Launch of new trade bloc
South Korea should step up regional partnership
South Korea signed the Regional Comprehensive Economic Partnership (RCEP) free trade agreement comprised of the 10 members of the Association of Southeast Asian Nations (ASEAN), China, Japan, Australia and New Zealand, alongside Seoul. This will be the world's largest free trade accord with a combined population and domestic product accounting for a third of the world's totals.
President Moon Jae-in and leaders of the other 14 countries witnessed the signing of the long-waited trade pact by their trade ministers on the sidelines of the 37th ASEAN virtual summit. The RCEP participating countries will now start their respective domestic procedures to bring the agreement into force.
RCEP member countries will likely benefit from the pact as it will help boost regional trade with reduced tariffs, and create more jobs, thereby contributing to reinvigorating their economies battered by the spread of the COVID-19 pandemic. The accord will also provide the participating countries with more open and inclusive opportunities for services and investment.
The leaders stressed that the pact "demonstrates our strong commitment to supporting economic recovery, inclusive development, job creation and strengthening regional supply chains as well as our support for open, rules-based trade and investment arrangements."
Cheong Wa Dae described the agreement as a "core result" of the Moon administration in the pursuit of its "New Southern Policy" designed to strengthen strategic partnerships with Southeast Asian nations. It also said South Korea will continue to play the role of a "pacesetting" economic power to enhance free trade.
South Korea, an export-oriented economy, will be able to utilize the pact as an opportunity to make another leap forward. According to the Korea Institute for International Economic Policy (KIEP), the launch of the RCEP will increase Korea's economic growth by 0.41 percent to 0.51 percent over the next 10 years. It also predicted the country will see another 0.1 percent growth once India, now staying away from the pact, joins.
We urge the government to proactively prepare for the smooth launch of the new trade bloc under close cooperation with businesses. The National Assembly should fully cooperate to ratify the RCEP agreement. Toward that end, the ruling and opposition parties should give bipartisan support for the pact.
As the pact has been initiated by China, the United States may attempt to apply the brakes on the regional partnership to counterbalance Beijing's growing influence in the region. The incoming Joe Biden administration will likely make efforts to curb China following President Donald Trump's declared trade and technology war with the Asian power.
Former U.S. President Barack Obama pushed for the Trans-Pacific Partnership (TPP) agreement. But the TPP has dwindled to the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) since Trump withdrew from it upon taking office. The new Biden administration will highly likely return to the TPP in a bid to utilize it as leverage against China.
In this case, South Korea will likely be caught in the crossfire between the U.S. and China. We need to employ strategic measures with a consistent policy of promoting free trade rather than taking either side of the G2 economies. We should consider joining both agreements ― the RCEP and the CPTPP ― following the moves of six countries ― Japan, Australia, New Zealand, Vietnam, Malaysia and Singapore.
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