Navigating Shifting Tides: South Korea and Northeast Asian Trade Integration

Executive Summary

MAIN ARGUMENT

Two major forces have shaped South Korea’s trade strategy in recent decades: the rise of preferential trade agreements and the intensifying U.S.-China techno-rivalry. Initially, South Korea adapted to globalization pressures by pursuing bilateral and minilateral FTAs, but it has lagged in capitalizing on mega-FTAs. Although South Korea joined the Regional Comprehensive Economic Partnership (RCEP) as a founding member, the agreement lacks the depth and breadth required for comprehensive trade liberalization compared to the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP). Therefore, strengthening ties with Japan is essential, as Tokyo holds a critical veto over South Korea’s bid for CPTPP membership. Meanwhile, the rise of economic statecraft worldwide has tested South Korea’s “U.S. for security, China for economy” strategy, challenged by Beijing’s Made in China 2025 and Washington’s “America first” high-tech policies. Leading tech companies such as Samsung and SK Hynix are diversifying supply chains away from China to the U.S. To further benefit from the U.S.-led supply chain reorganization, South Korea must also improve relations with Japan, drawing lessons from the recent whitelist dispute over Japan’s critical material exports that contribute to South Korea’s high-tech products.

POLICY IMPLICATIONS

• South Korea must intensify its efforts to join the CPTPP to navigate the turbulent geopolitical and economic landscape. Achieving this goal requires strengthening strategic and economic relations with Japan, as politically charged trade disputes, like the recent whitelist issue, benefit no one.
• Amid rising uncertainties in the Chinese market, South Korea should further diversify away from China as both an export market and an import source.
• Following the recent U.S. presidential election and the domestic political turmoil resulting from the short-lived martial law and subsequent impeachment processes, South Korea faces both challenges and opportunities in the U.S. market. It must navigate political uncertainties at home while exploring ways to benefit from U.S. reshoring policies and safeguarding its own industrial foundation.

Min Gyo Koo is a Professor at Seoul National University’s Graduate School of Public Administration (South Korea). His expertise lies in the political economy and security of East Asia, with recent work centered on maritime conflicts in the South and East China Seas and the securitization of trade policy.