Since the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) took effect, nearly half of South Korea's manufacturing exports have experienced a decline in competitiveness within member markets. This is particularly evident in key industries such as shipbuilding and automobiles, where the competitiveness gap with regional member countries has widened. With the government deciding not to apply for CPTPP membership this year, there are urgent calls for improvements in trade conditions.
According to a report released on October 14 by the Korea Institute for Industrial Economics and Trade, out of 5,185 South Korean manufacturing exports analyzed, 2,474 items (47.7%) saw a drop in competitiveness indicators compared to before the agreement took effect.
The institute utilized the Revealed Symmetric Comparative Advantage (RSCA) index to analyze changes in competitiveness. The RSCA ranges from -1 to 1, with higher values indicating greater relative competitive advantage in the market. The analysis compared data from 2012 to 2018, before the CPTPP took effect, with data from 2021 to 2024, excluding the years 2019 and 2020 due to the significant impact of COVID-19.
When categorizing the items with declining indicators into 15 manufacturing sectors, it was found that competitiveness indicators for CPTPP member countries increased across all 15 sectors. The largest declines for South Korea were seen in non-metallic mineral products (-0.296), shipbuilding (-0.262), displays (-0.230), and automobiles (-0.199). Notably, the shipbuilding sector experienced the most significant disparity, with South Korea's indicator dropping by 0.262 while CPTPP member countries saw an increase of 0.125.
Among the 2,474 items with declining competitiveness indicators, 796 (32.2%) maintained or improved their indicators in non-CPTPP markets. The median decline for these items was -0.183 in CPTPP markets, compared to just -0.035 in external markets.
The impact of Mexico was particularly pronounced in the automotive sector. For items where South Korea's automotive competitiveness declined, the indicators for the 11 CPTPP member countries rose by 0.047, with Mexico alone contributing a significant increase of 0.312.
This situation has led to analyses suggesting that South Korea is at a disadvantage in terms of tariffs, as it is the only CPTPP member country that has not signed a preferential trade agreement with Mexico. The potential for further widening of the competitiveness gap is raised, especially since Mexico has implemented tariffs ranging from 5% to 50% on certain items from countries without free trade agreements since January of this year.
The South Korean government has currently shelved plans to pursue CPTPP membership this year. President Lee Jae-myung directed on October 6 that the country would not apply for membership, prioritizing the restoration of trust with farmers and fishermen and ensuring sufficient consultation.
Previous economic impact analyses by the Ministry of Trade, Industry and Energy and other relevant agencies estimated that if South Korea were to join the CPTPP, the country's real GDP would be 0.38 percentage points higher than if it did not join, ten years after the agreement's implementation. However, it was projected that the manufacturing sector could see an annual production ripple effect increase of 6.3 trillion to 6.7 trillion won over 15 years, while agriculture, forestry, and fisheries could experience a production decrease of about 850 billion won.
The Korea Institute for Industrial Economics and Trade noted that while changes in competitiveness indicators reflect factors beyond the CPTPP, it is difficult to definitively establish a causal relationship with the agreement's implementation. However, they emphasized the need to be aware of the potential for South Korea's position in regional markets to weaken further if it remains a non-member.
Kim Ji-hyun, a researcher at the institute, stated, "CPTPP is no longer just about the additional benefits of joining; it is a matter of survival, as not joining could weaken our position in regional markets. We need to explore ways to improve trade relations with Mexico, monitor changes in competitiveness by item, and enhance the provision of tariff and origin information to businesses."
* This article has been translated by AI.
Copyright ⓒ Aju Press All rights reserved.