Container ships are docked as shipping containers sit in the Busan Port Terminal in this file photo taken in Busan, on Oct. 13, 2020. (Bloomberg)
Korean businesses have pinned high hopes on the imminent launch of a new US-led economic initiative, called the Indo-Pacific Economic Framework or IPEF, in tackling supply chain disruptions and improving soured ties with Japan.
But they remained cautious about the new platform’s anti-Chinese undertones.
South Korea’s envisioned entry into the IPEF is expected to top the agenda during summit talks between Presidents Yoon Suk-yeol and Joe Biden in Seoul on Saturday.
The IPEF aims to enhance America’s partnership with countries in the Indo-Pacific region on a wide range of areas such as digital trade, supply chain resilience, infrastructure and green technology.
Biden has sought to pour resources into the region, which is home to top players in the fields of chipmaking and related industries, in a push to reshape global supply chains and effectively counter China’s growing influence there.
The US president is highly likely to declare the official launch of the new platform during his Asia trip this week. He is scheduled to arrive in Seoul on Friday for a three-day state visit before heading to Japan for a summit on May 23-24.
South Korea is widely expected to be included in the group along with Japan, Singapore, Australia and New Zealand.
According to a report by the Korea International Trade Association, the region, excluding China, is a huge market that makes up 44.8 percent of the global GDP and 35.3 percent of trade volume.
Korea alone has seen a steady growth in trade volume in the region. Last year, the region made up 47.1 percent of the nation’s total export, up 5.3 percent from 41.8 percent in 2015. During the same period, China’s portion has remained almost the same at 31 percent.
The report said regional supply chains have already been established, citing semiconductors.
Korea is a top player in terms of memory chips, while Taiwan is a market leader in the foundry business. Japan is a key supplier of equipment and materials for chips. ASEAN countries are considered the key production base for smartphones and other electronics products.
In a separate survey conducted by the Korea Chamber of Commerce and Industry last month, almost 80 percent of its members responded in favor of joining the IPEF.
They cited the platform’s effectiveness in tackling supply chain disruptions and bolstering responsiveness to calls for decarbonization. Some expect that it would also play a role in improving the soured relationship with Japan.
The IPEF faces several headwinds.
Ahead of the November midterm election in the US, Republicans have opposed Biden’s new initiative, saying the nonbinding alliance does little to expand accessibility to the market. Depending on the election results, the president may lose momentum to push ahead with it.
Another issue is the expansion of the alliance. In order to gain momentum, it would need more ASEAN countries to join but the initiative is likely to be received with hesitancy in Taiwan, given its strained relations with China.
The KITA report, however, downplayed the possibility that the new platform would further deepen the US-China rivalry, saying the US has embraced a more cautious approach to tackling China issues more recently.
“The US has also repeated that it is not enforcing members to decide between the US and China,” said Park Seon-min, a KITA analyst. “Korea also should seek a practical approach that maximizes national interest.”
The Korean government has also started discussions on joining a separate alliance led by China, called the Comprehensive Progressive Agreement for Trans-Pacific Partnership.
“Because it is an early stage, we are closely watching the progress,” an official at a Korean company said on condition of anonymity. “The government should handle the issue carefully not to cause damage to companies doing business with China.”
By Lee Ji-yoon (email@example.com)