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| Trade Minister Yeo Han-koo speaks during an interview with The Korea Times at the ministry's Seoul office, Dec. 23. Korea Times photo by Shim Hyun-chul |
Country moving to join RCEP, CPTPP mega trade pacts: trade minister
By Baek Byung-yeul, Kim Yoo-chul
The COVID-19 pandemic and the prolonged trade row between the United States and China have led the global community to realize how interrelated it is as well as the importance of the global value chain, as the disruptions have direct economic effects worldwide.
At this moment when the global economic order is undergoing rapid changes, Trade Minister Yeo Han-koo said there needs to be a new framework for the international trade scene.
"Korea is capable of coping with this well and taking the lead in the upheaval," Yeo told The Korea Times in a recent interview.
"I think the problems arising in the current international trade scene in the wake of the pandemic are due to reactions to problems that were overlooked in the globalization process," the country's top trade negotiator said.
"In addition, as digitalization accelerates, it has become important to respond to global supply chain vulnerabilities. Therefore, it seems that we should break away from the present beliefs regarding trade policy and come up with a new framework."
Since he took office in August 2021, the trade minister has traveled around the world, meeting with various decision makers in international trade and exploring ways for the Korean economy to move forward.
What he was able to confirm over the past months is that Korea's status on the international stage is different from what it was before. As a result, he believes that the country should now speak out in the international community to make a greater contribution.
While the global economy has been struggling to cope with climate change, resolve supply chain issues and distribute vaccines in 2021, Yeo said that Korea, which is the world leader in semiconductors, vaccine manufacturing and eco-friendly vehicle parts, is fully capable of playing the role of a "linchpin" in solving these problems.
"What I felt as trade minister was that the status of the country has changed a lot. Ten years ago, we were in the position to ask for investment in the country, but now countries want to do business with Korea. In addition to bringing up discussions on issues related to Korea on the international stage, it is time to actively emphasize the constructive leadership we can provide," he said.
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| Trade Minister Yeo Han-koo / Korea Times photo by Shim Hyun-chul |
As a country with an export-reliant economy, Yeo said that it is essential for Korea to join these pacts for future growth.
"It is a huge problem if Korea misses out. We are a country that has grown through trade. As a country that is highly dependent on foreign countries and exports, not joining such huge regional FTAs would be missing a big opportunity," the minister said.
To make it easier to explain the RCEP and the CPTPP, Yeo cited the example of buying an unlimited pass for a theme park, saying that the key point in the discussion of joining the two mega trade pacts is whether Korea can participate in global trade or not.
"In order to strengthen the competitiveness of the Korean economy, we've signed 17 FTAs with 57 countries. These FTAs are like purchasing individual tickets for each ride at a theme park, while joining the RCEP and the CPTPP is like buying an unlimited ticket where you can do as you please within the boundaries of the park," he elaborated.
"Taking the FTA with the U.S. as an example, the agreement can be recognized as preferential treatment only when trade is between the two countries. Since the RCEP and the CPTPP are set as large blocs, if the countries in the pacts do businesses with each other, they can receive various advantages such as customs benefits."
Joining these pacts is also expected to see opposition from Korea's agricultural industries, which will likely see their profitability, as well as the livelihoods of rural farmers, drop due to the domestic availability of cheaper products from Southeast Asian nations. Yeo explained that the government is preparing support measures for local farmers, such as helping them develop high value-added products.
In the same vein, Korea is also working on signing more trade pacts in digital industries at a time when the country's exports of digital content, such as dramas, music and games, are increasing. As part of these efforts, the government inked a Digital Partnership Agreement (DPA) with Singapore on Dec. 15, which is its first trade pact in the digital sector.
The DPA covers the facilitation of e-commerce, the revitalization of digital businesses, the removal of tariffs and non-discrimination for digital products as well as cybersecurity. The two countries hope that the trade pact will facilitate faster and safer transactions via online platforms and a smooth cross-border supply of digital content and various online services, such as education, finance and medical consulting.
"In the digital age, content is another export engine for our economy. As you know, Korea's digital content and related services, and products, are enjoying soaring popularity around the world and we need to have more agreements to facilitate this," Yeo said.
Korea already applied for membership in the Digital Economy Partnership Agreement (DEPA), which counts Singapore, New Zealand and Chile as its members. Yeo added that Korea is actively seeking to take part in the Indo-Pacific Economic Framework project, a new trade agreement that the U.S. plans to initiate.
As for the question of which side Korea needs to stand on in the trade row between the U.S. and China, Yeo said he "doesn't think Korea is forced to choose either way."
"I think Korea can and should be able to judge ourselves according to our principles and interests and create the pictures we want. In the case of the U.S., the supply chains of Korea and the U.S. are connected as if they were indispensable to each other. China is also important to us as it is the largest trading partner of Korea," he said.
"Most countries in the Asia-Pacific region have relied on the U.S. for security and had no choice but to stay close to China, which has shown through 20 years of dramatic economic growth. Globally, around 50 countries have the U.S. as their largest trading partner while about 100 countries have China as theirs. So not only Korea, but also other nations are feeling the same way. I think we are now in the process of figuring out a model of coexistence and sustainability between the superpowers."
Japan's export controls are 'blessing in disguise'
The chief negotiator described the consequences of Japan's export curbs on Korea as a "blessing in disguise," adding that Tokyo's export restrictions have served as an opportunity to confirm Korea's industrial competitiveness.
"The crisis has helped the country come up with a new strategy, which is strengthening our core competitiveness in the materials, parts and equipment industries. After Japan started to impose toughened export restrictions, we saw that the amount of direct investment from Japan to Korea has increased significantly," Yeo said.
In July 2019, Japan began imposing tough restrictions on exports of high-tech materials to Korea. That was in retaliation to Korea's top court ruling in 2018 ordering Nippon Steel to compensate surviving Korean victims of wartime forced labor. Since then, the government has been supporting local industries to nurture their capabilities and cut off their heavy reliance on Japanese firms.
Direct investment from Japan decreased in 2020 due to the pandemic, but the figure started to increase again this year, Yeo said.
"The export curb issue is an important part that can affect the supply chain at the global level. I think the restrictions have served as an opportunity to strengthen our competitiveness and inspired the government to reduce its dependence on Japan," he said.
