TPP market liberalization scope similar to S. Korea-U.S. FTA: gov't

The level of market liberalization of the recently signed Trans-Pacific Partnership (TPP) is similar to the free trade pact reached between South Korea and the United States, although more time is needed to determine what impact it will have on Asia's fourth largest economy, the government said Thursday.

The Ministry of Trade, Industry and Energy said that the text of the agreement reached between 12 Asia-Pacific countries early last month has to be checked in detail, and claimed there were no big surprises.

The agreement between the United States, Japan, Canada, Australia, Mexico, Vietnam, Chile, Peru, New Zealand, Malaysia, Singapore and Brunei aims to free up commerce among countries that combined make up about 40 percent of the world's economy.

In terms of product liberalization, the TPP outlines a market opening rate of 95-100 percent depending on country.

In the case of the South Korea-U.S. free trade agreement (FTA) that went into affect as of March 2012, the liberalization rate stands at 98-100 percent.

Broken down, the agreement that is made up of 30 chapters, outlines eight countries pledging to cut their tariffs 100 percent on all goods, with Japan, Canada, Australia and Mexico getting some exceptions to protect local markets.

Countries like Japan excluded some 80 agricultural and fisheries products from market liberalization.

The country's overall product liberalization number in terms of all goods stood at 95 percent.

The multinational agreement adopted the so-called "complete accumulation rules" for the country of origin rule.

The trade ministry said the TPP will only give favors to products that use parts and components made within the trading bloc and assembled within the 12 member states.

The agreement has defined rules on sanitary and phytosanitary (SPS) related disputes that are viewed by some as non-tariff barriers.

It also outlines arbitration for better technical barriers to trade, investment, cross-border and financial services, government procurement.

Compared to past FTAs, the TPP has a dedicated chapter to e-commerce and state-owned enterprises (SOEs).

In the SOE area, governments will be required to limit support for SOEs that use state backing to expand into overseas markets.

It has tougher rules in regards to intellectual property rights, labor and environmental protection.

The ministry said the TPP outlines intellectual property protection on par with the South Korea-U.S. FTA, although it has more stringent rules when it comes to medical drugs that can get protection for upwards to eight years.

Kim Hak-do, the country's assistant minister for trade negotiations, said that while there are some differences between the TPP and FTA that South Korea inked with 10 of the 12 countries in the mega trade deal, the gap is not great.

South Korea does not have FTAs with Japan and Mexico.

"At this stage it is too early to say if the decision to stay out initially was a wise move or not," he said.

He pointed out that while Japan got exemption in agricultural areas, this probably led to the country making concessions in the area of manufactured goods and in particular cars.

The official said that Tokyo made concessions in autos because the mega bloc's market liberalization timeline actually fell short of the agreement reached between Seoul and Washington.

Under the bilateral pact, Seoul and Washington agreed to end slapping tariffs on passenger cars five years after ratification with a grace period of 10 years being set for trucks and pickups.

The U.S. levies 2.5 percent duties on passenger cars with numbers rising to a staggering 25 percent for trucks.

In the case of the TPP, the United States said it will start lowering rates on passenger cars 15 year after the pact goes into effect with all duties being cut in 25 years. For trucks, the current tariffs will come down all at once in the 30th year.

Kim then pointed out that with all but two country agreeing to open their manufacturing sector fully to foreign goods, South Korea needs to access potential fallouts to its domestic market.

"Local manufacturers may be wary of lowering all duties to goods made in Japan," he said.

The senior official then said that government ministries have been in consultation on this issue since July and experts have been contacted to comb through the details of each chapter to compare it with existing FTAs signed by South Korea.

"A more comprehensive understanding should become clear in about a month," he said.

After a thorough assessment is made, the government will hold hearings to determine what future course of action it should take.

He pointed out that the TPP made clear that new members will be accepted along the rules and standards set by the World Trade Organization, which includes getting approval from existing members.

It said a formal working group will be set up to look into new members.

South Korea, the Philippines, Indonesia and Thailand have expressed interest in the TPP.

The TPP agreement, meanwhile, said that while the pact will go into effect once all 12 countries ratify the deal, if this does not occur within 2 years of the signing, it can be launched partially if six countries that account for 85 percent of the TPP members GDP ratify it. (Yonhap)