"Ten-Year Void in Global Trade Order... Korea Must Strengthen Multilateral Alliances" [Deglobalization? New Order!] ⑫

What Should Korea Do?
Berceo, Chief Negotiator of the Korea-EU FTA
The United States Has Completely Abandoned the International Trade Framework
China Relies on Massive Subsidies and Coercive Measures
"Korea Needs Multilateral Alliances Such as

"For at least the next 7 to 10 years, we must prepare for a period in which there is no global trade order. During this time, it is essential to uphold commitments to WTO rules while simultaneously forming the largest possible coalition of countries willing to establish a new framework. Rather than relying on either the United States or China, Korea should strengthen alliances with trustworthy trading partners. Stability should be secured through broader multilateral coalitions. Cooperation with the European Union could be the cornerstone of such efforts."

Ignacio Garcia Berceo, Senior Researcher at the Bruegel Institute, made these remarks in an interview with Asia Economy on the topic of "Changes in the Global Trade Order and the Path Korea Should Take." Berceo is a veteran official who spent over 30 years handling trade policy at the European Commission. Since 1987, he has participated in the Uruguay Round negotiations and worked at the New York United Nations Mission. Notably, in 2009, he served as the EU's chief negotiator for the Korea-EU FTA and led the agreement to its conclusion.

Ignacio Garcia Berceo Senior Researcher at Bruegel Institute. Bruegel Institute Website

Berceo advised that in today's reality, where the United States is turning away from a rules-based trade order and China is pursuing a much more aggressive industrial policy, highly trade-dependent countries like Korea should not lean excessively toward either side. He emphasized that Korea should maintain balance between the United States and China, and join forces with countries that advocate free trade to build a multilateral trade coalition.

Berceo diagnosed that, as the existing multilateral trade system loses its strength, an alliance among countries that respect rules-based trade is essential. His specific recommendations for Korea are to join the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) and participate in the Multi-Party Interim Appeal Arbitration Arrangement (MPIA). "Korea should not simply adopt an anti-US or anti-China stance, but should actively pursue a 'rules-based trade coalition,'" he said. "Although joining the CPTPP faces challenges due to agricultural issues, it is strategically important for Korea to participate in cooperation frameworks with the EU, CPTPP, and ASEAN." He further noted, "Korea must reconsider its decision not to participate in the MPIA, which serves as an alternative multilateral dispute settlement procedure."

The following is a Q&A from a phone interview with Berceo conducted on August 25.

-Even if the United States withdraws from the multilateral trade system, do you believe that major WTO members such as the EU and China can still adhere to reciprocal trade norms?

▲That is a good question. Currently, the United States has essentially abandoned the basic framework of international trade rules and is acting in direct opposition to the fundamental principles of the WTO. China's position is a bit more complex. On one hand, it claims to comply with WTO rules and has joined the MPIA, a multilateral interim arbitration agreement involving some WTO members, thereby participating in a system to judge unfair trade practices. However, at the same time, China's economic model is based on massive subsidies, which have led to global oversupply, and it has not hesitated to use coercive means to achieve its geopolitical and economic objectives.

In this situation, the EU must both comply with WTO rules and take the lead in WTO reform. The current system is unsustainable, making reform inevitable. Additionally, the EU must be able to respond to the coercive measures of both the United States and China. Although it has not been proactive enough so far, this needs to be reconsidered going forward. In conclusion, the EU must demonstrate a strong commitment to the WTO and its reform, while also developing the ability to respond to coercive actions when necessary.

-Some argue that global trade is splitting into two blocs. Do you see a structure where the EU, Korea, and Japan align with the United States, while China, India, and Brazil form a counterbalancing group?

▲It is too early to say that two trade blocs have formed. The EU does not define itself as part of an anti-China bloc. The EU is in the process of ratifying an FTA with MERCOSUR (the Southern Common Market) and is negotiating with BRICS members such as India and Indonesia, as well as other Asian countries.

What matters to the EU is solidarity with countries that support rules-based trade. CPTPP members, as well as Korea, can play an important role in this coalition. However, it is regrettable that Korea has not yet joined the multilateral MPIA, which guarantees appellate dispute resolution under the WTO. I believe Korea should join this system as soon as possible.

-If the tariff agreement with the United States is maintained for three years under a Trump administration, what impact do you foresee on the EU's GDP, employment, and sectoral trade?

▲If the tariff agreement with the United States is maintained for the next three years, the direct impact on the EU economy will be limited. The United States lacks the industrial capacity to replace EU imports in the short term, and the EU's competitive position is similar to that of Japan and Korea. Instead, the EU should use this period to strengthen its own economic competitiveness, finalize FTAs with MERCOSUR and major Asian countries, and expand alliances with groups such as the CPTPP.

-You previously mentioned that the EU must respond to the coercive measures of the United States and China. Could you elaborate?

