Window Likely Closed for South Korea to Join TPP Talks Before an Agreement
U.S. trade negotiators are likely opposed to South Korea joining Trans-Pacific Partnership talks before the negotiations conclude because such a move would delay an agreement, but it's unclear whether the U.S. would actually deny a South Korean request, said Jeffrey Schott, senior fellow at the Peterson Institute for International Economics on Sept. 22. Political and market access disagreement with Japan are probably the most significant obstacles South Korea would face in its TPP bid, said analysts at a Peterson Institute event. Free trade negotiations between the two sides petered out in 2004, but Japan and South Korea are currently negotiating a tripartite pact with China (see 14090423).
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If South Korea were to say it wants to join in the coming weeks, all countries may still have a window of opportunity to close a deal before the process gets bogged down in the 2016 U.S. presidential election, said Schott. Singaporean Prime Minister Lee Hsien Loong recently said 2015 will be the “last chance” for the parties to come to reach agreement (see 14092305). “There is a strong view among all the TPP countries to try to finish a good deal quickly and not accommodate new members, whether it be Korea or anyone else, by extending the talks by six or 12 months, while other parts of the negotiations are concluded,” said Schott.
Congress is likely to insist, however, that outstanding issues in the U.S.-South Korea Free Trade Agreement (KORUS) are first resolved. “It would be hard for Congress to endorse Korea if there are any residual implementation issues left over or continuing from the implementation of the KORUS FTA, and so there’s been ongoing negotiations between the two governments to try to resolve outstanding concerns on both sides about implementation of that agreement,” said Schott. “Progress has been made in many of those issues. I can’t say that everyone is yet fully satisfied, but there has been a goodwill effort to move forward.”
South Korea and the U.S. are working to resolve rules of origin certificates, USTR said in recent months (see 14031425). Schott said the two sides also still don’t see eye to eye completely on cross-border data flow regulations, auto emission procedures and organic goods certification procedures. The Office of the U.S. Trade Representative would have to notify Congress that South Korea wants to join the TPP talks, and then both chambers would have 90 days to consider it, said Schott. A USTR spokesman said the agency opposes South Korean accession.
South Korean trade is increasingly less reliant on U.S. trade and more reliant on trade with China, so the deal marks a big opportunity for U.S. traders, said Cathleen Cimino, a research associate at Peterson. The U.S. share of South Korean trade decreased from 20 percent in 2000 to 10 percent in 2013, as opposed to a rise in China's share from 9 percent to 21 percent during the same time period, said Cimino. “The striking, but of course well-known trend … is the growing importance of economic ties with China,” she said, adding that South Korean political and diplomatic conflict with Japan is a real challenge. “So the levels of trade with the U.S. and Japan continue to be significant, but the relative importance has declined significantly over the past decade.”
The U.S. is already struggling to make progress in TPP agricultural market access and auto trade talks with Japan. Both sides aim to disclose details of the bilateral negotiations to the other TPP partners by October, analysts say. More details on the talks may help Congress move forward Trade Promotion Authority because lawmakers will be more informed about the deal TPA will primarily be used for, said Schott.
TPA provides confidence to negotiators, but it doesn’t necessarily mean the deal reached will be the one Congress chooses to enact, Schott added. “The negotiation of the implementing legislation usually yields some alterations in the FTA text,” said Schott. “So it isn’t a guarantee to our trading partners that the deal that they conclude with USTR will be the deal that is finally entered into force once the Congress passes implementing legislation. Almost every U.S. free trade agreement has been changed in one way or another prior to its entry into force.” TPA is unlikely in the lame duck session and lawmakers are likely to have to take up another bill in the next Congress, Schott added.
The period the U.S. has taken to ratify free trade agreements after reaching a deal with partners has grown substantially since the U.S.-Australia FTA was reached in 2004. The recently ratified Colombian, Panamanian and South Korean FTAs took years to enter into force. “There can be a considerable lag between the time a deal is negotiated and the time it actually enters into force and the reforms begin to take place,” said Schott. “That can be a dead zone, a period when business is still uncertain about the opportunities that will be created for new trade and investment, but it also can be a great period of uncertainty for countries that are considering joining the trade partnership.” -- Brian Dabbs