Korean Trade Minister Proclaims Interest in TPP, Even as Seoul Begins FTA Talks With China

Originally published: Monday, May 21, 2012 Daily News
South Korea is interested in ultimately joining the Trans-Pacific Partnership (TPP) at a later date but in the meantime has launched trade negotiations with China and plans to work on a trilateral deal with China and Japan later this year, Korean Trade Minister Bark Taeho said last week.
“We have a strong interest in monitoring TPP and joining TPP later,” Bark said on May 16 during a speech at the Peterson Institute for International Economics.
He explained that while South Korea has trade deals with all current nine members of the TPP negotiations, the agreement still holds interest for Korean companies. “After TPP is formed, it is much more beneficial for Korean companies [than existing Korean FTAs] to join the TPP” because the Pacific trade pact will have integrated rules of origin and cumulation arrangements that allow better access to preferential tariffs, Bark said.
He added that having the U.S.-Korea FTA in place has not reduced Korea’s interest in the TPP. “We are not saying because of KORUS FTA we don’t need to join,” he said.
Bark described how Korea is now working on a trade deal with China, for which the two sides concluded their first round of trade negotiations on May 14 after announcing the launch of the talks in Beijing on May 2.
According to Bark, the importance of Korea signing a trade deal with China now is to ensure that it maintains a commercial foothold in the country as China tries to shift its economy away from being dependent on exports and more toward domestic consumption. Currently, most Korean trade to China is intra-firm, with Korean companies using China as an export platform, he explained.
He also pointed out that the  leaders of Korea, China and Japan announced on May 13 they will launch trilateral free trade talks before the end of the year. He said that Japan wanted an earlier launch, which was not acceptable to Korea, which led to the compromise of starting negotiations for a trilateral deal this year.
Bark said that if a trilateral pact is reached between Korea, Japan and China, it could lead to a so-called “ASEAN Plus Three” deal, given that all three East Asian countries have separate trade agreements with the 10-member bloc of Southeast Asian nations. He expressed the hope that at some point this arrangement – whatever form it ultimately takes – could be stitched together with TPP.
“This East Asian movement and TPP will progress in parallel for the time being. And I think at a later stage … we will want to somehow [merge them],” Bark said. “Maybe in the future – not the near future.”
Bark said the Korea-China deal will be comprehensive but will protect sensitive areas. He noted that a joint statement he issued with Chinese Minister of Commerce Chen Deming at the official announcement of their trade talks refers to deliberations by the two sides on how to address the sensitivities in these FTA negotiations.
To address sensitivities in the goods area, the two sides will establish separate tracks for “normal” and  “sensitive” items, according to the announcement. That sensitive track may include a “sensitive” and a “highly sensitive” category for goods, the statement said.
The ministers considered that potential ways to handle sensitivities include longer phaseout periods for tariffs, partial reductions, and exclusions, according to the statement.
The statement said that overall, liberalization of trade in goods and in services should go beyond each country’s commitments in the World Trade Organization, but does not mention agriculture at all. It added that on investment, the “level of ambition and coverage” will appropriately address issues related to bilateral investment flows “while taking into account the current and future investment related arrangements involving the two countries.”
The statement also said the deal will include measures to address how to handle products from so-called outward processing zones on the Korean peninsula, a reference to the Kaesong Industrial Complex, a South Korean-operated factory park in North Korea that employs North Koreans.
The U.S.-Korea FTA included provisions that allow a committee to review the possibility of goods from such zones to enter the United States and be considered as of South Korean origin – measures that proved controversial in the run-up to the trade pact’s passage by the U.S. Congress (Inside U.S. Trade, July 1 — See here and here).
The United States maintains a trade embargo with North Korea.
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