Pacific Money | Economy | East Asia

What’s Next for the Long-Awaited China-Japan-South Korea FTA?

Will RCEP be able to accelerate the negotiation process for the China-Japan-South Korea free trade agreement?

What’s Next for the Long-Awaited China-Japan-South Korea FTA?
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done by researchers from South Korea, agriculture is regarded as the major stumbling block to the finalizing of the CJK FTA. Industry concerns include not only the loss of market share, but also intellectual property rights (IPR) on agriculture-related technology and breeds, food safety, and observing quarantines.

Second, China, Japan, and South Korea have each adopted a different FTA strategy. China is known for its selective and gradualist approach in formulating FTAs. More importantly, China does not want a high-level CJK FTA. Instead, it favors a moderate-level trilateral FTA, which is primarily focused on trade in goods. South Korea prefers a comprehensive FTA in terms of both scope and content, including services, investment, government procurement, IPR, and technical standards, in addition to trade in goods. Though Japan is keen to exclude agriculture and fishery production from the agreement, the country – being mobilized by the most influential business federations – refuses a low-standard CJK FTA. Instead, Japan advocates for an agreement that includes not only a substantial tariff reduction but also the liberalization of services, IPR, environmental protection, and labor policy.

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Third, broad diplomatic tensions have also cast a shadow over the CJK FTA. China and Japan are said to be more politically, especially geopolitically, driven. The rivalry over regional hegemony between China and Japan looms large. In addition, some that China’s push for the CJK FTA aims at checking the United States’ influence in East Asia. Japan’s search for a balance of power between the United States and China means that the country’s attitude toward the trilateral FTA blow hot and cold.

Muhui Zhang of Pusan National University that South Korea, as the bridge between China and Japan, is vital for the trilateral economic integration, but unfortunately, South Korea would like to keep its distance from Japan even though both are allies of the United States. Japan’s colonial history on the Korean Peninsula continues to rankle. In addition, other disruptive factors such as nationalist sentiments and maritime disputes – between China and Japan as well as Japan and South Korea – also help explain the slow progress and few achievements of the negotiations so far.

RCEP: A Change in the Winds?

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Meanwhile, although the level of standards and scope of contents found in RCEP cannot be compared to those in the Comprehensive and Progress Agreement for Trans-Pacific Partnership (CPTPP), which is mainly advocated by Japan, Tokyo’s signing on to RCEP and being the third member to ratify the agreement further indicate Japan’s relative satisfaction toward the current RCEP. As a result, an “RCEP Plus” model for the CJK FTA is likely to be also welcomed by Japan.

RCEP also presents a compromise on and thus an approach to deal with domestic sector sensitivities. Taking agriculture, the source of many major concerns, as an example, not only are some agricultural products exempted from the RCEP, but the tariffs on other products will be reduced gradually. This gradualist approach provides time for the agriculture sector to get used to and prepare itself for the full implementation as well as further development of the RCEP. The performance of this gradualist approach will be an important reference for the three countries in CJK FTA negotiation and implementation.

Obstacles resulting from geopolitical competition, maritime disputes, and history-related factors are almost impossible to fully remove. However, the existence of these obstacles does not mean that the attempt to formulate a CJK FTA is doomed to fail. RCEP may help create a friendly and favorable atmosphere between the three countries. Besides, past experiences also provide some clues on the question of under what conditions China, Japan, and South Korea are able to cooperate. For instance, the Asian Financial Crisis motivated the three countries to support the establishment of the Chiang Mai Initiative. Given the fact that COVID-19’s impacts on economic development are even the Asian Financial Crisis and Global Financial Crisis, it is possible and likely that the lasting pandemic may provide stimulus for speeding up the long-stalled trilateral negotiations.

Last but not least, if an absence of leadership partially led to the stagnation of CJK FTA negotiations, the conclusion of RCEP may directly help solve that problem. It is said that China has prioritized RCEP over the CJK FTA. After the successful conclusion of the RCEP, China has reiterated its willingness to resume and accelerate the CJK FTA negotiations. How China will mobilize Japan and South Korea to conclude this “win-win-win” trade pact will be worth following in the coming years.