▲The EU has introduced anti-coercion instruments. These are mechanisms that allow for retaliatory measures if a third country applies coercion. For example, the United States' use of high tariffs as a negotiating tactic was a classic act of coercion. It was a mistake for the EU not to activate this instrument at that time. Even if immediate retaliation was not necessary, the EU should have clearly signaled its readiness to respond if needed. China, too, could use its strong position in key raw material supply chains to pressure the EU. Therefore, the EU must also demonstrate a clear willingness to respond to China. As geopolitical tensions rise, these instruments will become increasingly important.

-Major countries such as Germany, France, and Italy have different trade strategies and attitudes toward the United States. Do you think the EU can maintain a unified trade policy?

▲It is not easy for the EU to maintain a single trade policy given the divergent interests among member states, especially regarding trade with the United States. However, if the EU faces external coercion, it is highly likely that a majority of member states will support a unified response. Since the EU can make decisions by qualified majority, not unanimity, a unified response is possible.

-Even if a new trade order is created without the United States, the nature of trade means that some countries will inevitably benefit while others will lose. How can these structural limitations be addressed?

▲Realistically, a multilateral agreement to reform the global trade system is impossible until both the United States and China are fully prepared to participate in such an initiative. Frankly, this will not happen within the next three years. Even if a future U.S. administration shows strong commitment, major reforms will be necessary and will take considerable time to achieve. Therefore, we must prepare for a period of at least 7 to 10 years without a global trade order.

During this period, it is essential to uphold commitments to WTO rules while forming the largest possible coalition of countries willing to establish a new framework. In practical terms, over the next 7 to 10 years, what is needed is not a global trade regime, but an alliance of countries that respect rules-based trade. The EU, CPTPP, EFTA (European Free Trade Association), some ASEAN countries, and Korea should participate in discussions on digital trade, supply chain resilience, and climate-trade linkage regulations. As these efforts accumulate, the United States and China may eventually be drawn into reform discussions in the long term.

-Where can such a broad coalition, as you mentioned, begin?

▲Cooperation should start on issues such as digital trade, supply chain resilience, and the intersection of trade and climate, so that global trade rules can be improved to reflect current realities. The world today is very different from 1995. Therefore, restructuring is essential to move forward without relying on decisions by the United States or China, as both will remain deeply entangled in geopolitical conflicts for the foreseeable future.

The EU and CPTPP could reach agreements to establish new global trade rules, and it is possible to invite other interested countries to join after initiating cooperation in certain areas. Even though Korea is not yet a CPTPP member, I hope it will be among the countries participating in this process. In other words, cooperation between the EU and CPTPP could serve as the starting point, and it is important to invite interested countries like Korea. However, Korea's decision not to participate in the MPIA must be reconsidered.

-Due to its export-driven economic structure, Korea is particularly vulnerable to tariff wars. As US-China tensions continue, the Lee Jaemyung administration must develop a new trade strategy. What do you see as Korea's greatest risk, and what countermeasures are necessary?

▲Korea is among the countries most likely to suffer in the midst of US-China tensions. Its security relies on the United States, but its trade is deeply intertwined with China. Being forced to choose between the two could be fatal for Korea. Therefore, Korea should actively pursue a 'rules-based trade coalition' rather than adopting an anti-US or anti-China stance. Although joining the CPTPP is challenging due to agricultural issues, it is strategically important for Korea to participate in cooperation frameworks with the EU, CPTPP, and ASEAN.

-I understand you visited Korea in 2009. What was your experience at that time?

▲At that time, I was the EU's chief negotiator for the FTA with Korea. I visited Seoul at least ten times. The Korean negotiation team was highly professional and thoroughly prepared. Thanks to the "ppalli-ppalli" (quickly, quickly) culture, negotiations progressed rapidly. The negotiations took place before the US-Korea agreement came into effect, and it was a very intense period. Although there was controversy within the European Union over some provisions of the agreement, particularly in the automotive sector, the agreement was actually ratified very quickly by both the EU Council and the European Parliament. In my view, both sides were quite satisfied with the outcome. Ultimately, the Korea-EU FTA came into effect before the Korea-US FTA. It was the EU's first comprehensive FTA and is still regarded as a successful achievement by both sides.

-Compared to 2009, how has Korea changed in the field of trade, and what strategies are needed now?

▲At that time, the WTO dispute settlement system was still functioning. All countries basically complied with WTO rules, and the United States was actively engaged in trade negotiations. The United States was negotiating trade agreements in the Pacific region and with the European Union. However, now the United States is turning away from rules-based trade, and China is pursuing a much more aggressive industrial policy.

In this environment, highly trade-dependent countries like Korea should strengthen alliances with trustworthy trading partners rather than relying excessively on either the United States or China, and should secure stability through broader multilateral coalitions. Cooperation with the European Union is crucial as the central pillar of such efforts.