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Wednesday, March 31, 2004

Journalists cautious on FTA talks

Japan must open its market before taking Asia leadership role

Staff writer

Is Japan ready to become a leader of Asia by opening its market to the rest of the region in ways commensurate with its status?

News photo
South Korean journalists discuss Japan-South Korea ties, economic conditions and other issues during a March 19 symposium at Keidanren Kaikan in Tokyo.

That question, according to South Korean journalists gathering at a recent symposium in Tokyo, lies behind South Korea's skepticism toward a free-trade agreement now being negotiated with Japan -- as well as the continuing lack of mutual trust in overall ties between the supposedly close neighbors.

The future of a Japan-South Korea FTA ultimately depends on the political will of the two governments, but Japan must first make sure it will reform its economic structure so that such an accord will truly benefit South Korean interests, the journalists said.

Six veteran journalists from South Korean newspapers took part in the March 19 symposium at Keidanren Kaikan at the end of a five-day visit organized by Keizai Koho Center. The participants discussed bilateral ties, economic conditions of the two countries and other issues.

One of the major discussion topics was the bilateral FTA talks.

Prime Minister Junichiro Koizumi and President Roh Moo Hyun agreed last October in Bangkok that the FTA should be finalized in 2005. Dozens of officials from both countries met in December in Seoul for the first round of government-level talks.

But the panelists were generally cautious about the talks' prospects.

"I wonder why Japan is in such a hurry (to conclude an FTA with South Korea)?" asked Kim Dong Won, editorial writer for the Maeil Business Newspaper.

Japan concluded its first-ever FTA with Singapore in 2002, and earlier this month reached a final accord on an FTA with Mexico after months of tough wrangling over farm trade.

South Korea signed its first FTA with Chile in 2002.

According to Jeong Kyu Jae, deputy managing editor for the Korea Economic Daily, South Korea picked Chile as the first FTA partner because it thought there would be little problem over farm trade, as the two countries are located on the opposite side of the globe -- meaning farmers in each country will be harvesting their crops while their counterparts in the other are not.

As it turned out, however, the government faced massive opposition from the farm industry and approval of the free-trade pact by the legislature was delayed twice, Jeong said.

News photo
Jeong Kyu Jae gestures as he addresses the audience while his copanelists (from second left) Lee Se Jung, Song Yang Min, Kim Byung Su, Kim Dong won and Ko Song Cheer look on.

He said that at least from South Korea's point of view, there will be no farm trade dispute in negotiating an FTA with Japan. On the other hand, he added, major manufacturing sectors like automobiles and household digital equipment will face increased competition with Japanese products.

Then what will be the benefits for South Korea?

Jeong said an FTA with Japan will not make much sense if it only lowers import tariffs.

While Japan has already lowered its tariffs on most industrial goods to nearly zero and there will be no room for further cuts, South Korea still has import duties of about 8 percent on such products as automobiles, he pointed out. So if the FTA is only aimed at tariff reductions, negotiations will make little headway, he said.

Lee Se Jung, editorial writer for the JoongAng Ilbo, said that while the FTA talks with Chile were troubled by the all-out resistance of the farm lobby, it was clear that South Korean manufacturing industries would benefit from the accord.

Therefore, the manufacturing sector was even willing to pay compensation for the farm sectors that will incur damage from the FTA with Chile, he noted.

But there are no sectors that will benefit directly from an FTA with Japan, Lee said. Some of the large manufacturing industries that pushed for the FTA with Chile are expected to suffer some damage from an accord with Japan.

So the major South Korean manufacturers are not opposed outright to an FTA with Japan but are not actively pushing for it either, according to Lee. At the same time, they are aware that in a broader picture, South Korea needs to be part of an East Asian regional free-trade agreement, he said.

While the FTA talks will go on because Koizumi and Roh have agreed to seek an accord by 2005, the outcome will eventually depend on thee political will of the two governments, Lee said.

Jeong of the Korean Economic Daily said an FTA with Japan must lead to changing the structure of Japan's markets and industries still closed to outsiders in various aspects.

South Korea hopes Japanese firms, particularly component manufacturers, will invest more in the country, he said.

It also places importance on investment by South Korean firms in Japan, he said. For example, South Korean companies taking over small-scale Japanese machinery component makers facing financial problems will be able to utilize their strong technology power, he added.

However, such attempts by South Korean companies have often met with resistance in the face of the closed nature of Japanese industries, Jeong pointed out.

There have been a few attempts by South Korean companies to take over Japanese machinery component makers, but they ended in failure because of strong opposition from within the takeover targets' industries, he said.

"Unless the closed nature of Japan's industrial sectors is reformed, there will be no benefits from an FTA with Japan," Jeong said. In other words, reform of such industrial and market structures is what the rest of Asia expects from an FTA with Japan, he added.

