Japan-Korea : Free trade talks

Asahi Shimbun | 2010/08/21

EDITORIAL : Free trade talks

Negotiations to liberalize trade between Japan and South Korea have been stalled for nearly six years.

The two countries, which have both achieved remarkable economic growth based on trade, have agreed on a meeting of their senior trade officials for the first time next month with a view to reopening the trade talks. We hope this will lead to real progress in the negotiations.

Talks over a bilateral free trade pact fell apart in 2004 because of disagreements over the opening of Japan’s markets for agricultural and fisheries products.

South Korea’s current lukewarm attitude toward a free trade deal with Japan, however, can be largely explained by a lack of enthusiasm within the South Korean business community.

South Korean companies like Hyundai Motor and Samsung Electronics have had great success in the world market, but they remain largely unfamiliar to Japanese consumers. These industries appear to think a free trade agreement with Japan would not bring significant benefits to them.

In addition, South Korea is running a structural trade deficit with Japan, with high-value-added components and machines accounting for the bulk of Japanese exports to its neighbor. Seoul, which has moved boldly in striking free trade deals with both the United States and the European Union, has been dragging its feet in its negotiations with Tokyo for fear of an increase in the deficit.

Japan needs to pay attention to this context and work out ways of overcoming the obstacles.

Unless Japan shows determination to reach a free trade agreement with South Korea quickly, so that the two countries can work together in trade talks with China, Seoul could opt to put its negotiations with Tokyo on the back burner. Tokyo needs to eliminate non-tariff trade barriers, reform its government procurement systems and expand the scope of economic cooperation projects between the two countries.

The government has been moving in that direction by seeking an economic partnership agreement, which aims to improve systems and rules for trade in services and investment, rather than only looking at a narrower free trade agreement designed solely to lower tariffs, in its talks with South Korea.

The significance of a free trade deal between Japan and South Korea goes beyond revitalizing the economies of the two nations. A greater benefit would be its contribution to promoting the idea of an East Asian free trade zone.

One challenge facing both Japan and South Korea is how to capitalize on the huge growth potential of China, a mammoth market which is right on their doorsteps.

The key question is what kind of trade agreement the two countries should seek from China, which lacks well-established market rules and a mature business-related legal system.

In May, Japan, China and South Korea launched joint academic, industry and government research into the possibility of a free trade agreement among the three countries. This joint study should pave the way to negotiations among the three countries on free trade and economic partnership.

Close cooperation between Japan and South Korea is essential to persuading China to make serious efforts to improve its standard certification system and investment rules, in order to create fair conditions of trade.

At the end of June, China and Taiwan signed an Economic Cooperation Framework Agreement, which was effectively a free trade deal. There are now concerns in South Korea that the pact could put South Korean companies at a disadvantage against Taiwanese competitors.

Unless Japan shows determination to reach a free trade agreement with South Korea quickly, so that the two countries can work together in trade talks with China, Seoul could opt to put its negotiations with Tokyo on the back burner.

Japan and South Korea must show greater enthusiasm about negotiating a bilateral free trade agreement, which would only be a first step toward the grand vision of an East Asian free trade zone.

— The Asahi Shimbun, Aug. 20

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source: Asahi Shimbun