South Korea Intends to Reinstate Efforts for CPTPP Membership to Mitigate Trade Uncertainty: Official Statement

South Korea Reconsiders Joining CPTPP Amid Trade Tensions and Economic Challenges

The South Korean government has announced plans to reconsider joining the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), a multilateral trade pact led by Japan and including countries such as Japan, Mexico, Australia, Canada, and Vietnam.

This decision comes amidst rising trade protectionism and trade conflicts between major economies, particularly between the US and China. The government believes that diversifying South Korea's export destinations is crucial to mitigate risks associated with concentrated markets.

The government's initial plan was to expand the volume of trade insurance to be provided this year to 256 trillion won. However, this has been revised upwards to 270 trillion won, in a bid to boost domestic demand for key export items such as automobiles, home appliances, and steel, and offset the decrease in overseas demand caused by US tariff measures.

To further support industries affected by tariffs, the government will provide up to 570 billion won in emergency financial aid. This aid will include a special low-interest rate loan program for companies in the steel and aluminum sectors, and cover expenses to lower interest rates on loans previously extended to small and medium-sized enterprises in those sectors.

The government also plans to strengthen responses to unfair trade practices such as circumvention of tariffs and dumping. In addition, steps will be taken to expand companies' access to the 13.6 trillion-won fund created earlier this year to provide emergency liquidity to firms in tariff-hit industries.

In a move to diversify Seoul's export items and destinations, a subsidy program for electric vehicles and high-efficiency home appliances, as well as a 100 trillion-won fund to promote investment in South Korea, primarily in the country's strategic industries, are expected to be created.

The government also plans to announce a set of measures later this year to enhance the fundamental competitiveness of the future mobility, steel, and secondary battery industries.

Trade Minister Yeo Han-koo has recommended that the government restart strategic consideration into the CPTPP during a Cabinet meeting. However, the membership application was not submitted in 2022 due to opposition from the agriculture and fisheries sectors and a strained relationship with Japan.

The industry ministry official stated that the situation has changed significantly since the previous attempt to join the CPTPP, and they are trying to restructure their logic for joining and consult with member nations of the CPTPP.

The reconsideration of joining the CPTPP is also part of efforts to increase economic alliances. In late July, Seoul and Washington reached a crucial agreement in which the United States imposed a 15 percent tariff on South Korea, down from the initially planned 25 percent, in exchange for an investment pledge of $350 billion in the US.

The CPTPP accounted for about 15.2% of global trade in 2019. If South Korea joins the pact, it could potentially boost its trade relations with the member countries and provide new opportunities for growth. However, the decision is complex and requires careful consideration, taking into account the interests of various sectors and the overall economic health of the country.