Japan To Pursue Chinese FTA If Tripartite Deal Falters

If a proposed tripartite China-Japan-South Korea free trade agreement (CJKFTA) is delayed by South Korean doubts, the Japanese government has decided to try to begin, instead, immediate bilateral trade talks with China.

Recent tripartite meetings between the three countries have looked to increased cooperation in many areas, including reaffirming their commitment to the early signing of an investment agreement, and to the launching of negotiations on the CJKFTA at the next Tripartite Leaders’ summit in May this year.

While there have been discussions on the CJKFTA since 2002, a feasibility study was completed in 2009, and further joint studies have, since then, been progressing between government, business and academic representatives, it is now thought to be unlikely that concrete negotiations will begin in May, as, at South Korea’s behest, they will probably not be on the summit agenda.

It was already expected that the completion of a bilateral FTA between China and South Korea would probably precede any tripartite agreement, largely because those two governments are well advanced in their preparations and, following the completion of joint feasibility studies, are already focusing on resolving sensitive trade issues.

In fact, after the recent foreign ministers’ bilateral meeting, it was stated that: “The two sides reaffirmed their willingness to start work on a South Korea-China FTA at an early date, and agreed to work together to start negotiations as soon as South Korea completes its relevant domestic procedures.”

In addition, however, it now appears that the South Korean government is also lukewarm on proceeding in the short term with an FTA including Japan as it is wary of the effect on its domestic economy of reducing tariffs with a country which is its greatest competitor, particularly with regard to the manufacture of industrial parts and products.

In reply, if South Korea vetoes the inclusion of CJKFTA negotiations in the May summit agenda, the Japanese government has made it known that it will seek to commence, immediately, its own FTA talks with China.

It is reported that China had already mentioned, in the past, the possibility of FTA talks with Japan, but that the latter was then concerned about the effect such an agreement would have on its agricultural sector. Nevertheless, it is now thought that, if South Korea proceeds with its FTA with China, Japan should do the same, or lose out to the competition; and that such an FTA would be a trade-off between losses in its farms, but substantial gains for its industries.

April 15, 2012

Source: Tax News