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Japan and South Korea are often perceived as geographically close but psychologically distant countries, with people on both sides loving to hate each other.

Although former South Korean President Kim Dae Jung adopted an unusually pro-Japan posture, bilateral ties have not improved as much as was hoped. Cohosting the World Cup soccer finals last year also yielded fewer than expected positive developments.

This situation may not be drastically altered under the administration of new President Roh Moo Hyun, who was sworn in Tuesday. But some believe ties will improve if both countries embark on a joint project — the creation of a bilateral free-trade agreement.

“We must do it by any means,” said a top official at the Japanese Embassy in Seoul. “Although there will be resistance from each sector . . . an integration of our economies would shore up our competitiveness.”

A Japan-South Korea FTA would create a gigantic market of 170 million consumers and generate a gross domestic product of $5 trillion (around 600 trillion yen).

A study panel comprising government officials, private-sector representatives and scholars from both nations has held four rounds of talks since July to discuss the possible creation of an FTA.

The panel was originally scheduled to submit a report by summer 2004. With China’s meteoric growth increasingly viewed as a threat to both countries, however, many panel members are now willing to bring this step forward, thereby allowing Tokyo and Seoul to launch formal negotiations as soon as possible.

Despite these burgeoning hopes, forging such an arrangement is expected to undergo a rough voyage, as Japan and South Korea are fierce economic competitors, particularly in terms of manufacturing industries.

“What’s in it for both countries to conclude an FTA?” asked Jiro Iokibe, senior analyst at the Seoul branch of Daiwa Securities SMBC Co. “They are the biggest rivals to each other, and it’s hard to set rules” to create a common market.

It is true that Japan and South Korea, once negotiations begin, will have to grapple with a variety of problems. These include whether Tokyo would be willing to remove high tariffs on competitive South Korean agricultural and fisheries imports, which account for about 10 percent of Japan’s total imports from South Korea.

Another potential stumbling block would be whether Seoul would be willing to eliminate tariffs on industrial goods and components imported from Japan.

This would probably boost South Korea’s trade deficit with Japan, which currently stands at around 1.1 trillion yen a year.

Kim Yang Hee, a researcher at the Korea Institute for International Economic Policy and a member of the study panel, believes Japan needs a bilateral FTA more than South Korea. She also thinks Tokyo should help Seoul convince the skeptical South Korean public of the need for an accord.

“What is worrying (South) Korea is . . . that although it can expect to suffer losses from an FTA in the short run, (South) Korea cannot expect any visible merit from it,” she said. “Leaders would find it difficult to pluck up their courage and say to the public, ‘Let’s do it.’ “

For all these obstacles, it is still believed that a bilateral FTA would benefit both nations, especially in terms of building future-oriented ties and of jointly pressing ahead with an East Asian integration plan involving China and Southeast Asian countries.

“Both Japan and South Korea are closed societies. A bilateral FTA would be a win-win game or positive-sum game as it would accelerate necessary domestic structural reform,” said Norio Nakazawa, director of the Seoul office of the Japan External Trade Organization.

“It would also signal a political message that would improve gloomy relations in the past,” he said.

South Korean memories of Japan’s prewar and wartime colonial rule are still fresh, with Tokyo having done little in terms of dealing with the issue constructively.

Kim said the two governments should consider a bilateral FTA “from a strategic viewpoint” and expand it to expedite broader East Asian integration, allowing the region to gain bargaining power against the European Union and North American Free Trade Agreement blocs.

Meanwhile, Park Jung Dong, a researcher at the Korea Development Institute, said Japan, South Korea and China should concentrate on a three-way integration plan, given that the 10-member Association of Southeast Asian Nations is already in the process of bringing the region closer together.

“Apart from concluding FTAs among them, Japan, (South) Korea and China need to establish an institute to study the possibility of creating a Northeast Asian community,” he said.

“For the three countries to leave behind the 20th century characterized by wars and accusations and to enter a new phase, Japan, (South) Korea and China should attempt to go beyond the relationship of mere cooperation and think about how to tear down the obstacles.”

Japan’s FTA with Singapore, the nation’s first, took effect in November. Japan is now in talks with Mexico over a similar accord and is looking to forge deals with Thailand, the Philippines and Malaysia, as well as with ASEAN.

South Korea signed its first FTA, with Chile, earlier this month. It also plans to forge accords with other countries, including Singapore.

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