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Tuesday, July 26, 2011

Push FTA of South Korea, Japan, China toward TPP


Ten years since the concept of a free-trade agreement (FTA) among Japan, China and South Korea was proposed, some visibly significant moves have gotten under way recently. The three countries, at their leaders' summit talks held in Japan on May 21 and 22, reached agreement to conclude the industry-government-academia joint studies on the FTA issue this year and begin intergovernmental negotiations next year.

In the wake of the agreement, three research institutes of the three Asian neighbors launched a joint economic and trade forum in Seoul on June 3 to help promote regional economic integration from a private sector's standpoint in preparation for the coming government-level talks.

The tripartite forum was set up after about a year's preparations at the proposal of the China Center for International Economic Exchanges, a think tank created with the Chinese government playing a central role, and with the participation of the Japan-China Organization for Business, Academia and Government Partnership and the Korea International Trade Association.

The three-way FTA concept goes back to the idea of a framework designed to strengthen economic relations among the three nations, which was proposed in 1998 by then Japanese Prime Minister Keizo Obuchi. Complying with his request, I took part in the preparatory work with some leading members of the Japanese business community. Government leaders of Japan, China and South Korea, at their summit held in Manila in October 1999, agreed to have the National Institute for Research Advancement (Japan), the Development Research Center of the State Council (China) and the Korea Institute for International Economic Policy (South Korea) start joint studies on ways to "strengthen economic cooperation" among the three countries.

Their research projects covered a wide range of related matters including the content and effects of the trilateral FTA and resulted in the positive conclusion that the proposed FTA will help accelerate the economic growth of the three nations and expand their trade. In those days, Chinese and South Korean leaders' responses were positive and they showed considerable interests in the FTA issue. But the Japanese leadership's reaction was regrettably not positive, perhaps in view of political obstacles such as Japan's agricultural problems.

Japan's trade policy began to get oriented toward promoting FTAs and economic partnership agreements (EPAs) around 2000 in line with the currents of the world but lagged far behind the moves of South Korea, which concluded FTA accords with the U.S. and the European Union, and the trends of ASEAN (the Association of Southeast Asian Nations) countries, which were widely promoting FTA networks.

The negotiations for formulating the Japan-South Korea FTA started in December 2003 but were suspended about a year later. The FTA issue with China still remained at a concept-drafting stage. So, Northeast Asia was then in a state of vacuum in terms of regional trade and economic cooperation.

In November 2010, the Japanese Cabinet approved the government's basic policy for a comprehensive economic partnership, clearly indicating that the government, under its principle of opening up the country to the international community and paving the way for sustained progress in the future, was set to promote studies for a Trans Pacific Partnership (PTT) while enhancing its efforts to implement FTA plans. This development was a matter of course if Japan aspires for growing further together with other countries of the world.

The March 11 earthquake, tsunami and Fukushima nuclear power plant crisis inflicted enormous damage not only on Japan's northeastern coastal area, but also on the Japanese economy as a whole. But, if Japan hopes to survive its national crisis and get on a new track for growth, it must make serious efforts to promote FTAs as well as to study ways to forge the TPP.

I would like to emphasize that Japan's strengthening of cooperative ties with China and South Korea — which are close to Japan geographically, historically and culturally, possess high growth power and are faced with economic and social problems similar to those of this country — is an important policy task for Japan, along with the issue of TPP creation.

At the Seoul conference, Chinese and South Korean delegates expressed positive views on promoting FTA ties. Main points of their remarks are as follows:

(1) Trilateral FTA relations will produce larger economic benefits for the three countries than bilateral FTA ties.

(2) A wide rage of content such as not only trade and investment, but also industrial structure, employment, global environment, energy, intellectual property, technological innovation and human resources development should be covered by the FTA arrangement.

(3) In consideration of the three countries' economic standings in East Asia, it is important to introduce a framework for supporting the economic development of the region in preparation for the formulation of an East Asia Community.

(4) The three countries can develop further if they can successfully cope with difficult domestic problems — agricultural and other issues — they are facing.

(5) They should promote cooperation in improving nuclear safety technology and study the possibility of creating a framework similar to the European Atomic Energy Community (Euratom).

Meanwhile, questions are being raised abroad as to which trade deal Japan is giving priority to — a comprehensive TPP or a Japan-China-South Korea FTA. There is some difference between the TPP and the tripartite FTA in that TPP is aimed at forging a highly advanced system of a market economy.

In my view, it is advisable for Japan to push FTA ties as far as to cover the area of the APEC (Asia-Pacific Economic Cooperation forum) in order to achieve a new framework for regional growth, that is a FTAAP (Free Trade Area of the Asia-Pacific), and it is appropriate for Japan to promote negotiations for the TPP and the tripartite FTA step by step in parallel to move forward toward the goal of Asia-Pacific regional integration.

After the Seoul conference, the delegates, including myself, paid a courtesy call on South Korean Prime Minister Kim Hwang-sik. I was strongly impressed by the prime minister's remark. He said that the system of economic integration centering on the tripartite FTA will pave the way for a new era.

Shinji Fukukawa, formerly vice minister of the Ministry of International Trade and Industry (now the Ministry of Economy, Trade and Industry) and president of Dentsu Research Institute, is currently chairman of the Machine Industry Memorial Foundation.


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