Nearly 48% of S. Korean Export Items Lose Competitiveness in CPTPP Markets

Export vehicles are parked at Pyeongtaek Port in Gyeonggi Province. Nearly half of South Korea’s export items have seen declines in competitiveness in markets covered by the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), as the country remains outside the trade pact. While member countries benefit from improved market access, including tariff elimination, South Korean exporters face a relative disadvantage in competing within the bloc. According to a report titled “Analysis of South Korea’s Competitiveness Before and After the Entry into Force of the CPTPP,” released by the Korea Institute for Industrial Economics & Trade (KIET) on Oct. 14, the competitiveness index declined for 2,474 of the 5,185 South Korean export items analyzed, or 47.7%, when the periods before the pact took effect in 2012–2018 and after it took effect in 2021–2024 were compared. The analysis used the Revealed Symmetric Comparative Advantage (RSCA) index, which measures the relative export competitiveness of individual products, and excluded 2019 and 2020 because of the significant impact of the COVID-19 pandemic. By sector, declines were particularly pronounced in key South Korean manufacturing industries, including shipbuilding and automobiles. In shipbuilding, South Korea’s competitiveness index fell by 0.262, while the index for CPTPP member countries rose by 0.125, creating the widest gap between the two sides among the 15 manufacturing sectors analyzed. In the automotive sector, products with declining competitiveness accounted for 56.3% of exports, indicating a weakening position in the regional market. At the product level, the RSCA index for electric vehicles fell from 0.821 before the pact took effect to 0.498 afterward. The index for passenger cars with engine displacements of 1,500cc to 3,000cc dropped from 0.079 to -0.044, turning negative. Para-xylene fell from 0.763 to 0.020, while the index for oil tankers declined from 0.861 to 0.685. Memory semiconductors and other integrated circuits also recorded modest declines but continued to maintain relatively high levels of competitiveness. In the automotive sector, South Korea’s lack of a free trade agreement (FTA) with Mexico is cited as a key factor behind the decline. For automotive products whose competitiveness index fell in South Korea, Mexico’s index rose by 0.312, while the index for the other 10 CPTPP member countries, excluding Mexico, declined by 0.042. Mexico began imposing tariffs of up to 50% on certain products from countries without FTAs in January this year, putting further pressure on the price competitiveness of South Korean goods. Notably, 32.2% of the products that lost competitiveness in CPTPP markets maintained or improved their competitiveness in markets outside the bloc. The median decline in the competitiveness index was also much larger within CPTPP markets, at -0.183, than outside the bloc, at -0.035. These findings suggest that changes in the trade environment associated with the CPTPP have contributed significantly to the decline, rather than the figures reflecting a broad deterioration in South Korea’s manufacturing capabilities. KIET warned that the longer South Korea remains outside the CPTPP, the wider the gap in tariff treatment and market access conditions between South Korea and member countries could become. However, the institute also noted that factors beyond the agreement, including China’s expanding production capacity and changes in industry conditions, have played a role. It said South Korea urgently needs to improve trade relations with Mexico and closely monitor products whose competitiveness has declined, regardless of whether the country ultimately joins the CPTPP. The government remains cautious about pursuing CPTPP membership. President Lee Jae-myung has instructed officials not to submit an application to join the pact this year, emphasizing the need for sufficient dialogue with farmers and fishers and efforts to rebuild trust with these groups. Developing separate measures to address the widening competitiveness gap in regional markets is therefore expected to be a key challenge for South Korea’s trade policy.