[Edaily Kim Sang-yoon Reporter Hwang Byung-seo] President Lee Jae-myung has instructed officials not to submit an application for membership in the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) within this year. This decision reflects a priority on restoring trust with farmers and fishermen rather than rushing the process ahead of the CPTPP ministerial meeting scheduled for this November. The government has also decided to secure 700 billion won from the national budget to cover the shortfall in the Rural-Urban Cooperation Fund, thereby fulfilling the support promises made during previous market liberalization efforts.

The intention is to leave open the possibility of accession while allowing time for consultation with farmers and fishermen. However, if the suspension of the application drags on, the timing for securing additional market access and benefits from regional supply chains could be delayed. The challenge remains in determining how to secure tangible trade benefits for the export and manufacturing sectors while implementing complementary measures to mitigate damage to agriculture and fisheries.

◇“Trust in Farmers and Fishermen Over Deadlines”… Decision to Postpone Application Within the Year Made Official

Kang Yu-jeong, Senior Spokesperson for the Blue House, stated in a written briefing on the 8th that President Lee had instructed that South Korea not submit its application for CPTPP accession within this year. She urged relevant ministries to listen sincerely and thoroughly to the voices of farmers and fishermen and to engage in ongoing dialogue, rather than setting a fixed deadline.

A report and discussion regarding CPTPP accession took place at the Cabinet meeting on the 6th. During the meeting, it was suggested that, for South Korea’s accession to be discussed at the CPTPP Ministerial Meeting scheduled for November of this year, plans for a public hearing must be announced in the Official Gazette by mid-October at the latest.

Rather than proceeding with the process to meet this schedule, President Lee directed officials to first secure domestic consensus. This is interpreted as a directive to determine the direction of the initiative through sufficient dialogue, rather than setting a specific date for the application and attempting to persuade farmers and fishermen.

Senior Spokesperson Kang explained, “Trade policy is directly linked to the lives of the people,” adding, “It must be pursued based on trust and consensus with farmers and fishermen, who are currently facing particular hardships.”

While joining the CPTPP is expected to boost production across the manufacturing sector, it could place a burden on the agriculture, forestry, and fisheries sectors by reducing output. According to preliminary impact analysis figures released by the Ministry of Trade, Industry and Energy on the 28th of last month, domestic production in the agriculture, forestry, and fisheries sectors is estimated to decrease by an average of approximately 850 billion won annually over the 15 years following the agreement’s entry into force. This means that even if the benefits of market liberalization are felt across the economy as a whole, the burden may be concentrated on specific industries and regions.

The government’s proposal to expand the Rural-Urban Cooperation Fund—made in conjunction with its decision to postpone the application—is also linked to these concerns. The government plans to secure the remaining 700 billion won from the national budget to make up the shortfall in the 1 trillion won fund promised during the National Assembly’s ratification of the Korea-China Free Trade Agreement (FTA) in 2015.

This is interpreted as an effort to fulfill existing support commitments before seeking consent for new market openings. Senior Spokesperson Kang emphasized, “Above all, restoring trust between the government and farmers and fishermen is the top priority.”

◇ Tangible Benefits from the Mexican Market and Supply Chains… Bilateral Agreements Also Being Pursued Separately

However, the expected benefits for the manufacturing sector from joining the CPTPP are also significant. The Blue House stated that the CPTPP is “an option that South Korea, as a nation aspiring to be a global trading power, must carefully consider.” The same government analysis estimated that CPTPP accession would increase real gross domestic product (GDP) by 0.38 percentage points 10 years after the agreement takes effect, and that domestic manufacturing output would grow by an average of 6.3 trillion to 6.7 trillion won annually over the 15 years following entry into force. This is an issue where both burdens on the agricultural and fishing sectors and growth benefits for the manufacturing sector are anticipated.

Mexico, in particular, is a country that can expect to benefit from the opening of new markets through CPTPP accession. Among the 12 existing CPTPP member countries, South Korea has bilateral or multilateral FTAs with all but Mexico. Although it does not have a separate bilateral FTA with Japan, the Regional Comprehensive Economic Partnership (RCEP) is in effect.

However, the CPTPP is not the only pathway to expanding market access to Mexico. Following last month’s summit, South Korea and Mexico signed an initiative on economic, industrial, and resource cooperation and agreed to begin a study on mutual interests to prepare for the launch of a future trade agreement. In other words, they are also exploring market opening through a bilateral agreement separate from the CPTPP.

Of course, as the agreement is still in the preparatory stage, it is difficult to view this as a definitive alternative that would replace the tangible benefits of the CPTPP. Even if access to the Mexican market is improved through a bilateral agreement, it cannot replace the cumulative origin benefits applicable to all CPTPP member countries.

The CPTPP includes rules on the cumulation of origin, which recognize a product as regionally produced if materials originating from a member country are used in production in another member country. Under this structure, even if parts are sourced and processed across multiple member countries, the final product can qualify for preferential tariffs as long as the relevant requirements are met. If South Korea joins, companies will have greater opportunities to utilize this within regional production networks.

However, using materials from non-member countries does not automatically result in the loss of tariff benefits. Even if materials from non-member countries are included, preferential tariffs can still be applied if the product-specific rules of origin are met; therefore, the actual impact varies depending on the product and supply chain.

The benefits of entering the North American market must be considered separately. Even if trade conditions between South Korea and Mexico improve through CPTPP accession, products manufactured in Mexico that are exported to the United States must meet the origin requirements of the United States-Mexico-Canada Agreement (USMCA) to qualify for preferential tariffs under that agreement.

The ongoing USMCA review is a factor that increases uncertainty in this regard. In a joint review last July, the United States did not agree to extend the current agreement, and while the agreement remains in effect, follow-up negotiations are underway regarding rules of origin and sectors such as automobiles and steel. This could also affect South Korean companies’ production and procurement strategies in Mexico.

Opinions within the manufacturing sector are also divided. At a Ministry of Trade, Industry and Energy briefing on the 2nd, industry associations in the electrical and electronics sectors—including semiconductors, batteries, and displays—expressed optimism about the benefits of a new FTA with Mexico and the easing of testing and certification burdens, but raised concerns about the expanded opening of the Japanese market for certain products. This means that, just as with agriculture and fisheries, the manufacturing sector must also assess the impact on a sector-by-sector basis.

The decision to postpone the application within this year does not in itself trigger new tariffs or sanctions. The government’s estimates of economic effects also reflect projected outcomes following accession, not losses resulting from this postponement. Since accession requires the consensus and negotiations of existing member countries, it will be necessary to separately assess the extent to which the delay in the application will postpone the actual effective date.