China, Japan and South Korea aim to speed up talks on free-trade agreement to counter US tariffs

Global turbulence adds incentive to strike a deal, but the trio still have differing priorities to reconcile after 13 rounds of talks since 2012 with little progress

PUBLISHED : Saturday, 22 September, 2018, 1:03am
UPDATED : Saturday, 22 September, 2018, 3:19am

Officials from China, Japan and South Korea are calling for further efforts to accelerate talks about a free-trade agreement between the three northeast Asian economies in the face of escalating trade pressures from the US.

While a quicker negotiation would send a firm signal about the commitment of the three countries to deepen economic cooperation in response to the uncertainties in global trade, experts say that diverging interests remain.

China, locked in a mounting trade war with the US, may seek an agreement more urgently, while Japan and South Korea, dissatisfied at Beijing’s reluctance to lower market barriers, may be more cautious in looking for a more substantial and progressive deal.

Yang Zhengwei, a deputy director general at the Chinese Ministry of Commerce, told the three countries’ fifth free-trade agreement (FTA) forum in Beijing on Wednesday that China was preparing for the next round of talks between the nations.

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“Speeding up FTA negotiations would also benefit the three countries together in the face of threats from unilateralism and protectionism,” said Yang, who is in charge of China’s FTA talks.

“As the promoters of free trade, joint efforts to push forward to build a China-Japan-South Korea FTA as well as the Regional Comprehensive Economic Partnership (RCEP) would also help to jointly resist the impact of turbulence in external markets.”

The RCEP is a 16-nation pact covering the 10 members of the Association of Southeast Asian Nations, along with China, Japan, Australia, India, New Zealand and South Korea. Negotiations for their deal are expected to be completed by the end of the year.

At the same forum, Hayashi Kazutaka, a councillor at the Japanese embassy in Beijing, reiterated a commitment made in Tokyo in May, when leaders of China, Japan and South Korea pledged to accelerate negotiation on a trilateral FTA.

Kazutaka said an agreement would serve the common interests of the three countries, especially when the global economy was under threat from protectionism.

“Japan would like to make further efforts to advance negotiations together with counterparts from China and [South Korea],” he said.

Kim Jeongil, director general of the FTA policy bureau at South Korea’s Ministry of Trade, Industry and Energy, admitted at the forum that negotiations had progressed slowly, attributing it to the countries’ “competitive industrial structures”, but stressed the importance of free trade.

“To further accelerate an FTA, the three countries should exercise greater flexibility and creativity than before on the major issues, such as goods, services and investment,” Kim said.

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“On trade in particular, it is very important to develop a mentality to bring about fair contributions and a balance of interests, reflecting differences among the three countries in their trade structures.”

China has stepped up efforts to build a global trade network with greater use of FTAs to diversify its markets and counter protectionism. So far China has 17 FTAs with 25 countries and regions, and is in talks over 12 new or upgraded FTA deals.

Such efforts have become more evident in the past two years, especially after US President Donald Trump, citing the huge trade deficit with China, adopted an aggressive trade policy and began imposing punitive tariffs on Chinese goods to push the world’s second largest economy to lower its market barriers.

Zhao Jinping, a researcher at the Development Research Centre of the State Council, said there was a broad consensus in China in favour of accelerating FTA talks.

“China would take more proactive measures in pushing ahead negotiation of a China-Japan-South Korea FTA, and would play a more important role,” Zhao said.

Despite relatively strong economic ties among the three countries, which together account for 20 per cent of global GDP, establishing a northeast Asian economic bloc remains a tall order.

“As allies to the US, South Korea and Japan have many policies that are in line with the US, which now sees China as a strategic rival,” said Song Hong, a senior fellow at Chinese Academy of Social Science.

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Major differences remain surrounding market openness. “China seems not fully ready to put aside concerns about opening its good trade, services and investment, while Japan and South Korea may be sensitive about opening sectors such as agriculture-related areas,” Zhao said.

Both Zhao and Song said the three governments should be more flexible and pragmatic in future talks and take a “phased approach”, agreeing a deal on trade of goods, in which the trio have more common interests, before moving on to services and investment.

But Japan and South Korea want more than that.

Tokyo, which has been the front-runner in pushing for a revival of the original 12-nation Trans-Pacific Partnership trade deal after Trump’s withdrawal from it, would prefer to conclude the RCEP first.

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“The China-Japan-South Korea FTA has to be a higher level of free trade than RCEP, otherwise there’s no meaning in agreeing the trilateral FTA,” said Tamura Akihiko, a professor at the National Graduate Institute for Policy Studies in Tokyo. “At the moment, we should focus on RCEP and the [China, Japan and South Korea] process should aim at a higher level.”

Dr Jeong Hyung-Gon, a senior research fellow at the Korea Institute for International Economic Policy, agreed that an FTA for the three economies should have a higher standard, otherwise it would be a “diplomatic show”.

“We have to consider a more advanced agreement,” Jeong said. “South Korea has concluded an FTA with China, but it is not so effective, because local governments have different rules that central government cannot control. We have to have rule-based free trade.”

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After nine years of feasibility study, the three countries’ long-anticipated FTA negotiations began in 2012, but 13 rounds of talks have been held with little progress, largely because of political tensions triggered by territorial disputes, and historic grievances between China and Japan as well as Japan and South Korea.

Relations between China and South Korea also became complicated over the past two years by the fallout of Seoul’s decision in 2016 to host a US-backed anti-missile system that Beijing sees as a security threat on its doorstep.

But new prospects for an agreement emerged in May when leaders from China, Japan and South Korea met in Tokyo and pledged to speed up negotiation for a “comprehensive, high-level and reciprocal” FTA deal.