News of a preliminary deal on the
Trans-Pacific Partnership drew a nervous response in South Korea, which missed the chance to become a founding member and is now fretting over the boost the trade pact will give to rival exporters in Japan.
The direct impact of membership would have been relatively limited for South Korea, which has secured bilateral trade deals with 10 of the TPP’s 12 members over the past 11 years. Those deals promised its
exporters an advantage over Japanese peers in crucial markets such as
the US, after Tokyo failed to match Seoul’s energetic trade liberalisation.
But with agreement reached on the TPP’s key points, that advantage looks set to be eliminated, sparking anxious commentary in national media. “Crisis as Korea will be overtaken by Japan in the trade deal war it had been winning”, ran a headline in the Chosun Ilbo, the top-selling national daily.
A survey published on Monday by the Korea Trade-Investment Promotion Agency suggested the damage from resurgent Japanese competition would be minimal in most large export industries. South Korean steel exporters do not compete against Japanese peers in the US market, it noted, while IT products to the US from both countries are already exempt from tariffs.
A stronger impact is expected in the automotive sector. South Korean and Japanese carmakers compete fiercely in the US market, and the former are set to enjoy tariff-free access from next year under the Korea-US trade deal that entered into force in 2011.
Monday’s deal means that advantage over Japanese producers is likely to be shortlived, prompting shares in carmakers Hyundai Motor and Kia Motors to fall more than 5 per cent on Tuesday before recovering some losses.
“The TPP is definitely negative for Korean autos . . . investors were surprised by the rapid advance of negotiations,” said Kim Jin-woo, an analyst at Korea Investment and Securities.
South Korea was slow to declare its interest in
joining the TPP, doing so only in November 2013, when talks among prospective members were already under way. That announcement drew a cool response from Washington, which said Seoul would need to wait until the next round of talks, and voiced concerns about implementation of its trade deal with the US.
While Choi Kyung-hwan, finance minister, on Tuesday promised public hearings on possible entry into the TPP, President Park Geun-hye has not requested that the subject be put on the agenda for her visit to the US in the middle of this month, according to a person familiar with the situation.
But the government should view entry to the TPP as a priority, argued Suh Jin-kyu, researcher at Korea Institute for International Economic Policy. He noted that the pact’s rules could block tariff relief for products made in member countries using South Korean components, as long as Seoul remains outside the club.
“This is critical for Korea, which exports more parts for assembly than finished products,” he said. “Not joining the TPP will hurt its global value chain in the long term.”
