CPTPP Before and After: Competitiveness Declines for 5 in 10 Korean Exports

KIET Analysis
Competitiveness declined for 2,474 products and rose for 2,711
Member countries saw competitiveness indicators rise across all 15 manufacturing sectors
Tariff differences due to non-membership... Focus on the Mexican market

Since the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) took effect, nearly half of South Korean export products in the region have seen their competitiveness indicators decline, a study has found. The competitiveness gap with CPTPP member countries widened most sharply in shipbuilding, while member countries gained a marked competitive edge in Mexico's automotive market. Differences in market access conditions, including tariffs, resulting from South Korea's non-membership in the CPTPP may have affected the competitive environment for South Korean exports.

According to a report titled "Analysis of South Korea's Competitiveness Before and After the CPTPP Took Effect," released on Oct. 14 by the Korea Institute for Industrial Economics & Trade (KIET), the competitiveness indicators of 2,474 of the 5,185 products analyzed declined in CPTPP markets compared with before the agreement took effect, accounting for 47.7% of the total. By contrast, the indicators rose for 2,711 products, or 52.3%.

The institute compared the pre-CPTPP period of 2012-2018 with the post-CPTPP period of 2021-2024, excluding 2019-2020, when the impact of COVID-19 was substantial. Competitiveness was measured using the symmetric revealed comparative advantage (RSCA) index, which indicates the extent to which a product has a comparative advantage in a particular market. The index ranges from -1 to 1, with higher values indicating greater relative competitiveness.

CPTPP member countries, by contrast, improved their competitiveness in products for which South Korea's competitiveness declined. An analysis of the 2,474 products with declining competitiveness, grouped into 15 manufacturing sectors, found that the RSCA index of CPTPP member countries rose in all 15 sectors for those same products.

South Korea's competitiveness fell most sharply in nonmetallic mineral products, with a decline of 0.296, followed by shipbuilding (-0.262), displays (-0.230), and automobiles (-0.199). In shipbuilding in particular, the competitiveness indicator for CPTPP member countries rose by 0.125 over the same period, making it the sector in which the gap between South Korea and member countries widened the most.

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However, it is difficult to attribute the decline in the competitiveness of South Korean exports solely to the CPTPP's entry into force. Of the 2,474 products that lost competitiveness in CPTPP markets, 796, or 32.2%, maintained or improved their competitiveness in markets outside the CPTPP. The median decline in competitiveness was also -0.183 in CPTPP markets, compared with just -0.035 in non-member markets. KIET said it was difficult to attribute the decline to the CPTPP alone, as the analysis focused exclusively on products that lost competitiveness in CPTPP markets.

Mexico was identified as a factor affecting the automotive sector. For automotive products that lost competitiveness, the competitiveness indicator for the 11 CPTPP member countries changed by 0.047, but the figure reached 0.312 when Mexico alone was considered. By contrast, the indicator was -0.042 for the other 10 countries, excluding Mexico.

In particular, South Korea's competitiveness indicators within the CPTPP region declined for all three major automotive product categories: passenger cars with engine capacities of 1,000-1,500 cc, passenger cars with engine capacities of 1,500-3,000 cc, and electric vehicles. KIET said one possible factor was that South Korea has not concluded a free trade agreement (FTA) with Mexico, resulting in differences in tariff conditions.

There were also significant differences among major export products. The RSCA for memory semiconductors fell from 0.4002 before the agreement took effect to 0.3815 afterward, while that for other integrated circuits declined from 0.5821 to 0.5055. Both, however, remained relatively high.

By contrast, the RSCA for electric vehicles fell from 0.8214 to 0.4983, while that for passenger cars with engine capacities of 1,500-3,000 cc turned negative, dropping from 0.0788 to -0.0440. The index for passenger cars with engine capacities of 1,000-1,500 cc also fell from 0.2629 to -0.0259. Paraxylene plunged from 0.7625 to 0.0195, the largest decline among major products. The index for oil tankers also fell from 0.8607 to 0.6854.

KIET said South Korea's position in regional markets could change if the country remains outside the CPTPP. It forecast that this could increase pressure to narrow the gaps in market access conditions, including tariffs, between South Korea and CPTPP member countries. KIET advised, "It is necessary to monitor changes in the competitiveness of products with declining indicators in CPTPP markets and, from a regional perspective, pay close attention to changes in trade conditions with Mexico."

This content was produced with the assistance of AI translation services.