Manufacturing production ripple effect to rise 6.3–6.7 trillion won annually

Agriculture to lose 710 billion won; fisheries 81.7 billion won; forestry 60.6 billion won

Government releases preliminary economic impact analysis early to gather public input

Photo not related to article [Getty Images Bank]
Photo not related to article [Getty Images Bank]

If South Korea joins the Comprehensive and Progressive Agreement for Trans-Pacific Partnership, agricultural, forestry and fishery production is projected to fall by an average of around 850 billion won a year over the 15 years following the agreement's entry into force. At the same time, the manufacturing-based production ripple effect is forecast to rise by up to 6.7 trillion won ($4.96 billion) annually on average, and real GDP is expected to be 0.38 percentage points higher 10 years after entry into force than it would be without membership.

The ministries of Trade, Industry and Energy; Agriculture, Food and Rural Affairs; Oceans and Fisheries; and SMEs and Startups, along with the Korea Forest Service, released preliminary findings Tuesday from an economic impact analysis on CPTPP accession conducted with affiliated research institutions.

The analysis updates earlier assessments to reflect the expansion of CPTPP membership since 2021, shifts in major economies' trade policies, and changes in domestic and international industrial and trade conditions. It covers macroeconomic effects as well as sector-by-sector impacts on manufacturing, small and medium-sized enterprises, agriculture, fisheries and forestry.

The table below summarizes the projected economic effects of CPTPP accession. The 0.38 percentage-point GDP figure represents a cumulative effect over 10 years after entry into force, not an annual increase in the growth rate. The manufacturing production ripple effect refers to the output impact — across manufacturing and its upstream and downstream industries — triggered by tariff changes on manufactured goods. All figures are preliminary projections based on set assumptions; actual outcomes may vary depending on the results of future accession negotiations and market conditions.

The key projected figures are as follows: real GDP would rise 0.38 percentage points compared with non-membership, measured 10 years after entry into force. The manufacturing-based production ripple effect would increase by an annual average of 6.3 trillion to 6.7 trillion won over 15 years after entry into force, of which the SME-based portion would account for 1.1 trillion to 1.2 trillion won. Agricultural production would decline by an annual average of 710 billion won, fishery production by 81.7 billion won, and forestry production by 60.6 billion won — all measured over the same 15-year period — for a combined agri-forestry-fishery loss of 852.3 billion won per year.

According to an analysis by the Korea Institute for International Economic Policy, South Korea's real GDP would be 0.38 percentage points higher 10 years after the agreement takes effect than it would be without accession. The figure represents the cumulative effect over the decade following entry into force, not a recurring annual boost to the GDP growth rate.

Manufacturing is also expected to benefit. The Korea Institute for Industrial Economics and Trade projected that, applying tariff changes from market opening, the manufacturing-based production ripple effect would rise by an annual average of 6.3 trillion to 6.7 trillion won over the 15 years after entry into force. Of that, the SME-based production ripple effect was estimated at 1.1 trillion to 1.2 trillion won per year.

The agri-forestry-fishery sector, however, faces projected output declines. The Korea Rural Economic Institute forecast that agricultural production would fall by an annual average of 710 billion won and forestry production by 60.6 billion won over the 15 years following entry into force. The Korea Maritime Institute projected fishery production would shrink by an annual average of 81.7 billion won. Combined across the three sectors, the annual average decline amounts to 852.3 billion won.

The figures are preliminary projections derived from economic modeling under set assumptions. Actual impacts could differ depending on the level of market opening negotiated for individual product categories and on domestic and international market conditions if accession talks proceed.

The government's decision to release the economic impact figures follows the start of a broader public debate over whether to pursue CPTPP membership. At an inter-ministerial meeting on external economic affairs on Aug. 27, the government decided to gather input from stakeholders without prejudging whether to join the agreement. At the time, officials said specific figures had not been finalized because the economic impact analysis was still under way.

The government has typically released economic feasibility analyses for trade agreements at public hearings, but this time it decided to publish the preliminary findings as soon as the initial analysis was complete — ahead of any formal hearing — in order to inform the public and stakeholders about the economic and industrial implications and to solicit their views.

The government plans to present the findings and gather input from various sectors through briefings and roundtable discussions. It also intends to listen to concerns and on-the-ground difficulties that are hard to quantify through economic modeling, and to incorporate that feedback into its future review process.


adastra@heraldcorp.com