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The Trump administration’s aggressive tariff policies are compelling countries around the world to diversify their trade portfolios and rethink their economic relationships with the United States. One promising avenue should be seized by two of the United States’ most important trading partners: The European Union and South Korea should overcome their misgivings and join the Comprehensive and Progressive Trans-Pacific Partnership (CPTPP).
The CPTPP holds promise as a standard-bearer that can carry the torch of global trade. Negotiated during President Barack Obama’s time in office, it harbors 12 member countries. Several more have applied to join, though President Donald Trump pulled the United States out upon taking office in 2017. The pact’s development of new rules and standards, also in the areas of supply chain resilience, and green and digital trade, will be key for the future.
A majority of the world´s countries still believe in the value of the multilateral system with rules, norms, and predictability, and have benefited from these qualities. This path must be continued, even if the United States pursues an America First policy. The European Union’s long and close relationship with the United States has security, political, economic, and cultural dimensions. The transatlantic trade of $1.6 trillion a year sustains more than 16 million US jobs. Yet the European Union was subjected to the 20 percent so-called reciprocal tariffs that the United States announced on April 2 before issuing a general 90-day pause on April 9. But almost 80 percent of the European Union’s total trade is with partners other than the United States, and Europe has more than 45 trade agreements with 75 countries.
South Korea, a staunch US military ally throughout the Korean and Vietnam wars, is the United States' sixth largest trading partner. Under the 13-year-old Korea-US Free Trade Agreement, South Korea’s average preferential tariff rate to the United States is 0.7 percent, and all US manufacturing exports to South Korea are subject to zero tariffs. Yet South Korea was slapped with 25 percent reciprocal tariffs in addition to the 25 percent steel and 25 percent automobile tariffs that also hit Europe. South Korean companies have invested $160 billion in the United States since the first Trump administration, making them the biggest source of greenfield investment, and they are eager to do more to help the United States rebuild manufacturing sectors in shipbuilding, semiconductors, electric vehicles and batteries, among others. But the US administration’s actions jeopardize their common interests and objectives.
Faced with the Trump administration’s actions, Europe and South Korea need to look elsewhere, including in the Global South, to diversify their trade. The CPTPP offers that opportunity. Its membership comprises Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore, the United Kingdom, and Vietnam—accounting for $16 trillion in economic output, around 15 percent of global trade.
The European Union, however, has been reluctant to formally apply to join the CPTPP, arguing that it already has bilateral trade agreements with most of the member countries that go further in trade liberalization, and that joining would jeopardize efforts to strengthen global agreements under the World Trade Organization (WTO). The European Commission, which negotiates trade on behalf of the bloc, has also been uncomfortable about joining an agreement that Europe has not been active in forming.
South Korea came close to starting a formal accession process to the CPTPP in 2022, but its interest waned because of protests from the farm sector and other interest groups as well as diplomatic and economic tensions with Japan, a CPTPP member. South Korea already has market access to all the member countries with bilateral trade agreements, except for Mexico, making it less urgent to pursue the CPTPP.
Ursula von der Leyen, president of the European Commission, has recently spoken about closer cooperation and a rapprochement with the CPTPP. In June, South Korea will have a new president with a mandate to prove that “Korea is back” after the political turmoil of the last few months triggered by the failed martial law incident. The CPTPP could be a great occasion for the new Korean leadership to join with like-minded countries to strengthen the rules-based international trade order.
If the 12 countries of CPTPP and the 27 countries of the European Union along with South Korea join forces, they will account for over 30 percent of global GDP and can reach a critical mass to advance global trade while aligning their interests and proving that in a stormy world, you need friends and allies.
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This publication does not include a replication package.
