TPP's demise may be Korea's gain

South Korea needs to rethink its trade negotiating strategies in the wake of Donald Trump’s US presidential election victory, experts here say.

President Barack Obama‘s administration has reportedly abandoned efforts to push for the passage of the 12-nation Trans-Pacific Partnership pact in the lame-duck session of Congress before his successor takes office in January.

In his election campaign, Trump labeled the deal a “disaster” that would send more American jobs abroad. His transition committee’s internal document disclosed by a US political news outlet showed the scrapping of TPP was on the list of 100 priority tasks to be carried out during his first 100 days in office.

As South Korea was preoccupied with achieving a bilateral free trade deal with China, it was excluded from the group of founding signatories to the TPP agreement, which was concluded in October 2015 after more than five years of negotiations.

The country now seems to be relieved of concerns over possible damage to its exporters that could have been caused by being excluded from what was set to become the world’s largest free trade zone.

Some experts here foresee the incoming Trump administration possibly seeking to replace the TPP with a new regional trade deal that could better serve US interests.

“(The new US administration) will not be able to ignore the importance of East Asia,” said Park Tae-ho, a former trade minister.

South Korea needs to take part in the initial stage of possible negotiations on a new US-proposed regional trade framework not to repeat the experience of being shut out of the TPP, experts say. This would also help the country avoid facing tougher pressure in renegotiation on the bilateral free trade agreement with the US.

The failure of TPP is not expected to bring huge trade impact in the short run as it focuses on rule-setting rather than tariff-scrapping. But it certainly signifies US retreat from its leadership role in global trade liberalization.

Obama has promoted the TPP, which excluded China, as writing the “rules of the road” for trade in the 21st century.

The collapse of the TPP is shifting attention to the China-led Regional Comprehensive Economic Partnership accord which encompasses 15 other countries, including South Korea, India and Japan.

During the Asia-Pacific Economic Cooperation summit to be held in Peru on Saturday and Sunday, Chinese President Xi Jinping is expected to drum up support for the RCEP deal. By contrast, Obama is set to painstakingly explain his inability to push through the TPP passage to leaders of other member states in the accord when he attends the summit.

Briefing journalists on Xi’s trip to Latin America, which will also take him to Chile and Ecuador, China’s Vice Foreign Minister Li Baodong said the region needed a free trade agreement as soon as possible.

Experts note the 16-member RCEP would reap more of the global trade’s low-hanging fruit.

It accounted for 29 percent of global trade last year, compared with 25.7 percent for the TPP, while its share of world gross domestic product at 29 percent was far lower than 37.1 percent for TPP participants, according to estimates by the Korea Institute for International Economic Policy.

Tariff walls protecting emerging markets are much higher than those in developed economies so lowering them would give a more immediate and greater boost to the economy.

South Korea is postured to expedite RCEP negotiations that have stalled over the level of market opening by participating countries.

“With the TPP drifting away, an early conclusion of RCEP will help set up a trade order in this part of the world and act favorably for us,” said Kim Young-man, head of the East Asia FTA negotiation division at the Ministry of Trade, Industry and Energy.

Some experts note a possible shift in Japan’s stance may place RCEP negotiations on a faster track.

With Japanese Prime Minister Shinzo Abe joining hands with Obama to launch the TPP, Tokyo has remained unenthusiastic toward the Beijing-led trade framework, demanding China agree on a higher level of trade liberalization.

Abe will reportedly try to salvage the TPP during his first meeting with Trump in New York later this week. If the TPP is finally thrown into the ditch, however, Japan may become more positive toward concluding the RCEP.

A joint statement issued in September by leaders of countries working on the deal called for an early conclusion of mutually beneficial agreement at a balanced and high level that takes into account participants’ various conditions.

This goal may continue to remain elusive given wide differences in the levels of trade liberalization among RCEP participants, which are set to hold their 16th round of negotiations in Indonesia from Dec. 6-10.

“We are ready to play a more active role in finding the middle ground,” said Kim.

Some experts here note South Korea, China and Japan may also feel the need to accelerate talks on a three-way free trade pact in yet another effort to minimize the fallout from a rise in trade protectionism under the Trump presidency.

By Kim Kyung-ho (khkim@heraldcorp.com)