China Economy

Beijing in push for free trade deal with Japan, South Korea

Talks finally open with Japan and South Korea on historic deal that could counter US initiatives, but tensions between territorial rivals persist

PUBLISHED : Wednesday, 27 March, 2013, 12:00am
UPDATED : Wednesday, 27 March, 2013, 5:40am

Long-awaited talks on a free trade deal involving China, Japan and South Korea opened yesterday. And while tensions, rivalries and suspicions cloud their relations, Beijing is keen to counter US initiatives in the region.

Washington's push for a Trans-Pacific Partnership (TPP) has so far excluded China.

"To strengthen its economic ties and counter the US-initiated TPP, China is eager to push the regional free trade agreement with Japan and South Korea, and the ongoing talks on the China-Asean Free Trade Area," said Shi Yinhong of Renmin University.

The idea of a trilateral free trade agreement has been on the table for years. With all three countries under new leadership, officials hope they can move beyond damaging territorial disputes that have dogged relations for decades.

China, Japan and South Korea are now the largest, second-largest and fourth-largest economies in Asia, with trade volume between them totalling US$690 billion in 2011.

Analysts in Japan said the biggest winner of a trade deal would be South Korea, while Japan was taking part largely to avoid increasing regional tensions.

New Japanese Prime Minister Shinzo Abe also announced earlier this month that his country would be participating in TPP negotiations with Washington.

Noriko Hama, a professor of economics at Kyoto's Doshisha University, said of a new three-way trade deal: "I don't think it will be of much benefit to Japan, but the difficulty for this government is that it has to be seen to be taking part, irrespective of whether it is in our best interests.

"To turn our back on these talks would send the wrong image to China and South Korea that Japan is totally on the side of the US."

China and Japan are arguing about sovereignty over an archipelago in the East China Sea, while Japan and South Korea have a historic dispute over the ownership of several islands.

Tokyo is also focusing on Europe. On Monday it agreed to open talks with the European Union on a trade pact that could come into effect next year.

Meanwhile, both Seoul and Tokyo could face intense domestic lobbying from sectors wary of a flood of cheap Chinese imports.

But Beijing is upbeat about a pact. Xinhua said it could lift China's GDP by up to 2.9 per cent, Japan's by 0.5 per cent and South Korea's by 3.1 per cent.

South Korean officials were quick to dampen expectations, casting the opening talks between trade ministers in Seoul as "meetings about meetings".

The first round would "involve no practical negotiations", one official said. He added: "It will cover broad matters such as the scope, agenda and procedure for further negotiations."

But an agreement on a fully fledged pact may not come easy.

"There are all sorts of things that could derail any agreement," Professor Hama said, referring to China's refusal in 2010 to release rare earth metals to Japan and other countries after a diplomatic spat stemming from an incident with Japan in the East China Sea.

"Something like that again would jeopardise whatever they agree to. It looks to me as if Mr Abe is walking a tightrope and for not very good reasons other than that Japan has to be there."

Talks are being held in Seoul until tomorrow, after which they will move to China followed by a third round in Japan.

Additional reporting by Agence France-Presse in Seoul