Regional Comprehensive Economic Partnership (RCEP) (Yonhap)
Rebuilding multilateralism and overcoming protectionism have been some of the most urgent tasks facing South Korea, which is heavily reliant on exports for its economy, amid the growing trade row between the United States and China along with an unprecedented pandemic.
The Regional Comprehensive Economic Partnership (RCEP), signed by South Korean President Moon Jae-in and his counterparts on Sunday, will help South Korea further boost its outbound shipments.
The China-initiated deal will be officially implemented after winning parliamentary approval from participating states, according to Seoul's trade ministry.
Since 2012, the Association of Southeast Asian Nations (ASEAN), along with its dialogue partners -- South Korea, China, Japan, Australia and New Zealand -- have been seeking to create the mega free trade agreement, which could create an economic bloc accounting for one-third of the world's gross domestic product.
RCEP represents roughly a quarter of global trade and a third of the global population.
The 15-member strong deal originally sought to include India as well, but New Delhi eventually decided not to join the bloc.
Including India would have even paved the way for the countries to create a bloc that includes half of the global population.
"An FTA of such record size will lift uncertainties in the global business environment and promote free trade," the Ministry of Trade, Industry and Energy said in a statement. "This will also help South Korea better cope with the weakened multilateralism and localization of the global value chain."
The ministry pointed out that South Korea's exports to ASEAN, which came to $38.7 billion in 2007, jumped to a whopping $95.1 billion in 2019 on the back of the South Korea-ASEAN FTA, indicating that RCEP could further help Asia's No. 4 economy expand its presence in Southeast Asia.
In terms of economic size, RCEP beats other regional economic blocs such as the United States-Mexico-Canada Agreement (USMCA) and the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTTP).
In 2019, South Korea's exports to the member nations of USMCA came to $89.8 billion, while those to CPTTP reached $126 billion.
They hovered below the $269 billion worth of goods shipped to RCEP nations.
The deal is also significant as it will speed up South Korea's efforts to lower trade barriers amid looming protectionism sparked by the Sino-American economic war coupled with Seoul-Japan trade friction.
The trade row between Washington and Beijing is not likely to end soon, even though US President-elect Joe Biden is widely considered to be more open to free trade compared to the incumbent Donald Trump.
The US may ask Seoul to join the CPTTP in the near future in a move to build its own trade and supply chain network.
South Korea, which depends on the US and China for 40 percent of its exports, has already been making efforts to diversify its trade portfolio and penetrate deeper into Southeast Asian countries.
Seoul and Manila held the fifth round of official negotiations for their FTA in January. Talks with Malaysia have been in progress, and the Comprehensive Economic Partnership Agreement (CEPA) with Indonesia is awaiting an official signing ceremony as well.
More recently, South Korea launched its FTA negotiations with Cambodia.
"South Korea can seek both bilateral and multilateral approaches in global trade along with RCEP and existing FTAs," the Korea Institute for International Economic Policy (KIEP) said in a report.
Another notable aspect of RCEP is that it is the first free trade deal to be signed between South Korea and Japan.
The relationship between the two countries has soured recently after Tokyo abruptly regulated exports of key industrial materials to South Korea last year.
The service sector will also enjoy more barrier-free trade compared to existing FTAs, as RCEP provides South Korean entertainment and gaming firms with more overseas market access.
South Korea, meanwhile, plans to maintain high barriers to protect its vulnerable segments under the mega trade deal.
The Ministry of Agriculture, Food and Rural Affairs said it will especially maintain high tariffs for fresh produce such as rice, peppers, garlic, onions and apples.
The country's total outbound shipments dipped 3.6 percent in October from a year earlier on fewer working days and virus resurgence, snapping the previous month's brief rebound.
South Korea had enjoyed a 4.5 percent rise in its outbound shipments in February, the first on-year rebound in 14 months, before it suffered full-fledged economic fallout from the pandemic.
Exports fell again in March as the number of COVID-19 cases around the globe escalated and the pace of decline further accelerated, plunging 25.5 percent in April and 23.6 percent in May. (Yonhap)