South Korea's automobiles and ships have lost export competitiveness within the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) market relative to member countries since the pact took effect.
Competitiveness declined in 46 of 90 detailed automobile product lines, according to a Korea Institute for Industrial Economics and Trade report released on the 14th that compared 2012-2018, before the CPTPP took effect, with 2021-2024, after it did. Those 46 lines accounted for 56.3% of Korea's automobile exports to CPTPP members. The institute excluded 2019 and 2020 from the analysis because of the COVID-19 pandemic.
The institute used the revealed symmetric comparative advantage (RSCA) index to compare how competitive Korea and CPTPP members are in specific products within the CPTPP market. The index measures the share a given product holds in Korea's exports to CPTPP members against the share that product holds in trade among CPTPP members themselves. A higher reading indicates stronger relative export competitiveness in that market.
For the automobile lines where competitiveness fell, Korea's RSCA dropped an average of 0.199 from before the pact took effect. The 11 CPTPP members, by contrast, saw their competitiveness in the same lines rise 0.048. Declines also showed up in Korea's main export categories, including passenger cars with engines of 1,000 to 1,500 cc, those of 1,500 to 3,000 cc, and electric vehicles.
Mexico weighed heavily on the automobile results. Based on the lines where Korean competitiveness fell, Mexico's RSCA rose 0.312. The other 10 members, excluding Mexico, saw theirs fall 0.042. That means much of the overall gain in automobile competitiveness among CPTPP members came from Mexico.
Korea has no preferential trade agreement with Mexico, leaving it at a tariff disadvantage against CPTPP members. The institute found that differences in tariff terms affected competitive conditions for three major automobile lines — the two passenger-car categories by engine displacement and electric vehicles. That gap could widen further after Mexico began applying tariffs of 5% to 50% in January on some products from countries without a free trade agreement.
The weakening was also pronounced in shipbuilding. Competitiveness fell in 15 of 35 detailed product lines, which accounted for 43.9% of Korea's shipbuilding exports to CPTPP members. Korea's RSCA in those lines fell an average of 0.262 while that of CPTPP members rose 0.125. The gap between Korea and member countries was the widest in shipbuilding among the 15 manufacturing industries the institute analyzed.
Beyond automobiles and shipbuilding, Korea also lost competitiveness in steel, general machinery and household goods while CPTPP members gained. Of the 2,474 product lines where Korea's competitiveness within the CPTPP declined, 796, or 32.2%, held steady or improved outside the bloc. The median decline was 0.183 within the CPTPP, larger than the 0.035 recorded in markets outside it.
That pattern is difficult to explain by a broad weakening of Korean manufacturing alone. As CPTPP members lowered tariffs and market access barriers among themselves, Korea, a non-member, received no such benefit, and its relative competitive position may have deteriorated as a result.
Still, non-membership cannot be identified as the direct cause of the decline. Factors outside the agreement also affect export competitiveness, including China's capacity expansion, shifts in industry conditions and the competitiveness of individual industries. The institute said multiple factors are reflected in the changes in competitiveness within the CPTPP market, while cautioning that a prolonged period outside the bloc could further erode the position of Korean products there.
The government has slowed its push to join the pact. President Lee Jae-myung recently instructed officials not to apply this year, saying sufficient dialogue with farmers and fishermen and the restoration of trust should come first.