Three-way FTA talks have key hurdles to surmount



The leaders of Japan, China and South Korea have announced their countries will launch negotiations on a trilateral free-trade agreement by year’s end. But the prospects are far from rosy.

The deal on the talks is seen by many experts as a by-product of, so to say, putting on too much makeup to brighten a dull complexion.

In reality, the signs are not promising that the three Asian countries — which together account for nearly 20 percent of global gross domestic product — will hold fruitful FTA talks in the foreseeable future. The main reason is South Korea.

“Japan and China have whipped and whipped but our horse did not run much. That has been the situation,” a senior Japanese diplomat said on condition of anonymity, in referring to South Korea’s passive attitude in the runup to the annual meeting over the idea of making greater efforts toward the substantial elimination of trade barriers.

Chinese Premier Wen Jiabao, Prime Minister Yoshihiko Noda and South Korean President Lee Myung Bak hailed the agreement to start the talks by year’s end as a major step.

But Japan and China had initially sought to declare the immediate start of talks in Beijing.

Japanese officials, who were involved in preparations for the meeting, said they believe Seoul’s priority now is to advance talks on a bilateral FTA with China.

South Korea also may not be in a position to make such an important decision because the four-year term of the National Assembly expires later this month and a presidential election looms in December, the officials said.

There is concern that Japanese companies could lag behind South Korea in seizing business opportunities in China and other major markets.

China is the biggest trading partner of both Japan and South Korea. Unlike Japan, South Korea, whose leading manufacturers have outpaced their competitors in some fast-growing countries, has already sealed FTAs with the European Union and the United States.

Japan’s FTA negotiations with South Korea have been suspended since 2004, less than a year after they kicked off.

Some government officials in Tokyo said Japan has not ruled out working toward a bilateral FTA with China if there is no tangible progress on the trilateral framework in the coming months, given China is enthusiastic about doing so.

But not all experts are pessimistic about the future course of Japan’s endeavor to increase trade in the Asia-Pacific region, which has turned into a center of world economic growth, even if Tokyo, Beijing and Seoul fail to produce immediate positive results toward a trilateral FTA.

Yukiko Fukagawa, a Waseda University professor who is an expert on Asian regional economic integration, said Tokyo should not worry too much about Seoul’s aggressive FTA initiatives with other major economies, noting that leading Japanese manufacturers are less prone to be affected by tariff barriers as the overall ratio of their overseas production is much higher than that of their South Korean rivals.

Gist of trilateral Beijing declarationBeijing


The leaders:

• Recognize further enhancement of trilateral cooperation has accelerated economic integration in Northeast Asia.

• Will approach trilateral cooperation from a strategic point of view.

• Will further enhance the future-oriented comprehensive cooperative partnership among the three countries.

• Encourage the three nations to advance cooperation in piracy, energy security and cybersecurity.

• Will enhance cooperation for creating an attractive environment for trade and investment.

• Recognize the establishment of a trilateral free-trade agreement that would contribute to the economic growth and prosperity of the three countries.

• Welcome the signing of a trilateral investment agreement.

• Are committed to working together to promote regional financial cooperation for the stability of financial markets and sustainable growth.

• Agree to promote investment by foreign reserve authorities in one another’s government bonds.

• Encourage nuclear safety regulation authorities of the three countries to cooperate substantially.

• Recognize the importance of the success of the Fukushima Ministerial Conference on Nuclear Safety in December in Japan for further progress in international nuclear safety.

• Recognize the importance of engaging in trilateral cooperation to address potential earthquakes, tsunami and volcanic eruptions.