• Sat
  • Sep 20, 2014
  • Updated: 4:16pm

Welcome step to a free-trade region

PUBLISHED : Monday, 21 May, 2012, 12:00am
UPDATED : Monday, 21 May, 2012, 12:00am

A strong and united Europe has long been pivotal to global growth. Now that the region is clouded by debt and internal division, interest has quickened in harnessing the rise of Asia with new economic partnerships to promote growth. The latest example is the announcement by China, Japan and South Korea - the region's three great trading powers - that they are to launch negotiations on a free-trade agreement. The road ahead is paved with good intentions and potholed with political distrust and trade barriers. The three parties will have to reconcile competing geopolitical and economic interests. Meanwhile, however, Premier Wen Jiabao , Prime Minister Yoshihiko Noda of Japan and President Lee Myung-bak of South Korea have sealed an investment treaty covering taxation, dispute resolution and the like - a step on the way to a free-trade area.

A proposal for a three-way pact has been on the table for a decade. The chill economic winds from Europe are not all that have prompted officials of the three countries to dust it off. It is not long since the US joined a fledgling Pacific partnership that already included Singapore and New Zealand, assumed leadership of it and transformed it into its main regional trade initiative. Ultimately it envisages a transpacific pact that would be the world's biggest multilateral free-trade zone and a platform for economic integration. For that vision to be credible, the first priority must be to get Japan fully on board, given opposition from its powerful farm lobby; and the overriding aim should be to work with Beijing to clear obstacles to China becoming a member. These obstacles include preconditions, such as open sourcing of government procurement, the conduct of state-owned companies and respect for intellectual property rights. All these are points of friction in Sino-US relations but the preconditions are seen as designed to freeze China out and part of efforts to counter its growing regional influence.

According to a feasibility study by China, Japan and South Korea in 2010, the three nations together accounted for nearly 20 per cent of global gross domestic product and 18.5 per cent of exports, making northeast Asia what Wen described as the world's most economically vibrant region. A free-trade deal would unleash its potential and boost economic integration. Both pacts would be good for more regional co-operation and development in light of the question mark over Europe and an unspectacular US recovery from the global financial crisis.

Mainland experts on US affairs have made it clear that China, understandably, will not abide by agreements such as the transpacific pact about which it was not consulted. However, the shift of economic power to Asia and the growing importance of lowering regional trade barriers are reminders of the need for China to undertake another round of economic reforms if it is to maintain sustainable growth.

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