China, Japan, South Korea to Launch Trade Talks

16 May 2012

China, Japan, and South Korea have agreed to begin formal negotiations later this year for a three-way free trade deal, heads of state from the three East Asian economies announced on Sunday 13 May.

"Recognising that the establishment of an FTA ... would contribute to the economic growth and prosperity of the three countries, we hereby endorsed the recommendations from trade ministers that the trilateral FTA negotiation would be launched within this year," Chinese Premier Wen Jiabao, South Korean President Lee Myung-bak, and Japanese Prime Minister Yoshihiko Noda said in a joint communiqué after the meet.

The three leaders highlighted the co-operation between their countries as a reason for the region's steady economic growth and accelerated economic integration, despite the ongoing global economic crisis; they further stressed that this co-operation would "facilitat[e] economic recovery and growth in the world."

The proposed trade pact will "unleash the economic vitality" of East Asia, Chinese Premier Wen Jiabao said after the high-level gathering.

The proposed deal would bring together three markets that together constitute 19.7 percent of global GDP, according to Japanese government data. Trade between the three countries has already increased more than five-fold from US$130 billion in 1999 to US$690 billion in 2011, according to statistics from China's Ministry of Foreign Affairs.

A trilateral trade deal could increase China's GDP by up to 2.9 percent, Japan's by 0.5 percent, and South Korea's 3.1 percent, according to Chinese state-run news agency Xinhua; the news agency did not cite the source for these figures.

For his part, Noda commented to the Wall Street Journal that trilateral trade negotiations "are an extremely important piece of his country's economic strategy."

"China is simply a huge market," the Japanese Prime Minister said. "That's all there is to it." Beijing is the largest trading partner of both Seoul and Tokyo.

The three countries also signed a trilateral investment agreement at their two-day summit, a step that is designed to facilitate a future trade pact.

Other trade negotiations in the background

The announcement comes as Japan vies for entry into talks for another proposed trade pact - the nine-country Trans-Pacific Partnership (TPP) Agreement. Tokyo expressed an interest in joining the TPP negotiations in November; however, whether or not Japan will indeed be able to join the proposed pact is still unclear. (For more on the TPP negotiations, see related article, this issue.)

China and South Korea are not members of the trans-Pacific trade talks.

While some observers have questioned whether Japan's goals of entering the US-backed TPP talks while at the same time clinching a separate deal involving China are mutually compatible, Prime Minister Noda rebuffed those concerns.

"We will promote the TPP and trilateral FTA in parallel," he told reporters on Sunday, adding that the negotiations could be "mutually reinforcing to each other."

In a separate effort, Beijing and Seoul confirmed earlier this month that they will be launching negotiations for a bilateral FTA, following up an earlier pledge made by leaders from both sides in January of this year. (See Bridges Weekly, 11 January 2012)

ICTSD reporting; "China, Japan and S. Korea in free trade talks," FINANCIAL TIMES, 13 May 2012; "East Asian powers set to push trade pact talks," REUTERS, 12 May 2012; "China, Japan, Korea Agree to Trade Talks," WALL STREET JOURNAL, 14 May 2012; "Japan's Leader Turns Trade Focus to China, South Korea," WALL STREET JOURNAL, 13 May 2012.

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