In today's challenging global trade environment, the transpacific trade pact known as the Comprehensive and Progressive Trans-Pacific Partnership (CPTPP) offers a strategic opportunity for both the European Union and South Korea. As the Trump administration implements aggressive tariff policies, joining this influential CPTPP could provide crucial trade diversification for these key economies.
Why the Transpacific Trade Pact Matters Now
The CPTPP has emerged as the leading following the United States' withdrawal in 2017. Originally negotiated during the Obama administration, this extensive transpacific trade pact now encompasses 12 member nations and continues to attract new applicants. The agreement's forward-looking approach to supply chain resilience, green commerce, and digital trade makes it particularly valuable in today's economic landscape.
While the United States pursues "America First" policies, most countries globally still value a rules-based multilateral trading system. The CPTPP represents a commitment to trade predictability, established norms, and mutually beneficial rules—principles that have historically driven economic growth worldwide.
EU-US Relations Under Strain
Despite the EU's deep $1.6 trillion annual trade relationship with the United States, supporting over 16 million American jobs, recent tariff tensions have strained this partnership. The European Union faced 20% "reciprocal tariffs" before a temporary 90-day pause was issued in April. This unpredictability highlights why the EU should consider the transpacific trade pact as a strategic alternative.
Importantly, nearly 80% of EU trade occurs with partners other than the United States, and Europe maintains trade agreements with 75 countries across 45 different arrangements. The CPTPP represents a natural extension of this diversification strategy.
South Korea's Need for Trade Alternatives
South Korea, despite being the United States' sixth-largest trading partner and a long-standing military ally, has similarly faced punitive tariffs—25% "reciprocal tariffs" plus additional 25% steel and automobile tariffs. This treatment comes despite South Korean companies investing $160 billion in the United States since Trump's first administration, making them the largest source of greenfield investment.
The transpacific trade pact offers South Korea an opportunity to safeguard its economic interests while maintaining its commitment to rules-based international trade.
Current Hesitations and Changing Perspectives
The European Union has hesitated to formally apply to the CPTPP, citing existing bilateral agreements with most member countries and concerns about undermining World Trade Organization efforts. The European Commission has also expressed discomfort about joining an agreement it didn't help create.
South Korea nearly initiated formal accession to the transpacific trade pact in 2022 but stepped back due to agricultural sector protests, interest group opposition, and tensions with Japan (an existing CPTPP member). With bilateral agreements already in place with all members except Mexico, the urgency seemed reduced.
Strategic Opportunity on the Horizon
Recent developments suggest a shifting perspective. European Commission President Ursula von der Leyen has indicated interest in closer cooperation with the transpacific trade pact. Meanwhile, South Korea's upcoming presidential transition presents an opportunity for new leadership to demonstrate that "Korea is back" on the global stage through strategic trade initiatives like joining the CPTPP.
The Potential Impact
If the current 12 countries of the CPTPP, the 27 EU nations, and South Korea joined forces, they would represent over 30% of global GDP. This critical mass could effectively advance global trade while strengthening international alliances during uncertain times.
As global trade tensions continue, the Trans-Pacific Trade pact offers a strategic pathway for both the European Union and South Korea to protect their economic interests while championing rules-based international commerce.
Conclusion
The CPTPP presents a timely opportunity for both the European Union and South Korea to diversify their trade relationships and strengthen their positions in the global economy. By joining the CPTPP, these key economic powers can help ensure that international trade continues to follow established rules and norms, even as the United States pursues more protectionist policies.
In today's global environment, the transpacific trade pact serves as a reminder that international cooperation remains vital for economic prosperity and stability. As the article of our Breaking News aptly notes, "in a stormy world, you need friends and allies." H2T Finance will continue to provide the latest updates on the CPTPP, helping forex investors stay informed and adjust their plans and forecasts on time.
