On November 15, 2020, after eight years of negotiation, South Korean officials signed the Regional Comprehensive Economic Partnership (RCEP), which establishes a broad-ranging free trade agreement (FTA) among 15 trading partners in Asia and Oceania: the 10 members of the Association of Southeast Asian Nations (ASEAN)—Brunei Darussalam, Cambodia, Indonesia, Laos, Malaysia, Myanmar, the Philippines, Singapore, Thailand, and Vietnam—plus Japan, China, South Korea, Australia, and New Zealand. For Korea, the pact supplements and upgrades Korea’s existing bilateral and regional FTAs and establishes new bilateral trade commitments with Japan, but it leaves untouched key barriers restricting Korea’s trade with China and Japan.

RCEP is the world’s largest FTA in terms of its aggregate output and population: RCEP countries account for 31 percent of global GDP and are home to 2.3 billion people. But it is not the most comprehensive of Korea’s FTAs: Trade liberalization is incomplete and incremental; many important areas are not subject to RCEP obligations; and exceptions to tariff reforms affecting bilateral trade between China, Japan, and Korea hollow out the impact of the free trade commitments with Korea’s two largest trading partners in Asia. Ongoing FTA talks between China, Japan, and Korea are meant to break down barriers to trade and supplement the RCEP results, but the RCEP experience cautions that it will be difficult to negotiate Chinese commitments to do so.

RCEP also is important from a political economy perspective. It demonstrates that Asian trading nations are unwilling to decouple from the Chinese economy and instead want to strengthen ties with the region’s predominant economy. Given increasing US pressure to sanction China for commercial and national security reasons, Korea and other large US trading partners in Asia face the delicate task of balancing growing integration with China and continuing cooperation and partnership with the United States.

In many respects, China is the big winner from RCEP, negotiating a deal that is generous to members of the Association of Southeast Asian Nations (ASEAN) but scrimpy regarding Chinese concessions to Korea and Japan. China offered significant market access to ASEAN exporters and accepted common trading rules, including rules of origin, that will deepen China-centric supply chains in the region. Korean exporters and investors also will benefit from closer integration with ASEAN; however, continuing barriers to the Chinese market will undercut some of their potential gains, especially in the farm and auto sectors.

This assessment does not mean that Korea should not ratify the RCEP but rather that its benefits are limited and need to be supplemented by more comprehensive agreements that deepen Korea’s ties to strategic allies in the Asia-Pacific region. The Korean Ministry of Economy and Finance (MOEF) recognized the need to move forward with RCEP as well as other major trade accords in a policy statement issued on January 11, 2021. It set ten goals for Korea’s international economic relations, including participating in megaregional FTAs such as RCEP and the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), which entered into force at the end of 2018.1 To complement RCEP, Korea should move forward with two other trade negotiating priorities, membership in the CPTPP and upgrading the Korea-US FTA (KORUS), the latter aimed at encouraging US reengagement in the Asia-Pacific integration pact. Korean trade negotiators still have much work left to do.