Korea likely to suffer big export losses failing to join TPP

Korea likely to suffer losses of 15.5 trillion won ($13.3 billion) in its export of parts and materials over 10 years failing to join the Trans-Pacific Partnership agreement, a think tank said on Thursday.

According to the Korea Economic Research Institute report, Korea’s exports of parts and materials to the United States are estimated to drop $11.3 billion in terms of added value, for 10 years after the TPP goes into effect, if the U.S.-led free trade agreement abolishes all import duties among its signatories.

It also said that exports to Japan is also likely to fall $1.96 billion.

Korean companies’ exports to 12 member nations of the TPP, made from their manufacturing bases in Vietnam, are expected to drop $620 million a year and their shipments via global supply networks in Mexico are also to drop $290 million, the report said.

By industry, the estimated export losses for textile are $420 million. Although Korea has already signed FTAs with 10 of the 12 TPP members, besides Japan and Mexico, the price competitiveness of Korean exporters, applied by complicated rules of origin, cannot help but lag behind those of their counterparts in member nations, which are applied by a uniform set of completely cumulative rules of origin, said Professor Choi Nam-seok of Chonbuk National University

The industries’ reliance on global value chains has increased since 2008. If, therefore, Korea is excluded from Asia-Pacific global supply networks to be created by the conclusion of the TPP, it would adversely affect the nation’s export of parts and materials, directly and indirectly.

Prof Choi said that the nation should hurry joining the mega-FTA to help Korean exporters make the most of its supply networks and set up new business models, taking into account the large export losses resulting from Korea’s exclusion from the regional supply networks of the TPP.