We were hoping that 2018 was an aberration. That countries were just reacting emotionally. That things would return to normal come next year. Sadly, those hopes were just hopes and recent reports confirm what many of us suspected and still dread: Global trade will not exit the “protectionist” orbit anytime soon, and China-US trade relations will continue on a collision course. To a country struggling to overcome an economic slowdown, with red lights flashing on major indicators, nothing could be more disappointing than this gloomy forecast. That is especially true considering that 70 percent of the country’s GDP depends on exports. This year alone, we are already seeing thinning patches in the “trade forest.”
Can we ride out this storm? What should we do? We can explore many “outside-the-box” ideas, but the most proven and reliable path is to mend and solidify our base of friends and liaise with them to cope with new challenges. Traditional 1-to-1 bilateral FTAs are important. But what we saw in 2018 underscores their inherent limitations. These pacts, compartmentalized and segmented piece by piece, apparently do not form a critical mass. Nor do they build on each other to establish a breakwater when it is most needed.
Which then draws our attention to a long-titled trade agreement, the Comprehensive and Progressive Agreement for Trans-Pacific Partnership or CPTPP. This is an 11-state mega-FTA to preserve the Trans-Pacific Partnership despite the US withdrawal. Against all odds, its entry into force may soon be imminent.
Under normal circumstances, it would be just one of those agreements. Nothing peculiar. In the barren landscape of global trade in 2018, however, this is a nice breeze -- a modest but still meaningful breakthrough for free trade. It will definitely serve as a morale booster for many “undecided” countries.
The survival of the CPTPP is forcing Korea once again to confront the hard question of whether to join. I say “again” because Korea faced the same question several years back when the TPP was in its prime. The accession plan didn’t go through for many reasons. Looking back on what has happened since then, Korea would have more maneuvering room by now if it had chosen to take part. Cooperation with like-minded countries is sorely missed when the environment is harsher.
The question, again, is “What should we do?” The government has expressed its strong interest in joining the mega-FTA. A difficult but wise decision, indeed. True, there are industries that will be thrown into a different type of competition, but the circumstances require us to find a platform to anchor ourselves on. Regrettably, prior opportunities were missed and we stand here again. Well, as they say, it is better late than never. Depending on how we coordinate and align with the other parties, we could earn friends on rainy days or miss out again.
There is a practical obstacle, though. A high admission fee. These 11 countries have outstanding bilateral issues with Seoul. Not surprisingly, they will purport to settle them during accession negotiations. Exorbitant admission fees might well derail Korea’s effort to join, because eagle-eyed domestic industries will be watching the government’s every move.
At the same time, the 11 countries need Korea too. After all, Korea is the seventh-largest trading nation, and our membership will reinforce the stature of the agreement -- all the more so if the desired US return does not materialize in the near future.
A changed trade landscape with hawkish and hostile environments is what we will see next year, the year after, and probably beyond. Having like-minded countries on our side is always a good idea in times of need. Of course, to make friends, Korea should be prepared to be a good friend to them as well.
Lee Jae-min
Lee Jae-min is a professor of law at Seoul National University. He can be reached at jaemin@snu.ac.kr. -- Ed.
