Tariff Uncertainty Grows Under US Policies: "Korea Should Accelerate CPTPP Accession"

KITA Report: "Trends and Implications of Major Countries' FTAs"
Stalled FTA Talks Among Major Countries Gain Momentum
Second Trump Administration's Tariffs Accelerate FTA Conclusions
South Korea's Exports to FTA Partners Rise by 5.1% Annually
"South Korea Should Expedite FTA Negotiations and CPTPP Accession"

As major countries accelerate free trade agreement (FTA) negotiations in response to the high-tariff policies expected from the second Trump administration in the United States, there are growing calls for South Korea to promptly ratify already-concluded agreements, expedite improvements to existing FTAs, and actively begin discussions on joining the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP).

The Korea International Trade Association (KITA) International Trade and Commerce Research Institute highlighted these points in its report, "Free Trade Under Attack: Trends and Implications of Major Countries' FTA Discussions," published on September 24.

The report noted that the broad tariff measures implemented by the United States have increased uncertainty in the global trade environment, prompting major countries to accelerate bilateral and regional cooperation through new FTAs, resumption of suspended negotiations, improvements to existing FTAs, and participation in multilateral trade agreements. For example, the European Union concluded FTA negotiations with the Southern Common Market (MERCOSUR) and Indonesia-after 25 years and 10 years of stagnation, respectively-following the election of President Trump. The United Kingdom also successfully concluded FTA negotiations with India in May, just three years after talks began.

The report further analyzed the types of FTA strategies pursued by major countries, categorizing them into three groups based on their dependence on external trade and exports to the United States. Countries such as South Korea, Switzerland, and Chile-with high external trade dependence but below-average (26%) export share to the United States-have small domestic markets and have actively pursued FTAs with most of their export partners to boost exports. As a result, the pace of new FTA agreements has slowed, with greater focus on improving and supplementing existing FTAs. Countries such as Canada, Mexico, and Costa Rica-with high external trade dependence and a significant share of exports going to the United States-are seeking alternative markets by pursuing FTAs with large markets such as MERCOSUR, ASEAN, the EU, and CPTPP. Additionally, countries with high domestic (regional) market dependence, such as Japan, China, Australia, and the EU, have also recently begun to strategically pursue additional FTAs.

It was also confirmed that the FTAs concluded by South Korea have contributed significantly to the stable expansion of the country's exports. Over the past five years (2020-2024), South Korea's exports to FTA partner countries increased by an average of 5.1% per year, outpacing both the overall global export growth rate (4.7%) and the export growth rate to non-FTA countries (3.7%).

In response, the report recommended that South Korea, like other countries, should further strengthen its FTA strategy to adapt to the changes in the trade environment brought about by the US-initiated tariff war. The report emphasized the need to improve existing agreements by expanding market access and advancing service and investment sectors, while also actively pursuing new agreements to overcome the limitations of the domestic market and secure a lead in advanced industry markets. In particular, it stressed the importance of swiftly pursuing accession to the CPTPP, which offers a higher level of liberalization compared to previously concluded FTAs.

Kang Geumyoon, Senior Researcher at KITA, stated, "Although South Korea has already concluded FTAs with many CPTPP member countries, joining the CPTPP offers advantages in terms of expanding export opportunities through improved market access, establishing stable supply chains, and reducing production costs." He added, "We should leverage our mature FTA policies and experience to prepare supplementary measures to protect vulnerable domestic industries, while resuming discussions on joining the CPTPP."