S. Korea must concentrate all energy on TPP: traders association head
South Korea must concentrate all of its resources on taking part in the U.S.-led Asia-Pacific mega free trade bloc, the head of the country’s traders association said Wednesday.
In a meeting with reporters in Seoul, Han Duck-soo, the chairman of the Korea International Trade Association (KITA) warned that failure to become part of the Trans-Pacific Partnership (TPP) could be fatal for the country, and brushed off concerns that a broad open market system will hurt whole industries.
"A TPP will encompass a trade region worth US$9 trillion, with $2 trillion being intermediate goods," he said, adding that with Japan, South Korea’s main rival in the intermediate goods sector, entrenched in TPP talks, failure to take part could result in serious losses for local companies.
Besides the United States and Japan, Canada, Mexico, Australia, New Zealand, Vietnam, Chile, Malaysia, Peru, Singapore and Brunei are engaged in the TPP talks. Combined, these countries account for 37.1 percent of the world’s GDP, one-fourth of its trade and 11.4 percent of its population.
The former finance and economy minister conceded that all 12 members of the TPP must agree in order for South Korea to become a member or join the talks, but he expressed confidence that by exchanging views and addressing outstanding issues, it will not be impossible for Seoul to become part of the economic trading bloc from the very outset, or at the very least, to become the first non-starting member to join.
Han said that South Korea has an edge over others wanting to take part in the TPP, because it already has free trade agreements (FTA) with 10 of the 12 countries engaged in ironing out the trade bloc.
"The only countries that South Korea does not have an FTA with are Japan and Mexico, yet even with these countries, Seoul had tried to broker trade pacts in the past, so it should not be too hard to engage in dialogue," he claimed.
The KITA chairman, in particular, said South Korea needs to move pro-actively on trying to alleviate concerns of U.S. businesses, which can influence Washington. He said areas of concern for U.S. businesses include the enforcement of stringent greenhouse gas emission rules, financial data transfer guidelines, insurance coverage for high-priced pharmaceuticals, protection of innovative products, and more streamlining of administrative processes in patent disputes.
"If such issues are addressed, U.S. policymakers will be more inclined toward letting Seoul in on the TPP process," Han argued.
On observations that South Korea is dragging its feet on the TPP matter, because it is worried about upsetting China’s desire to push forward a Free Trade Area of the Asia-Pacific (FTAAP), the official said the two are not directly related.
He pointed out that it will take quite some time for the FTAAP to make meaningful headway, compared to the TPP, which could be concluded as early as next year. There has been speculation that if an agreement is not reached on the TPP in 2015, political developments in the U.S. could cause it to be delayed for some time.
On the potential fallout of joining a large trading bloc, Han stressed that there will invariably be those that are left out and hurt, but for the most part, the country will benefit.
He claimed that even the head of the Korea Automobile Manufacturers Association said that local carmakers, such as Hyundai Motor Co., and Kia Motors Corp., who in the past have expressed reservations about an open market system, are not opposed to letting in Japanese competition.
"It makes no sense that South Korean companies that make cars, steel, ships, and electronics, and who have taken market share from the Japanese in overseas markets, cannot compete on its home turf," the executive stressed.
He, in particular, rejected the notion that entire industries will collapse by pointing out that South Korea’s textile industry is actually doing better nowadays than when textiles were the leading export item for the country in the 1960s and 1970s.
Han then said that for those who are left out of benefits and lose their jobs, the government must give protection.
The KITA chief said that the TPP can fuel economic growth and that this wealth translates into more taxes.
He said that by setting up a so-called income transfer scheme, South Korea can directly support the disadvantaged. (Yonhap)