Spotlight: China, Japan, South Korea embracing fresh opportunities to promote FTA process

With the clinching of the China-South Korea free trade agreement (FTA), and fresh opportunities brought by an improved political environment, China, Japan and South Korea should accelerate their negotiations for a trilateral FTA.

In a sign of warming relations, a trilateral summit is expected to take place in early November after a three-year hiatus, providing a fresh but precious opportunity for the three sides to advance their talks for a long-awaited FTA, a three-way treaty that can help bring their advantages into full play, further unleashing economic vitality of the three countries, boosting regional integration and driving world economic growth.

SIGNIFICANCE OF TRILATERAL FTA

During China's week-long National Day holiday on Oct. 1-7, Chinese tourists flocked to Japan, leading to a big boom in the sales volume of Japan's shopping malls, Japanese Nikkei has reported.

"Sales of duty-free products in some Japanese department stores were twice the amount of the same period last year," Nikkei said on its Chinese website. "The slowdown of the Chinese economy that's worrying before did not seem to have a big impact."

Meanwhile, Chinese mainland travelers spent 466 billion yen (3.8 billion U.S. dollars) in the July-September period, out of the 1,000.9 billion yen (8.2 billion dollars) by foreign visitors, Japan National Tourism Agency said. Spending by per Chinese visitor stood at 143,620 yen (1,178 dollars), almost twice the average spending by a foreign tourist.

The surging number of Chinese tourists and their growing buying power, which have pleased Japanese retailers, serve as a microcosm of the increasing economic and trade ties between the two countries.

In fact, China is the largest trading partner of Japan and South Korea, while Japan is China's second largest single-country trading partner and South Korea the third, with their respective trading volume in 2014 totaling at 307.5 and 235.4 billion U.S. dollars, according to China's Ministry of Commerce.

Furthermore, the three countries, whose combined GDP accounts for 20 percent of that of the whole world, constitute one of the three largest economic blocks, along with the European Union (EU) and North America, both of which already have an FTA within themselves.

However, despite the high trade volume they enjoy, trade dependency between the three countries is only 19.4 percent, much lower than the 63.8 percent of the EU and 40.2 percent of the North America, leaving much room for improvement.

Moreover, during the 8th round of FTA talks in September this year, Chinese Vice Commerce Minister Wang Shouwen warned in an interview with China Radio International that taking down trade barriers is critical, particularly given what's been happening in East Asia this year.

"During the first eight months of this year, bilateral trade between China and Japan decreased by almost 11 percent. China-South Korea bilateral trade dropped by close to 5 percent. Trade between Japan and Korea is not that good either," Wang said, noting the importance of the FTA negotiation work.

The planned three-way FTA will expand trilateral and bilateral trade and investment and provide a comprehensive and institutional framework in which a wide range of trilateral cooperation would evolve.

Yang Xiyu, a researcher with the China Institute of International Studies also said "Differences in economic structure bring comparative advantages, which provide huge room for mutually beneficial cooperation."

Virtually, benefits are more than that. Apart from boosting cooperation within the three Northeastern Asian countries, a China-SKorea-Japan FTA marks the starting point of economic integration in Asia as a whole, said Lee Bong-geol, an expert with Korea International Trade Association, noting that's why it requires "a big-picture determination."

BARRIERS TO FTA NEGOTIATIONS

Since their launch in November 2012, the trilateral FTA negotiations have been carried on despite an unfavorable political environment. So far, eight rounds of talks in this regard have been held, with the ninth scheduled for December this year.

However, advancement has been slow and concrete results are yet to be achieved as the three countries haven't moved on to discuss specific tariffs.

Each country has its soft spots that need strict protection, and wants to expand the market share of its strong industries in other countries, Yang said. "That's why negotiations are complex."

Japan's agriculture, for example, is an issue not only in its FTA negotiations with China and South Korea, but also in the Trans-Pacific Partnership negotiation (TPP) with the United States, Yang said.

Experts say China's industrial areas such as iron and steel, petrochemical engineering and automobile production may be affected, while South Korea' s manufacturing industry, especially in such aspects as large machinery and nonferrous metals, is weaker than that of Japan and regarded as a sensitive field.

