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According to Pulse by Maeil Business News Korea,
South Korea has joined the U.S.-led Indo-Pacific Economic Framework (IPEF) despite the risk of irking its biggest trading country, China, to ensure its trade market of 40 percent and supply security amid realignment of the global order from U.S.-China conflict and isolated Russia due to military aggression.
Korea’s exports to 12 members of IPEF reached $261 billion and imports $237.2 billion in 2021, accounting for 40.4 percent and 38.6 percent, respectively of Korean exports and imports. They eclipse China responsible of 25.3 percent of Korean exports and 22.5 percent of imports.
The Korea International Trade Association (KITA) in a report pointed out the Indo-Pacific region accounted for 44.8 percent of the global economy in 2020, 35.3 percent of entire trade, and 35.2 percent of population. The region’s combined gross domestic product amounted to $38.16 trillion and trade volume $12.07 trillion.
Simple math shows Korea made the right choice to join the new economic framework.
The four key agendas of IPEF are fair trade, supply chain, clean energy and decarbonisation, and tax and anti-corruption. Among them, Korea has its focus on supply chain, clean energy and decarbonisation.
In the supply network, Korea has an upper hand over other countries in chip and battery-related capacities. It also has predominant technology and manufacturing capability in nuclear sector that paves the ground for decarbonisation.
The recent summit has allowed Korea to enhance its industry and economic alliance with the U.S.
President Yoon Suk-yeol virtually joining the inaugural conference on Monday emphasized chips, batteries, and future vehicles are the key to responding to supply chain crisis and pitched Korea’s strength in nuclear, hydrogen, and renewable energy technologies.
How China will react after outright protest to Seoul’s move remains to be seen. Korean companies, travel, and contents all suffered retaliatory action from Beijing when Korea installed U.S. antimissile system.
China remains Korea’s single-largest trading partner with exports reaching $162.9 billion and imports $138.6 billion last year, nearly doubling trade figures with the U.S.
Korea relies heavily on China for imports of large-capacity batteries (39.5 percent), chips (93.3 percent), and medicine and medical supplies and raw materials (52.7 percent) as of 2020.
The participation in IPEF suggests Seoul is shifting away from China on trade reliance.
Yoon told reporters Monday that the IPEF should be seen not as an accord like the free trade agreement but an “organization” to create rules related to economics and trade in Indo-Pacific region, and it would only be natural for Korea to join.
As of now, countries have only set key agendas of IPEF and details are to come after discussions among member countries. There are calls for Korea to make its own voice to protect national interest in the process of establishing rules.
Experts also call for Korea to emphasize basic values of fair and transparent international trade on top of national interest.
“An establishment of a U.S.-focused supply network will bring big economic impact as it will allow closer connection to other advanced markets like the European Union,” said Park Jee-hyeong, professor of economics at Seoul National University. “Korea should underscore values that can be recognized by everyone in the international society.”
Korea should maintain balance through participation in the China-led Regional Comprehensive Economic Partnership and Japan-led Comprehensive and Progressive Agreement for Trans-Pacific Partnership.
To meet summit declaratory elevation of bilateral ties to “global, comprehensive, and strategic” level, South Korea is sending presidential officials to strengthen economic security with the U.S.
Maeil Business News has learned Monday that the three officials including Wang Yun-jong, presidential secretary for economic security, will meet with U.S. officials from National Security Council. The dialogue is expected to include issues on nuclear energy and space cooperation.
In their joint statement, Korea and the U.S. vowed to strengthen alliance “across all sectors of space cooperation.”
“Building on the ROK’s previous commitment to participate in the Artemis program, the two Presidents agreed to foster joint research in space exploration and to support the ROK’s development of the Korean Positioning System,” the statement said.
By Baek Sang-kyung, Park In-hye, Kim Hee-rae, and Lee Eun-joo
Copyrights Pulse by Maeil Business News Korea. All Rights Reserved.
Source: Pulse by Maeil Business News Korea (May 24, 2022)