Renew talks on free trade agreement

The Korea Herald, Asia News Network, Bangkok

It is disappointing that Korea, China and Japan failed to agree on their pursuit of economic integration when they held a summit on the sidelines of an annual ASEAN-plus-three forum. Lack of progress in the talks on a free trade agreement (FTA) as a means of regional economic integration was in stark contrast with the advances made in regional security and other areas.

According to a post-summit joint declaration, President Roh Moo-hyun, Japanese Prime Minister Junichiro Koizumi and Chinese Premier Wen Jiabao agreed "to explore a closer economic partnership in due course."

That was nothing but diplomatic nicety that no progress was made on the proposal to create a huge trading bloc encompassing 24 percent of world population and generating 18 percent of the world's gross domestic product.

The three nations failed to decide whether or not to pursue an FTA, not to mention when to start negotiating it, though they were well aware of what benefits it would bring them. According to a recent study, an FTA would raise gross domestic product 2 percent to 3 percent for Korea and China and 0.5 percent for Japan.

A major obstacle was rooted in simmering rivalry between China and Japan, each of which wished to secure the leadership position in promoting economic integration for East Asia. A race started when China agreed with the Association of Southeast Asian Nations in late 2001 to conclude an FTA within 10 years. The two sides agreed later to advance the schedule.

Until recently, however, Beijing showed little enthusiasm about the nascent academic idea of binding Korea, China and Japan into a Northeast Asian free trade region. It was the same with Japan, though it wanted a separate FTA with Korea.

Not to be outdone by China's rush for an FTA with ASEAN, Japanese Prime Minister Koizumi visited Southeast Asia in January 2002 and proposed a joint FTA study group with ASEAN.

But it appears that Japan's basic strategy is to conclude individual FTAs with Korea and Southeast Asian nations and evolve them into one vast FTA zone covering ASEAN and China under its leadership later on. Rapid progress has recently been made in talks on a Korea-Japan FTA, with their business communities endorsing it with vigor.

China then proposed an FTA feasibility study with Korea and Japan at the ASEAN-plus-three forum in November last year. Korea, a middle power with a lower ego than its giant trading partners, consented to the Chinese suggestion. Japan, however, continued to balk at the Chinese proposal.

The failure to push for a Northeast Asian FTA in Bali this time should not deter the three nations from pursuing it as a mid- or long-term goal. Instead, they are advised to renew talks at the working level.

The talks should be based on joint research that has been conducted for the past several years by the Korea Institute for International Economic Policy, China's Development Research Center of the State Council, and Japan's National Institute for Research Advancement. In fact, the three leaders "appreciated the progress" made in their joint study, which said an FTA would boost exports and GDP for all three nations, albeit by different margins.

No doubt negotiations will be time-consuming, given the different goals the three nations in different stages of industrialization are pursuing. Still, it will be worthwhile for them to make efforts to remove tariff and non-tariff trade barriers as the rewards will be enormous.

In addition, they should not allow themselves to be left out in the global trend of seeking regional integration. With the WTO-led globalization being challenged by nongovernmental organizations and poor nations, the pursuit of regionalism is certain to gain momentum in many parts of the world.