Korean Trade Strategies For RCEP and TPP as Regional and Global
Economic Integration
8Prof. Dr. Dr. Sang Chul Park1. Changing global trade
environment and after global financial crisisBackground- Global
financial crisis in 2008 contracting global economy with 0.5 ~ 1%
growth in 2009: lowest world economic growth last 60 years-
Advanced nations recovering slowly since 2012 while developing
countries facing a lower economic growth- Estimated as trillions US
dollars lost in equity market and credit squeezeIncreasing
unemployment: from 18 million in 2008 to 38 million in 2009,
recovering since 2012, but higher than before the crisis
2Prof. Dr. Dr. Sang Chul ParkNew global trade environment-
Escalating existing anti globalization sentiment & views of
opposition in liberalized trade: restrictions on trade- G-20
leaders summit fighting against protectionism in trade in 2010-
Protectionism & beggar-thy-neighbor policy limited by rules of
WTOLong delay of DDA & high number of bilateral & regional
free trade agreements: 271 RTA in 2012, EU, USA, East Asia as major
playersLow global trade growth: 2.6% (2015), 5% (1990~2007) (fig.
1)
3Prof. Dr. Dr. Sang Chul Park
4Prof. Dr. Dr. Sang Chul Park2. Korean trade policy and
strategyDevelopment of trade policy- Import substitution
industrialization policy in the 1950s: Impeding export growth-
Export oriented policy since the 1960s: from 1 billion US dollar in
1966 to over 500 billion US dollars in 2011- Heavy & chemical
industrial policy in the 1970s- Picking up national champion policy
in the 1980s: Samsung, LG, Hyundai etc.- Weighting on multilateral
trade more than bilateral & regional FTA until Asian financial
crisis- Restructuring for bilateral & regional FTA based on
liberalization process since 1998: doubts for WTO 5Prof. Dr. Dr.
Sang Chul Park- Rapid proliferation of bilateral & regional FTA
and participating in the new trend (fig. 2)Bilateral & regional
FTA as trade policy strategy- Building extensive network &
learning FTA with Chile in 2002: long distance & opposite
seasonal climate- Announcing FTA roadmap for economic development:
trade policy shift from passive to active (Singapore in 2003 &
the EFTA in 2004)- Two principles: increase competitiveness &
reduce opportunity cost, multi-track & FTA with large
economies- Aiming at comprehensive and high quality FTA (table
1)
6Prof. Dr. Dr. Sang Chul Park
7Prof. Dr. Dr. Sang Chul Park- FTA with USA in 2007: most
controversial negotiationPositive result of FTA for Korea- FTA with
the EU in 2007: world largest FTA since NAFTALess resistance except
agricultural sectorRegarded as win-win negotiation (fig. 3)Strategy
for comprehensive and high quality oriented FTA- Korea as only
Asian nation completing FTA with major economic power USA, EU &
China: preserving its share of market against China & expansion
in China- Strengthening competitive position vis--vis Japan-
Overcoming disadvantages in bloc economic zones- Pursuing
comprehensive and high quality commitments with FTA partners (table
2)- Diversifying trade destination at a global scale (fig. 4)9Prof.
Dr. Dr. Sang Chul Park
10Prof. Dr. Dr. Sang Chul Park
11Prof. Dr. Dr. Sang Chul Park
12Prof. Dr. Dr. Sang Chul Park3. New Challenge for Mega FTAs in
RCEP and TPPMega FTAs in Asia and Pacific Region- Asias output same
as USA & EU in 2013: high economic growth potential- 50% larger
than USA & EU in 2020 based on PPP- De factor China led
Regional Comprehensive Economic Partnership (RCEP)- US led Trans
Pacific Partnership (TPP)- RCEP & TPP regarded as trade
liberalization and economic integration in Asian countries- Free
Trade Area of the Asia Pacific (FTAAP): questionable (fig.
