During their recent trilateral summit in Seoul, the leaders of South Korea, China and Japan agreed to strengthen efforts to conclude a comprehensive, high-level and mutually beneficial three-way free trade agreement.
A joint statement issued after the annual summit, which was resumed after more than three years of hiatus, said they also agreed to exercise joint leadership to push forward negotiations on the Regional Comprehensive Economic Partnership.
It was not mentioned by any of the three leaders — South Korean President Park Geun-hye, Chinese Premier Li Keqiang and Japanese Prime Minister Shinzo Abe — but last month’s conclusion of the U.S.-led Trans-Pacific Partnership trade deal was lurking in the background.
Japan joined the TPP as a founding member and South Korea has expressed its intention to join the accord, which encompasses a dozen Pacific Rim countries. China is unlikely to take part in it.
Experts suggest that the conclusion of the TPP might have prompted China to be more positive about the three-way trade pact and the RCEP — which includes the 10 members of the Association of Southeast Asian Nations, India, Australia and New Zealand as well as the three Northeast Asian countries.
Japan has focused on TPP negotiations, remaining lukewarm about establishing other trade blocs swayed by China. During the latest trilateral summit, however, it apparently had no reason to shun an agreement with its two neighboring countries to make efforts toward concluding free trade deals involving them at a high level.
For their part, South Korean officials may expect that progress in negotiations on the FTA with China and Japan and the RCEP would help forge more favorable conditions for its entry into the TPP.
Seoul, Beijing and Tokyo have made no meaningful headway in talks that started in 2012 to remove trade barriers among themselves. They are scheduled to hold a ninth round of negotiations in December.
If concluded, the trilateral deal would create one of the world’s largest economic blocs, roughly on par with the European Union and the North American Free Trade Agreement. The three Northeast Asian countries account for 22.8 percent and 18.6 percent of global gross domestic product and trade at $16.9 trillion and $6.9 trillion, respectively.
Despite the impressive figures, disputes over territorial and historical issues have held back trade and economic cooperation among the neighboring states from achieving their full potential.
While talks on the three-way FTA have stalled, negotiations on the RCEP have shown some progress in the service liberalization and investment areas in recent months. China has particularly been eager to launch the RCEP within the year, whose members will account for 28 percent and 31 percent of the world’s GDP and trade, in its answer to the U.S.-led multilateral trade accord.
Concluding the FTA with China and Japan along with the RCEP will bring benefits to South Korea, which has seen its exports contracting for 10 consecutive months through October. Some officials argue that, along with a free trade deal signed between South Korea and China in June, the two agreements could offset the possible negative effect of its exclusion from the TPP in the foreseeable future.
But caution has been raised that this argument should not come in the way of South Korea’s efforts to join the TPP, which will account for 37 percent and 27 percent of global GDP and trade.
“Korea needs to take a balance in the growing competition between the U.S. and China to expand their influence on the global economy,” said Je Hyun-jung, a senior researcher at the Seoul-based Institute for International Trade.
In her recent contribution to a local daily, Yukiko Fukagawa, professor of political science and economics at Waseda University in Tokyo, advised South Korea to accelerate efforts to join the TPP, indicating Japanese companies would have a competitive advantage over South Korean manufacturers under the cumulative rules of origin to be applied to its members.
In this regard, negotiations on the three-way trade accord with China and Japan may serve to prepare Seoul for entering the TPP. South Korea has concluded a bilateral free trade pact with all but Japan and Mexico of its 12 members. Achieving the trilateral deal at a high level would help pave the way for smooth negotiations with Japan on conditions for South Korea’s admission into the TPP, experts say.
South Korea has been ahead of other major economic powers in concluding bilateral free trade deals. Its presumably advantageous position, however, has been eroded by a surging tide toward forging multilateral trade blocs. Professor Fukagawa said what South Korea needs to do under this challenging environment is to create more liberal market conditions and move faster than greater economies in the direction of global economic trends.