administration, predicted, "Considering economic benefits and the U.S. domestic and international situation, the actual timing and probability of the U.S. rejoining CPTPP is about two-thirds in two years."

He added, "In a changed world with China’s rise, the U.S. faces many challenges to lead the world again, including uniting a divided America, restoring democratic values, and regaining global trust in the U.S." Kim Yang-hee, Director of the International Trade and Development Research Department at the Korea National Diplomatic Academy, who participated in the panel discussion, said, "Considering China’s current economic system, it is expected that China’s participation in the CPTPP, which requires a high level of openness, will be difficult for the time being. The U.S. also appears to need a long time to engage in external issues due to domestic and international health and political challenges." She further argued, "To prevent China’s expanding influence in the Asia-Pacific region, the U.S. might find it easier to join the RCEP (Regional Comprehensive Economic Partnership) as an intermediate step before joining the CPTPP."

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