But political factors pose more barriers than economic calculations to the trilateral FTA negotiations, Lee, the South Korean expert, pointed out.

The high-level trilateral meeting mechanism was suspended in 2012, when China-Japan and South Korea-Japan relations soured due to disputes over historical and territorial issues.

Among others, constant visits by Japanese ministers and lawmakers to the Yasukuni shrine that honors 14 Class-A convicted war criminals from WWII have become a major obstacle for Japan to mend ties with its two closest neighbors of China and South Korea, as both had suffered most from Japan's wartime atrocities.

The bad political atmosphere makes it harder to achieve progress in FTA negotiations, Yang said.

However, despite political and economic barriers, economic and trade circles in each country long for an FTA to promote their economic interaction.

At the 10th China-Northeast Asia Expo held in China' s Jilin Province in September, merchants enthusiastically discussed the China-Japan-South Korea FTA negotiations.

Japanese and South Korean enterprises actively participated in the first China, Japan and ROK Industries Expo, also in September, with 332 companies showing up, accounting for 57.3 percent of the total, South Korea's JoongAng Daily said on its Chinese website.

As cooperation between the three countries is gradually expanding to more fields, the business community in each country has been increasingly demanding an FTA to magnify convenience and advantages, said Secretary-General of the China-Japan-ROK Trilateral Cooperation Secretariat Yang Houlan.

SEIZING OPPORTUNITIES THAT DON'T COME EASILY

China-Japan relations have shown momentum of improvement with the signing of a four-point principled agreement in November 2014, which includes resuming political, diplomatic and security dialogues while acknowledging their different positions on the Diaoyu Islands.

In 2012, Tokyo's unilateral move to "purchase" and "nationalize" part of the Diaoyu Islands, an inherent part of Chinese territory documented and validated in history, seriously strained China-Japan relations.

As an important event on the diplomacy front, a trilateral foreign ministerial meeting was held for the first time in three years in March, during which the three top diplomats expressed their hope that the meeting would see the beginning of a restoration process of the trilateral cooperation mechanism.

"I hope Japan could grasp the opportunity and face up to history in order to unload the historical burden and advance toward the future with its neighbors," Chinese Foreign Minister Wang Yi said.

The ministers also promised to accelerate their trilateral FTA talks, which will undoubtedly be further boosted by the upcoming summit in Seoul.

The renewed meeting will inject a political impetus into the strenuous efforts to build a free trade area, Yang Xiyu said.

In addition, the landmark China-South Korea FTA reached in June is also seen as a boost for a trilateral one.

Under the deal, South Korea will eliminate tariffs on 92 percent of all imports from China within 20 years after its implementation, while China is to abolish tariffs on 91 percent of all imported South Korean goods.

South Korea expects the bilateral FTA to raise its real GDP by 0.95 percentage points and create 53,800 new jobs in the next 10 years.

Junichi Sugawara with the Mizuho Research Institute said Japan should urgently reach an FTA with China and South Korea as the China-South Korea FTA puts Japanese companies in disadvantaged positions when competing against companies in the two countries.

Experts have also said that the trilateral FTA should run parallel with the recently reached TPP deal and the Regional Comprehensive Economic Partnership (RCEP) still under negotiation, and that Japan should value all of them.

"If Japan loses the Japan-China-South Korea FTA and the RCEP because it chooses the TPP, then TPP would become meaningless," Junichi Arai with Japan Center for Economic Research said.

Intensifying economic cooperation with China is the best way for Japan to revive its stalled economy, as some positive factors brought by the "Abenomics" seem exhausted, Kiyoyuki Seguchi, research director of Japanese think tank Canon Institute for Global Studies told Xinhua in April.

Once implemented, a trilateral FTA will bring together a market of more than 1.5 billion people, raising China's GDP by 2.9 percent, Japan's 0.5 percent and South Korea's 3.1 percent, the Financial Times said.

Opportunities between the three countries do not come easily. They should properly handle their differences through negotiations and work for an early conclusion of the FTA talks. Enditem