Mega FTA in East Asia for Regional Economic Integration: RCEP and TPP Sang-Chul Park, Professor at Graduate School of Knowledge Based Technology and Energy, Korea Polytechnic University Email: scpark@kpu.ac.kr

1. Changing global trade environment and after global financial crisis Background - Global financial crisis in 2008 contracting global economy with 0.5 ~ 1% growth in 2009: lowest world economic growth last 60 years - Advanced nations recovering slowly since 2012 while developing countries facing a lower economic growth - Estimated as trillions US dollars lost in equity market and credit squeeze Increasing unemployment: from 18 million in 2008 to 38 million in 2009, recovering since 2012, but higher than before the crisis Prof. Dr. Dr. Sang Chul Park

Prof. Dr. Dr. Sang Chul Park New global trade environment - Escalating existing anti globalization sentiment & views of opposition in liberalized trade: restrictions on trade - G-20 leaders summit fighting against protectionism in trade in 2010 - Protectionism & beggar-thy-neighbor policy limited by rules of WTO Long delay of DDA & high number of bilateral & regional free trade agreements: 271 RTA in 2012, EU, USA, East Asia as major players Low global trade growth: 2.6% (2015), 5% (1990~2007) (fig. 1) Prof. Dr. Dr. Sang Chul Park

Prof. Dr. Dr. Sang Chul Park

2. Korean trade policy and strategy Development of trade policy - Import substitution industrialization policy in the 1950s: Impeding export growth - Export oriented policy since the 1960s: from 1 billion US dollar in 1966 to over 500 billion US dollars in 2011 - Heavy & chemical industrial policy in the 1970s - Picking up national champion policy in the 1980s: Samsung, LG, Hyundai etc. - Weighting on multilateral trade more than bilateral & regional FTA until Asian financial crisis - Restructuring for bilateral & regional FTA based on liberalization process since 1998: doubts for WTO Prof. Dr. Dr. Sang Chul Park

Prof. Dr. Dr. Sang Chul Park - Rapid proliferation of bilateral & regional FTA and participating in the new trend (fig. 2) Bilateral & regional FTA as trade policy strategy - Building extensive network & learning FTA with Chile in 2002: long distance & opposite seasonal climate - Announcing FTA roadmap for economic development: trade policy shift from passive to active (Singapore in 2003 & the EFTA in 2004) - Two principles: increase competitiveness & reduce opportunity cost, multi-track & FTA with large economies - Aiming at comprehensive and high quality FTA (table 1) Prof. Dr. Dr. Sang Chul Park

Prof. Dr. Dr. Sang Chul Park

Prof. Dr. Dr. Sang Chul Park

Prof. Dr. Dr. Sang Chul Park - FTA with USA in 2007: most controversial negotiation Positive result of FTA for Korea - FTA with the EU in 2007: world largest FTA since NAFTA Less resistance except agricultural sector Regarded as win-win negotiation (fig. 3) Strategy for comprehensive and high quality oriented FTA - Korea as only Asian nation completing FTA with major economic power USA, EU & China: preserving its share of market against China & expansion in China - Strengthening competitive position vis-à-vis Japan - Overcoming disadvantages in bloc economic zones - Pursuing comprehensive and high quality commitments with FTA partners (table 2) - Diversifying trade destination at a global scale (fig. 4) Prof. Dr. Dr. Sang Chul Park

Prof. Dr. Dr. Sang Chul Park

Prof. Dr. Dr. Sang Chul Park

Prof. Dr. Dr. Sang Chul Park

3. New Challenge for Mega FTAs in RCEP and TPP Mega FTAs in Asia and Pacific Region - Asia’s output same as USA & EU in 2013: high economic growth potential - 50% larger than USA & EU in 2020 based on PPP - De factor China led Regional Comprehensive Economic Partnership (RCEP) - US led Trans Pacific Partnership (TPP) - RCEP & TPP regarded as trade liberalization and economic integration in Asian countries - Free Trade Area of the Asia Pacific (FTAAP): questionable (fig. 5) Prof. Dr. Dr. Sang Chul Park

Prof. Dr. Dr. Sang Chul Park

Prof. Dr. Dr. Sang Chul Park Comparison of Mega FTAs between RCEP and TPP - RCEP driven by ASEAN and supported by China Aiming at high quality & mutually beneficial economic partnership Open access clause & planned to be completed in 2015 - TPP initiated by P4 & led by USA Member based consensus Larger geographical scale (table 3) - Functional level between RCEP & TPP RCEP based on ASEAN’s experience & integrating all ASEAN plus one into a regional framework Providing flexibility & adjust mechanism Prof. Dr. Dr. Sang Chul Park

Prof. Dr. Dr. Sang Chul Park

Prof. Dr. Dr. Sang Chul Park - TPP regarded as more demanding set of commitments IPR, labor standards, competition policy, investment rules, environment etc. Pursuing gold standard of FTA in 21st century - Economic benefits of two mega FTAs RCEP calculated by CGE model: USD 644 billion & 2% of Asian GDP by 2025 TPP: USD 223 billion by 2025 Reducing noodle bowl effects Contributing to better trade system particularly in developing nations (table 4) Prof. Dr. Dr. Sang Chul Park

Prof. Dr. Dr. Sang Chul Park

Prof. Dr. Dr. Sang Chul Park 4. Analysis on Trade Policy Strategy and National Interests for RCEP & TPP Trade policy strategy - Regarded as successful, but needed to improve: diversifying trade partners & products, developing service sectors, improving effectiveness of FTAs National interests for RCEP & TPP - Dealing with RCEP in 2012 & TPP in 2013 - Economic benefit of RCEP > that of TPP (table 5) - CGE model: RCEP gaining 2.5%, TPP generating 1.54% in real GDP, 5.41% & 5.05% in export - Playing catalytic role in shaping of outcome of RCEP & TPP Prof. Dr. Dr. Sang Chul Park

Prof. Dr. Dr. Sang Chul Park

Prof. Dr. Dr. Sang Chul Park 5. Conclusions Trade policy as a major economic growth strategy FTA strategy as a further economic growth policy Facing new trend for mega FTAs: RCEP & TPP RCEP generating more economic benefits than TPP Two mega FTAs regarded as equally important and both beneficial for national interests Prof. Dr. Dr. Sang Chul Park