Korea urged to join CPTPP to cut reliance on China

01-Feb-2020 Intellasia | KoreaTimes | 6:02 AM Print This Post

Korea should join a trade agreement among 11 countries in the trans-Pacific area to reduce its heavy reliance on China and foster the export of goods manufactured by small and medium-sized enterprises (SMEs), a state-run think tank report said Thursday.

This will remove tariffs involving trade between the signatories, thereby helping Asia’s fourth-largest, export-reliant economy gain a competitive edge with its cheaper, quality products in certain niche markets.

The move will also help Korea have a greater say in setting global standards in areas such as intellectual property within key legal frameworks yet to be established between developing economies, leading the international discourse to better reflect the interests of the country.

Korea Development Institute (KDI) researcher Song Yeong-kwan said that Korea should join the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) to diversify trading partners, a move that could limit the vulnerability caused by uncertainties in China.

Partner countries are Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore, and Vietnam.

“The most effective way for the country to reduce its heavy reliance on China will be joining the agreement under which intermediate goods produced in designated countries will be recognised as final goods, making them eligible for tariff benefits,” Song said.

This will help create a new global value chain in Southeast Asia connecting Korea, Japan and Vietnam, a key area of growth where Korea’s foreign direct investments are increasingly headed.

The current China-centered global value chain’s structure makes Korea’s semiconductor industry highly vulnerable to external influences; the drawn-out US-China dispute being a case in point.

Diversification of trading partners and finding an alternative to the precarious status quo, in his view, will provide an impetus for growth of the chip industry, which accounts for about a fifth of the country’s exports.

“With the US set to rejoin the agreement after it abruptly left under the Trump administration, Korea’s exports will see substantial benefit, not to mention the overall inter-signatories investment and intermediate goods trade to be bolstered as a result,” he said.

The move will be in line with the government initiative to foster parts, materials and equipment industries, most of which are made by SMEs whose long-term, sustainable growth is premised on going beyond domestic sales.

“Korea used to be the exporter of final goods backed by shipbuilding industries, but that once-booming sector has reached a clear limit. Korea should join in the agreement to lay the groundwork for the promising SMEs to expand in untapped overseas markets,” he said.

Song dismissed concerns that the agreement would become meaningless if Japan threatens further export bans, for example.

“The World Trade Organisation (WTO) essentially remains defunct in resolving the trade dispute between Korea and Japan, the parties to a dispute. But the multilateral CPRPP has clear stipulations on dispute resolution. Japan or any other country will not be able to resort to such unilateral action,” he said.



Category: Korea

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