BEIJING--With Japan agreeing to three-way free trade talks with China and South Korea, will it place more importance on this pact than joining the Trans-Pacific Partnership trade agreement, led by the United States?
The answer appears yes, from comments made on May 12 after trade ministers from the three countries agreed to start negotiations for a trilateral free trade agreement (FTA) within this year, and comparison of the economic benefits of the two trade pacts.
In a news conference held here, Chinese Commerce Minister Chen Deming said, “It is extremely important for Japan, China and South Korea to start FTA negotiations. The agreement will promote the economic integration process in East Asia.”
Yukio Edano, minister of Economy, Trade and Industry, also told reporters, “The general direction to be pursued by the three countries is exactly the same.”
Though the three countries agreed to start talks on the trilateral FTA within this year, China and South Korea had already agreed on May 2 that they will start negotiations for a two-party FTA this month. It is apparent that talks for a bilateral agreement between Japan and China are lagging behind.
If Japan concludes a bilateral FTA with a single country, it will be able to obtain the largest economic effects with China, which has a huge market.
According to calculations by the Japanese government-affiliated Research Institute of Economy, Trade and Industry (RIETI), a bilateral FTA between Japan and China will boost Japan’s gross domestic product by 0.66 percent in 10 years.
Meanwhile, a trilateral FTA among Japan, China and South Korea will increase the GDP by 0.74 percent during the same period. The corresponding figure for an East Asian framework among the 10 countries of the Association of Southeast Asian Nations (ASEAN) plus six countries, including Japan, China and India, would be 1.1 percent.
On the other hand, the TPP, which has been negotiated among nine countries including the United States and Australia but does not include China and South Korea, will boost Japan’s GDP by only 0.54 percent.
In spite of the major economic effects expected from a bilateral FTA with China, Japan cannot start negotiations with China because it fears that cheap Chinese agricultural products could flood Japanese markets. Political issues, such as territorial disputes, are also influencing Tokyo’s reluctance to begin talks.
China also has reasons for failing to start negotiations for a bilateral FTA with Japan.
Beijing has concluded FTAs with eight countries or regions, including Chile and ASEAN. In addition, it is holding or will hold negotiations with seven other countries. Of the eight countries and regions that have already concluded FTAs, only Singapore and New Zealand are industrialized countries.
If China concludes bilateral FTAs with industrialized countries, its domestic industries could be damaged. In addition, it will be required to strengthen its rules on the protection of intellectual property rights.
Therefore, China says, “We are not seeking a high level (of free trade through a trilateral FTA with Japan and South Korea or a bilateral FTA with South Korea). Those FTAs have the strong meaning that they are symbols of cooperation (between China and those countries).”
As for Japanese trade strategy, Prime Minister Yoshihiko Noda said in an interview with The Wall Street Journal on May 12, “We must make an environment in which China and South Korea can join the TPP.”
As Japan is also aiming to use the East Asian framework, he added, “Japan will be able to play a role as a comprehensive coordinator (for both the TPP and the East Asian framework).”
Meanwhile, as for why importance is being placed on FTAs involving China, Noda said, “China is a big market. That is the biggest reason.”
Japan is currently facing difficulties in promoting talks for joining the TPP due to domestic opposition. In such circumstances, Japan could be required to shift its priorities on frameworks that involve China.
(This article was written by Keiko Yoshioka and Takashi Fukuyama.)
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