Some room for optimism

In contrast to the skepticism over an FTA with Japan, some of the participants gave a positive assessment of increased cultural exchanges between the two countries that followed the cohosting of the FIFA World Cup in 2002.

In the latest move in the gradual lifting of the ban on Japanese cultural products, Japanese pop music CDs went on sale "legally" for the first time in South Korea in January.

Ko Song Cheer, deputy chief editor of the Dong-A Ilbo, said he was surprised to hear that a South Korean TV drama -- "Winter Sonata" -- became a big hit among Japanese people.

During the visit, he saw books on TV dramas and other topics on South Korea featured in special sections in bookstores. He quoted Liberal Democratic Party Secretary General Shinzo Abe as saying that his wife is a fan of "Winter Sonata" and has hired a tutor to study Korean.

In South Korea, study of the Japanese language has become popular among youths in recent years, Ko said.

"Boys wanted to study Japanese so they can play Japanese computer games, girls so that they can sing Japanese songs, and university students so they can read the novels of Haruki Murakami," he said.

And what is called a "night-owl tour" is becoming popular among South Korean salaried workers, who depart Seoul on a Friday evening, stay in Japan over the weekend and arrive back Monday morning, according to Ko.

But despite such positive developments, negative sentiments that are rooted in Japan's 1910-1945 colonial rule of the Korean Peninsula remain, some of the panelists said.

Kim Byung Su, economy and business editor with the Hankyoreh newspaper, said the average South Korean consumer will still balk at buying a Japanese product even if it is good, and even after buying it would not want to show it to others.

"Nearly 60 years after the colonial rule ended, hard feelings over the past history remain, and prevent Japan and South Korea from building mutual trust," Kim said.

He said the two countries should not get stuck on history and must put the history behind them.

"Once it is done, history should only remain in textbooks, and should not be brought up repeatedly," he said. But attempts by Japanese and South Korean governments to settle the past have so far proved unsuccessful, he added.

Kim referred to the "undesirable acts of some Japanese politicians that rub South Korean public sentiment the wrong way," apparently alluding to Koizumi's repeated visits to Yasukuni Shrine and remarks by lawmakers trying to justify the colonial rule.

And if the politicians are making those statements and actions to win favor with Japanese voters, people in this country will need to keep a close watch on such behavior. "Such efforts would contribute to building mutual trust," he said.

Alarm bells over SDF

Recent political developments in Japan -- the dispatch of Self-Defense Forces troops to Iraq, the enactment last year of the nation's first war contingency legislation since World War II and increasing talk of a possible review of the war-renouncing Constitution -- are ringing alarm bells in its Asian neighbors, the panelists said.

"In those countries, people are talking about Japan's swing to the right," Kim said. "But Japanese people say they are only trying to become a 'normal nation.' "

Nobuyuki Yoshida, executive chairman of the editorial board of Japan's Sankei Shimbun who served as a moderator in the symposium, said a "swing to the right" is a rather mild expression compared to words used by critics in South Korea and China.

"They say Japan is returning to militarism," Yoshida said. "But I don't think anybody in Japan is considering constitutional revision to enable Japan to launch military aggression again. And (the SDF) is not going to Iraq to make war. It is regrettable that (the SDF dispatch) is linked to militarism."

There is some truth in what Japan says, Kim told the audience.

"But if there is such a difference in views between Japan and its neighbors, I hope the Japanese people would stop and think why those countries have such views, and what Japan can do to fill the gap," Kim said.

Jeong of the Korea Economic Daily said the issues of Japan trying to become a "normal" country, its bid for a leadership role in Asia and the FTA talks with South Korea are all linked.

He said he is not concerned about Japan's effort to become "normal," adding that he even welcomes such an attempt.

But if Japan is trying to become a normal nation and wants the rest of Asia to recognize it as a leader, it needs to make sure that its market is sufficiently open, he said.

"Japan is a major economic power, but I'm afraid it still behaves as if it were a developing country," Jeong said, citing as an example Japan still trying to maintain a trade surplus with the rest of Asia.

"No major powers have had trade surpluses -- ranging from the Roman Empire, the British Empire and the United States. It is a historical fact," he said.

If Japan reforms its economic structure and fully opens up its market to the rest of Asia, the region's view toward Japan will change radically and the FTA talks with South Korea will move ahead, he predicted. "And there will be no more talk of Japan swinging to the right.

"Once all these hurdles are cleared, Japan can become a normal nation and leader of Asia," Jeong said.

Currently, Japan may be feeling jittery about its position in Asia because of the rise of China, but to be the region's leader it must accordingly become an "open" country, he said.

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