Korea is at a dilemma between the U.S. vs. China hegemonic rivalry in the Asia-Pacific economic bloc. It is under increasing pressure to choose sides as the G2 countries’ Asia-Pacific strategies are taking concrete shape.
Trade experts point out that Korea has to use its free trade deals with China, Australia, the U.S., and others to deal with the issue. “FTAs having a binding force on the respective countries that are discussing the formation of economic blocs led by the G2 will allow Korea to raise its own voice in multilateral negotiations,” said one of them, adding, “This will also prevent Korea from suffering disadvantages even in the event of non-participation in mega-FTAs for economic bloc formation.”
China is planning to discuss the Free Trade Area of the Asia Pacific (FTAAP) at the APEC CEO Meeting scheduled for next month in Beijing. The FTAAP is a multilateral agreement for free trade with 21 APEC member countries including Canada and Mexico. It can be regarded as an extended version of the China-led Regional Comprehensive Economic Partnership (RCEP) and a countermeasure against the U.S.-led Trans-Pacific Partnership (TPP).
This signifies a heavy challenge for Korea. Although the establishment of the economic cooperation scheme led by China is still distant and vague, Korea cannot rule out its participation. China is the largest trade partner for Korea, which accounts for one-fourth of its total trade size. It is in this very context that Deputy Prime Minister Choi Kyung-hwan made a positive remark in Beijing as to Korea’s accession to the Asia Infrastructure Investment Bank (AIIB).
The problem is that a number of countries to join the FTAAP are already found in the TPP. The Korean government, which expressed its interest in the TPP late last year on the assumption of participation, is going to decide on the matter after thorough observation of its impact and the other participants’ moves. Diplomatic and national security experts are in favor of joining the TPP in view of close relations between Washington and Seoul.
At present, it is said that China is trying harder than Korea to conclude the Korea-China FTA before the end of this year. “Bilateral FTAs with each one of the FTAAP and TPP members can be more helpful for Korea rather than pondering upon whether or not to join the mega blocs,” LG Economic Research Institute senior analyst Kang Jung-ku said.
Another urgent issue is the ratification of the Korea-Australia and Korea-Canada FTAs pending in the National Assembly. These FTAs can function as strategic leverage. Australia is associated with the TPP and the RCEP at the same time. “The RCEP is unlikely to become a high-standard free trade regime, because the ASEAN countries are in different development stages, and the FTAAP is still at its conception stage,” Kim Young-gui at the Korea Institute for International Economic Policy continued, adding, “In that case, Korea would be well advised to join the TPP and play an important role in the establishment of new international trade standards.”