E. Asian powers’ 3-way FTA talks to have twists and turns

Mainichi Daliy News, Japan

ANALYSIS: E. Asian powers’ 3-way FTA talks to have twists and turns

15 May 2012

BEIJING (Kyodo) — The leaders of Japan, China and South Korea announced Sunday that the countries will launch negotiations for a trilateral free trade agreement by the end of this year. But the prospects are far from rosy.

The deal on the launch 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 successive rounds of FTA talks in the foreseeable future. The main reason is South Korea’s hesitation.

"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 run-up to the annual meeting over the idea of making greater efforts for the substantial elimination of trade barriers.

Chinese Premier Wen Jiabao, Japanese Prime Minister Yoshihiko Noda and South Korean President Lee Myung Bak hailed the agreement on the launch of negotiations by year-end as marking a major step.

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

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

Moreover, South Korea is not in a situation where it can make an important decision as the four-year term of the National Assembly will expire later this month and the country will hold a presidential election 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 does not rule out the possibility of working toward a bilateral FTA with China if there is no tangible progress on the trilateral framework in the coming months, given that China is enthusiastic about doing so.

"If FTA talks between China and South Korea start to move forward, it will act as a springboard for Japan to also shift toward China," one of the officials said. "We cannot just wait forever."

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 for their possible trilateral FTA.

Yukiko Fukagawa, a Waseda University professor who is an expert on Asian regional economic integration, said that 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 South Korean rivals.

For Japan, she said it would be more important for the time being to be involved in "the rule-making" of a wider trade liberalization bloc and in this context Tokyo’s planned participation in the Trans-Pacific Partnership negotiations carries considerable weight.

China’s eagerness to work toward a bilateral FTA with Japan is widely seen as being fueled by its fears over the U.S.-backed TPP trade talks.

Japan’s official entry into negotiations on the new Asia-Pacific trade grouping, which do not include China, is pending approval from all nine countries involved in the TPP talks — Australia, Brunei, Chile, Malaysia, New Zealand, Peru, Singapore, the United States and Vietnam.

Speaking at a joint news conference after the meeting in Beijing, Noda said that Japan will pursue the TPP and trilateral FTA "in parallel."

With this double-track approach, Noda said, "It is possible to "stimulate each other and...I hope there will be dynamism to activate the whole process" of developing a broad network of FTAs in the region.

Fukagawa and many other experts, however, that the TPP will make faster progress than the three-way FTA.

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