Anticipated impacts and implications of a Korea-Japan FTA

The need for a Free Trade Agreement (FTA) between Japan and South Korea as a proactive response to challenges in the global trade environment, including rising protectionism and the realignment of global value and supply chains, has never been more evident. The Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) is expected to serve as a benchmark for FTA negotiations, making it necessary to analyze how bilateral trade structures would change under a CPTPP-level agreement. An FTA modeled on the CPTPP would accelerate the elimination of existing bilateral import tariffs, which are currently being phased out gradually. From Korea’s perspective, eliminating tariffs on imports of Japanese petrochemicals, electronics, and automobiles could drive increased imports of these goods. However, lower Japanese tariffs on Korean exports such as petrochemicals, plastics, and metals are not likely to generate substantial export growth for Korea, making it essential that Korea prepare for the potential negative impacts of a wider trade deficit with Japan. The benefits of an FTA must therefore be assessed holistically, looking beyond the simple metric of the trade balance. Rather than being treated as a standalone measure, the FTA should be understood as part of a broader policy package designed to prevent and manage economic friction while ensuring stable cooperation on key emerging trade issues.