FTA or CPTPP? Seoul-Tokyo summit renews push for economic ties

Korea Herald

17 hours ago

Neighbors weigh trade frameworks as US tariffs, China rivalry reshape global order
Ahead of Saturday's summit between South Korea and Japan, momentum is building for deeper economic cooperation between the neighboring countries.
The prospect of reviving the long-stalled bilateral free trade negotiations has returned to the spotlight, with experts and business leaders believing the partnership would benefit both countries' industries and offset prevailing trade uncertainties driven by Washington's tariff policies.
The renewed impetus comes as South Korean President Lee Jae Myung is set to visit Tokyo for his first summit with Japanese Prime Minister Shigeru Ishiba, fueling expectations that discussions could move beyond political reconciliation to tangible economic cooperation frameworks.
From friction to partnership
For decades, Seoul and Tokyo relations were framed by caution, weighed down by long-standing historical issues. But in recent years, the perception has shifted toward being more friendly, attributed to revitalized cultural exchange, increased tourism and more active diplomacy between leaders.
President Lee has also made enhanced economic ties with Japan a key priority. This is a notable shift for the liberal Democratic Party of Korea, which has traditionally maintained a more adversarial position toward Japan than its conservative rival, the People Power Party. The diplomatic pivot reflects growing recognition that stronger Seoul-Tokyo ties are crucial for navigating the US' protectionist trade agenda under President Donald Trump.
Both Seoul and Tokyo, which are heavily reliant on exports, are searching for a breakthrough after the US, their key trading partner, imposed a 15 percent tariff on all South Korean goods. Core industries such as automobiles have already been hit with the separate levy, while additional tariffs targeting semiconductors and pharmaceuticals are expected to follow.
As exports to the US decline, both Seoul and Tokyo are under pressure to safeguard their supply chains and diversify trade partners.
'I believe we have reached a stage where the possibility of an FTA (free trade agreement) or economic cooperation is very high,' said Lee Won-deok, an expert on Japan at Kookmin University in Seoul. 'With Trump in office, strengthening Korea-Japan relations has become important, and what we can do is pursue an FTA.'
Park Inn-won, professor emeritus at the College of International Studies at Korea University, echoed the sentiment, noting that global trade headwinds — including Trump's protectionism and the weakening of the World Trade Organization system — leave few alternatives.
'The external environment surrounding Korea and Japan is changing fast, and the positive effects of cooperation now outweigh the negatives that were feared in the past,' Park said.
Park added that the Korea-Japan FTA discussions have been ongoing for a long time, and the recent Trump policies are 'acting as a catalyst.'
'Given Korea's level of competitiveness, I believe Korea-Japan cooperation is necessary for supply chain stability," he said.
Economic data highlights the need for further tie-ups. According to the Bank of Korea, South Korea's gross domestic product per capita stood at $36,024 last year, surpassing Japan's $32,859 for the third consecutive year after first overtaking it in 2022. The two countries remain stuck in the so-called $30,000 threshold, but the gap underscores how similar the two economies have become.
Business leaders have also argued that the two countries could form a $6 trillion to $7 trillion economic bloc akin to the European Union as a solution to stagnant domestic economies, aging populations and rising global trade barriers. Chey Tae-won, chair of the Korea Chamber of Commerce and Industry and SK Group, has been advocating for such a union to create the world's fourth-largest economy, saying the two countries must strengthen cooperation in the artificial intelligence and manufacturing sectors to tackle shared challenges.
Observers note that since forming a bilateral FTA could be tough, the more realistic choice could be for Seoul to join the Comprehensive and Progressive Agreement for Trans-Pacific Partnership. Led by Japan, the CPTPP serves as a high-standard FTA among its member nations, which include Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore, the UK and Vietnam.
For years, Seoul has sought to join the mega trade agreement, though the previous Yoon Suk Yeol administration's efforts stalled amid fierce resistance from Korea's agricultural and fishing sectors.
'In Korea's perspective, joining the CPTPP is simpler than pursuing a bilateral FTA,' said professor Lee. 'It's a high-level agreement, and it's easier because Korea just needs to enter an already established framework. But for the Korea-Japan FTA, many detailed aspects need to be resolved.'
Calls for Seoul to join CPTPP have grown in recent months, with the topic likely to be on the agenda at the bilateral summit.
During the latest Korea-Japan Forum held in Seoul on Wednesday, an annual forum launched in 1993 to promote high-level talks between the two countries, the participants agreed on the need for Korea to join the CPTPP.
'With Trump's second term and strategic competition between the US and China, there is a growing consensus on the need for close cooperation between Korea and Japan,' said Yu Myung-hwan, former foreign minister and chair of the Korea-Japan Forum. 'As the global economic order is being reshaped, the two countries must exercise joint leadership in defending the rules-based free trade system. At this forum, all participants agreed on the need for Korea to join the CPTPP at the earliest.'
Skeptics warn of the risks of closer economic ties. Korea ran a $17.9 billion trade deficit with Japan in 2024, sparking fears that further opening up could increase the imbalance.
A recent report by the Korea Institute for Industrial Economics and Trade cautioned that an FTA at CPTPP-level market opening standards would likely increase Korean imports of cars, petrochemicals and electronics more than it would boost exports to Japan, potentially worsening the trade deficit.
'Measures are needed to prepare for the negative effects of widening trade deficits from a potential Korea-Japan FTA,' Choi Jeong-hwan, research fellow at KIIET, said in the report. 'The economic impact of a Korea-Japan FTA should be assessed comprehensively, going beyond simple trade balance to examine how it would affect consumption, production and welfare of consumers and businesses.'