Beijing, Seoul, and Tokyo look
to an uncertain future By Yong
Kwon
On May 13, China, Japan, and South
Korea took the formative steps towards
establishing a trilateral free-trade agreement.
The joint declaration issued by Premier Wen
Jiabao, Prime Minister Yoshihiko Noda, and
President Lee Myung-bak emphasized how closer
cooperation between the three economies could not
only enhance the prosperity of the region but also
"[facilitate] economic recovery and growth in the
world". [1]
The lofty rhetoric is not far
from reality. Economic integration of northeast
Asia would certainly boost the region's combined
share of global gross domestic product (GDP) and
trade, which stood at 19.6% and 17.5% in 2010.
With the crisis in the eurozone and markets
everywhere in desperate need of dynamism,
increased commercial interaction between the three
countries could have a positive effect on the
global economy.
On paper, all three
countries have much to gain. According to the
Japanese Ministry of
Trade, a trilateral free-trade agreement would
increase Japan's GDP by 0.3%, China's by 0.4% and
South Korea's by 2.8%. Some private sector
calculations have been even more optimistic.
Tokyo-based financial services group Nomura
Securities estimated Japan's potential GDP growth
at 0.74%, exceeding even the 0.54% increase
expected with Japan's entry into the Trans-Pacific
Partnership (TPP), a trade grouping that includes
many Pacific-rim countries but not China. [2]
Although the vast differences in the
indices of development have been widely cited, the
economic robustness of the region, having survived
the global recession relatively unscathed, is not
under severe scrutiny. The bigger issue is how far
these states are willing to go to make this
mutually beneficial integration work. Underlying
political factors and overlapping interests both
facilitate and hinder this process as each
government advances its own foreign policy
objectives alongside the free-trade negotiations.
The conflict of interest was reportedly
very evident with South Korea during the initial
stages of the negotiations. Compared to his
counterparts, South Korea President Lee Myung-bak
was apparently less enthusiastic about the
potential free-trade agreement, in part because
Seoul could maximize its economic influence by
simply concluding a bilateral free-trade agreement
with China (negotiations for which have already
started) than collaborate on an arrangement that
includes Japan.
A trilateral agreement
would force South Korea to "[rely] more on
Japanese core components and other technology"
while also dividing the Chinese electronics market
with Japanese firms, Professor Kim Young Han from
Sungkyunkwan University explained. [3]
Nonetheless, President Lee ultimately came
out in support of starting negotiations for a
free-trade agreement at the trilateral summit in
Beijing because Seoul has other interests and
concerns. Although still refusing to set a
definitive timetable, President Lee seemed more
attune to the idea than he was in December last
year.
Considering the events in the past
five months, Seoul's change of heart may be a
measure to facilitate a closer political
partnership with regional powers to better contain
and deter Pyongyang's provocative behaviors.
Bilateral accords on sharing military
intelligence and logistics between Seoul and
Tokyo, although currently on hold, were in their
final stage before the trilateral negotiations
began. Further revealing Seoul's intentions, the
South Korean Ministry of Defense initiated talks
to launch a similar military cooperation pact with
China right after the summit. [4] There is
definitely a political angle to the trilateral
arrangement that Seoul wants to exploit.
It is difficult to see these specific
interests manifest as of yet. Despite the joint
efforts of President Lee and Prime Minister Noda,
negotiations in Beijing did not produce a
consensus on how to deal with North Korea. In
fact, the joint statement excluded an explicit
mention of Pyongyang's provocative behaviors.
President Lee, whose tenure will be
remembered in part for the two deadly attacks by
North Korean forces in 2010, is frustrated by
China's reluctance to participate in a concerted
diplomatic front against Pyongyang. However, with
Beijing enthusiastic for the establishment of an
exclusive trade bloc in Northeast Asia, South
Korea may be seeking to leverage its crucial
position to advance foreign policy objectives that
hinge on China's cooperation.
Indeed, it
would have been unlikely for South Korea to take
steps towards a region-wide free-trade zone if it
approached the matter from a purely economic
standpoint.
Meanwhile, Prime Minister Noda
is not in an enviable position. The ratification
of the Korea-US Free-Trade Agreement in March and
bilateral talks between South Korea and China have
left Japan more economically and politically
isolated in the region. Despite Prime Minister
Noda's declared intentions to simultaneously
pursue the TPP and the trilateral free-trade
agreement, many believe that the endemic division
in the Diet will stymie progress in both tracks.
It is not just the problem of having a
weak government. Even under a strong premiership,
like that of prime minister Junichiro Koizumi, the
Japanese economy would have had a tough time
opening its doors.
One should remember
that Koizumi, impeded by lingering issues
surrounding Japan's colonial legacy and domestic
concerns over the health of the agricultural
industry, was unable to rally the country behind a
free-trade agreement with South Korea.
This time around, Japan is once again
hampered by non-economic matters such as the
dispute over the Senkaku/Daioyu Islands with China
- according to some sources, President Hu Jintao
rejected a bilateral meeting with Noda following
the summit in Beijing because of the ongoing
tensions over maritime territory in the South
China Sea. [5]
This deadlock may force
Japan to forego valuable opportunities in
advancing its interests in other areas. Tokyo
recognizes the imperative for it to take assertive
steps towards regional integration. If it
succeeds, then Japan can enjoy the benefits of
expanding into China's vast market and gain
diplomatic capital by restoring confidence in
Tokyo's ability to execute political decisions. If
it fails then it concedes a large share in the
role that the region will play on the
international stage in the near future.
China has the most to gain from the
establishment of a new economic order in Northeast
Asia. With consumption at a low in the United
States and the European Union, China's
export-driven economy needs new importers.
If negotiations on the free-trade
agreement do proceed between the three countries,
the issue of agriculture will undoubtedly dominate
the talks. A quarter of China's agricultural
exports go to Japan and South Korea, the value of
which stood at $10.99 billion and $4.17 billion
respectively in 2011. Both Tokyo and Seoul
maintain massive subsidies for domestic
agricultural producers and impose high tariffs on
imports, thus it is in Beijing's best interest to
advance negotiations to reduce these barriers.
While China promises to strike a balance
in exports, domestic agriculture remains an
extremely sensitive issue for both Japan and South
Korea. In particular, having just ratified a
free-trade agreement with the United States,
President Lee will have a difficult time assuaging
domestic agricultural producers of the benefits of
another such agreement, this time with a
competitive food exporter.
At the same
time, China is under scrutiny from both South
Korea and Japan for taking an aggressive posture
in the South China Sea and an ambivalent one
towards North Korea. In addition, both Seoul and
Tokyo want Beijing to rein in on its flotilla of
bellicose fishing trawlers, which have become a
major source of conflict in the region.
Political and economic considerations are
intermeshed in the negotiations for a trilateral
free-trade agreement. While all three countries
have much to gain, it is difficult to eliminate
these competing interests that go to the core of
each state's longstanding foreign policy
objectives.
With power transition
approaching for South Korea and China this year
(and possibly for Japan next year), further
negotiations and talks will have to wait until all
three governments can reach an internal consensus
on the direction of their respective countries.
And with an uncertain global economic
environment and belligerent states in the region,
it may be a long time until productive discussions
on the matter actually take place.
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