IPEF Launch... Establishing a New Economic Security Landscape

The Shifting Global Landscape of Economic Security
Industrial Gains and Losses from Korea's Participation in IPEF

[Image source=Yonhap News]

[Asia Economy Reporter Park Sun-mi] On the 23rd, President Yoon Suk-yeol will attend the Indo-Pacific Economic Framework (IPEF) high-level meeting led by U.S. President Joe Biden via video conference. President Biden, who is staying in Japan after completing his visit to Korea the previous day, is expected to officially announce the launch of IPEF.

The industry is hopeful that the launch of IPEF will establish a new economic security landscape centered on the Indo-Pacific region. According to the Korea International Trade Association, the Indo-Pacific region accounted for 44.8% of the global economy (GDP), 35.3% of trade, and 35.2% of the population as of 2020, making it a massive economic bloc. Notably, the share of the Indo-Pacific region in Korea’s exports last year was 47.1%, up 5.3 percentage points from 41.8% in 2015. Considering that exports to China remained stagnant in the 31% range during the same period, the Indo-Pacific region’s influence on the Korean economy is significant.

Although IPEF does not address market access issues such as tariff reductions, it is evaluated that Korean industries can find opportunities as it establishes a comprehensive economic cooperation system covering not only trade but also ▲supply chain security ▲digital economy ▲energy and climate change response ▲labor and environment. There is an expectation that Korea can create synergy in sectors where it has strengths, such as semiconductors, electric vehicles, batteries, and digital fields, within the newly formed economic security landscape. However, there is also concern that domestic companies may suffer damage due to China’s economic retaliation, given Korea’s high export dependence on China.

With the U.S. midterm elections approaching in November, the U.S. is expected to focus on concretizing supply chain restructuring plans, which have become central to economic security, to produce tangible results from IPEF. Asia Economy plans to review the practical benefits of participating in IPEF by examining supply chain restructuring and resulting industrial landscape changes, synergies and concerns for Korean companies, and power dynamics with competing countries in key domestic industries confirmed to participate in IPEF.