5)13Prof. Dr. Dr. Sang Chul Park
14Prof. Dr. Dr. Sang Chul ParkComparison of Mega FTAs between
RCEP and TPP- RCEP driven by ASEAN and supported by ChinaAiming at
high quality & mutually beneficial economic partnershipOpen
access clause & planned to be completed in 2015- TPP initiated
by P4 & led by USAMember based consensusLarger geographical
scale (table 3)- Functional level between RCEP & TPPRCEP based
on ASEANs experience & integrating all ASEAN plus one into a
regional frameworkProviding flexibility & adjust
mechanism15Prof. Dr. Dr. Sang Chul Park
16Prof. Dr. Dr. Sang Chul Park- TPP regarded as more demanding
set of commitmentsIPR, labor standards, competition policy,
investment rules, environment etc.Pursuing gold standard of FTA in
21st century- Economic benefits of two mega FTAsRCEP calculated by
CGE model: USD 644 billion & 2% of Asian GDP by 2025TPP: USD
223 billion by 2025Reducing noodle bowl effectsContributing to
better trade system particularly in developing nations (table
4)
17Prof. Dr. Dr. Sang Chul Park
18Prof. Dr. Dr. Sang Chul Park4. Analysis on Trade Policy
Strategy and National Interests for RCEP & TPPTrade policy
strategy- Regarded as successful, but needed to improve:
diversifying trade partners & products, developing service
sectors, improving effectiveness of FTAsNational interests for RCEP
& TPP- Dealing with RCEP in 2012 & TPP in 2013- Economic
benefit of RCEP > that of TPP (table 5)- CGE model: RCEP gaining
2.5%, TPP generating 1.54% in real GDP, 5.41% & 5.05% in
export- Playing catalytic role in shaping of outcome of RCEP &
TPP 19Prof. Dr. Dr. Sang Chul Park
20Prof. Dr. Dr. Sang Chul Park5. ConclusionsTrade policy as a
major economic growth strategy
FTA strategy as a further economic growth policy
Facing new trend for mega FTAs: RCEP & TPP
RCEP generating more economic benefits than TPP
Two mega FTAs regarded as equally important and both beneficial
for national interests21Prof. Dr. Dr. Sang Chul ParkFigure 1:
Growth Trend of World Trade and GDP (2005 2012, %)
Source: WTO, 2013Figure 2: Export Trend after FTAs (1998 2013,
USD million)
Source: Bank of Korea, 2014Table 1: Koreas FTA Network (As of
2013)
Korean FTA ActivityShare of Korean Exports in 2012
In Effect/ RatifiedChile (2004)0.4%
Singapore (2006)4.1%
EFTA (2006)0.4%
ASEAN (2007)13.3%
India (2010)2.2%
EU (2011)9.0%
Peru (2011)0.3%
USA (2012)10.7%
Turkey (2013)0.8%
Subtotal: 938.0%
Under negotiationJapan (2003; suspended 2004)7.0%
Canada (July 2005)0.9%
Mexico (Feb. 2006)1.6%
GCC (July 2008)3.5%
Australia (May 2009)1.7%
New Zealand (June 2009)0.3%
Colombia (Dec. 2009; signed 2013)0.3%
China (May 2012)24.3%
Vietnam (Sep. 2012)2.9%
Indonesia (July 2012)2.5%
China-Japan-Korea (March 2013)31.4%
RCEP (May 2013)49.8%
Subtotal: 1256.1%
Total: 2177.6%
Potential AgreementTPP31.3%
Source: Ministry of Foreign Affairs, 2013, IMF, 2013Figure 3: EU
trade flows and balances in goods with Korea (2004 2013, Million
Euro)
Source: European Commission, 2014Table 2: Degree of
liberalization in Koreas FTAs with partners
FTADegree of liberalization (%)
Korea - Chile99.8
Korea - Singapore91.6
Korea - EFTA99.1
Korea - ASEAN99.2
Korea - India93.2
Korea - USA99.8
Korea - EU99.6
Source: MOFAT, 2012, KIET, 2012Figure 4: Change of Koreas trade
share (As of 2007 2012, %)
Source: KITA, 2013Figure 5: Mega FTAs in Asia and Pacific
Region
Source: Petri and Plummer, 2014Table 3: Major Regional
Initiatives for FTAs and Economic Cooperation
Source: IMF Database, 2012; WTO Database, 2012Table 4:
Comparison of Time and Cost in Trade (As of 2009)
Source: Asian Development Bank, 2009; UNESCAP, 2009Table 5:
Trade Interdependency Ratio in Different Member Nations (2002 2012,
%)
Source: Adopted by NEAT working Group based on UN Comtrade and
WDI Database, 2014
