As protectionism from the United States and supply chain uncertainties spread, the need for South Korea to join the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) is growing. Membership could lower tariff barriers with Mexico, which does not have a free trade agreement (FTA) with South Korea, and provide greater access to the Japanese market compared to the Regional Comprehensive Economic Partnership (RCEP).
Utilizing regional cumulative origin rules is expected to help connect production networks spread across various member countries, thereby expanding intermediate exports and diversifying supply chains.
According to relevant government departments, the CPTPP has been in effect since 2018 and will see the United Kingdom join in 2024, bringing the total number of participating countries to 12, including Japan, Canada, the UK, Australia, and Mexico. South Korea has established bilateral or multilateral FTA relationships with 11 of these countries, excluding Mexico.
Mexico is a key export market for South Korea's main products, such as automobiles, auto parts, steel, and machinery, and serves as a production base for North American market entry. However, without an FTA with Mexico, South Korea faces unfavorable tariff conditions compared to CPTPP members like Japan and Vietnam. Joining the CPTPP is expected to enhance the price competitiveness of domestic small and medium-sized enterprises supplying both finished products and materials and components if tariff barriers are reduced.
Additional market access in Japan is also anticipated. While South Korea and Japan established their first FTA relationship through the RCEP, the level of openness is lower than that of the CPTPP. Membership in the CPTPP would not only broaden the scope of tariff eliminations but also expand market access in services, investment, and government procurement.
Under the CPTPP, materials that meet the origin requirements of other member countries can be treated as domestic materials, allowing for cumulative origin determinations. This means South Korean companies can meet item-specific origin standards using regionally sourced intermediate goods procured from countries like Vietnam and Malaysia.
The economic benefits of joining have been highlighted in various studies. The Korea Institute for International Economic Policy (KIEP) previously analyzed that South Korea's real GDP could increase by 0.33% to 0.35% with CPTPP membership, and consumer welfare could rise by $3 billion. The Korea Institute for Industrial Economics and Trade also projected that South Korea's net exports could increase by an average of $600 million to $900 million annually over 15 years if it joins. During the same period, domestic production is expected to grow by an average of 1.18 trillion to 1.82 trillion won.
However, since South Korea has already signed FTAs with many member countries, the extent of additional tariff reductions and export benefits may vary by country and product. Existing member countries may also demand further openings in agricultural and marine products during membership negotiations, which could be a variable.
There are calls to comprehensively assess the benefits of tariff reductions, supply chains, and trade norms while minimizing damage to the agricultural and fisheries sectors.
Jung Sung-hoon, head of the Industrial and Market Policy Research Division at the Korea Development Institute (KDI), stated, "While South Korea has individual FTAs with many member countries, the CPTPP encompasses new trade agendas beyond goods, including environment, labor, digital, and intellectual property rights. In a situation where the World Trade Organization (WTO) has been effectively paralyzed, joining the CPTPP remains a valid and effective means."
He added, "Many member countries have abundant raw materials, so joining could be advantageous for broadening procurement sources and stabilizing supply chains."
Utilizing regional cumulative origin rules is expected to help connect production networks spread across various member countries, thereby expanding intermediate exports and diversifying supply chains.
According to relevant government departments, the CPTPP has been in effect since 2018 and will see the United Kingdom join in 2024, bringing the total number of participating countries to 12, including Japan, Canada, the UK, Australia, and Mexico. South Korea has established bilateral or multilateral FTA relationships with 11 of these countries, excluding Mexico.
Mexico is a key export market for South Korea's main products, such as automobiles, auto parts, steel, and machinery, and serves as a production base for North American market entry. However, without an FTA with Mexico, South Korea faces unfavorable tariff conditions compared to CPTPP members like Japan and Vietnam. Joining the CPTPP is expected to enhance the price competitiveness of domestic small and medium-sized enterprises supplying both finished products and materials and components if tariff barriers are reduced.
Additional market access in Japan is also anticipated. While South Korea and Japan established their first FTA relationship through the RCEP, the level of openness is lower than that of the CPTPP. Membership in the CPTPP would not only broaden the scope of tariff eliminations but also expand market access in services, investment, and government procurement.
Under the CPTPP, materials that meet the origin requirements of other member countries can be treated as domestic materials, allowing for cumulative origin determinations. This means South Korean companies can meet item-specific origin standards using regionally sourced intermediate goods procured from countries like Vietnam and Malaysia.
The economic benefits of joining have been highlighted in various studies. The Korea Institute for International Economic Policy (KIEP) previously analyzed that South Korea's real GDP could increase by 0.33% to 0.35% with CPTPP membership, and consumer welfare could rise by $3 billion. The Korea Institute for Industrial Economics and Trade also projected that South Korea's net exports could increase by an average of $600 million to $900 million annually over 15 years if it joins. During the same period, domestic production is expected to grow by an average of 1.18 trillion to 1.82 trillion won.
However, since South Korea has already signed FTAs with many member countries, the extent of additional tariff reductions and export benefits may vary by country and product. Existing member countries may also demand further openings in agricultural and marine products during membership negotiations, which could be a variable.
There are calls to comprehensively assess the benefits of tariff reductions, supply chains, and trade norms while minimizing damage to the agricultural and fisheries sectors.
Jung Sung-hoon, head of the Industrial and Market Policy Research Division at the Korea Development Institute (KDI), stated, "While South Korea has individual FTAs with many member countries, the CPTPP encompasses new trade agendas beyond goods, including environment, labor, digital, and intellectual property rights. In a situation where the World Trade Organization (WTO) has been effectively paralyzed, joining the CPTPP remains a valid and effective means."
He added, "Many member countries have abundant raw materials, so joining could be advantageous for broadening procurement sources and stabilizing supply chains."
* This article has been translated by AI.
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