RPT: ANALYSIS - China-Japan-South Korea FTA Talks Vital Amid Rising Protectionism But Fraught With Hurdles

SOCHI (UrduPoint News / Sputnik - 18th April, 2019) Beijing's recent call on Tokyo and Seoul to establish the long-negotiated free trade area (FTA) as soon as possible may seem a ray of light amid the global rise of protectionism and disintegration trends, yet there are a number of serious factors, including those economic, political and historical, that can put a damper on the process, experts told Sputnik.

On Sunday, during a high-level economic dialogue with Japanese Foreign Minister Taro Kono, Chinese top diplomat Wang Yi called for a swift establishment of a FTA between the three northeastern Asian nations, a matter that has been subject of trilateral negotiations since 2012.

According to Sunkung Choi, an assistant professor at the University of Groningen's Faculty of Economics and business, the sides have already reached a significant level of integration, and the 2015 FTA agreement between China and South Korea is a good example of it.

"The current level of integration happened without any political or institutional support till Korea and China sign the FTA in 2015. Which means, they don't need to start 'radical' changes [to agree on the trilateral FTA deal]," Choi told Sputnik.

The expert therefore considers the statement made at the Wang-Toro meeting to be "very much political rather than an economic agenda," adding, however, that "the free trade agreement would have a positive impact overall in the region."

Making a reference to the growing global protectionism, Seijiro Takeshita, a professor at the University of Shizuoka's school of Management and Information, agrees that the potential FTA agreement would be obviously good news.

"It certainly is not negative - when we have [US President] Mr. [Donald] Trump hollering and possibly Brexit taking place. We need to regress our thinking into creating synergism via freer trade," Seijiro Takeshita told Sputnik.

The Beijing-Tokyo-Seoul trade deal, meanwhile, may indeed turn the whole region into one huge FTA, according to Kim Sung-han, a former South Korean deputy foreign minister and professor of international relations at the Korea University.

"China is leading RCEP [the Regional Comprehensive Economic Partnership] and Japan is leading CCTPP [the Comprehensive and Progressive Agreement for Trans-Pacific Partnership]. If China and Japan agree on FTA together with Korea, it will play as a linking pin between RCEP and CCTPP, thereby contributing to the region-wide FTA," Kim told Sputnik.

Professor Choi, in turn, went even further, noting that the trilateral FTA, coupled with China's Belt and Road Initiative, would enable China to "embrace both sides of the Eurasian continent" � an obviously unwanted prospect from the US perspective.

"If China can take the 'role' of the go-between and engage the relevant countries to the projects in harmony, China will become a regional power ... This will be also helpful for North Korea to integrate and develop its economy later when they open up," she went on to say.

Former South Korean deputy foreign minister Kim, however, doubts that the three countries will manage to strike the long-anticipated deal in the near future.

"The different level of economies of those three countries appears to be in the way. For example, Korea and China are already in FTA, but Japan would be reluctant to see Chinese products come into its market through FTA more easily and replace the Japanese products using their comparative advantage of the price. The same could be applied to Korean products," he suggested.

Michael Pettis, a nonresident senior fellow in the Carnegie Asia Program and professor at Peking University's Guanghua School of Management, similarly believes that the sides would manage to reach agreement easily only "on paper."

"All three countries suffer from weak domestic demand, and so all three need from international trade a place in which to invest excess savings and to sell excess production ... What the three countries really need are trade partners that are willing to run trade deficits, but unfortunately none of three can play that role for the other two," Pettis told Sputnik, adding that "a great deal of mutual suspicion between the three countries" would make the objective of creating FTA even less attainable.

The expert, therefore, suggested that Wang's statement was "not much beyond political signaling."

Professor Choi of the University of Groningen's Faculty of Economics and Business, however, sounds more optimistic.

"Japan is trying hard to reactivate the domestic economy and Korea is also suffering from the slowing-down-economy. China is also looking for a solution for exit for the "excessive investment" of the last years. Three countries are finally in mutual "needs" for further steps, so it seems to be a good time to do some visible action," she said.

The expert noted that the free trade agreement would "restructure the economy" of the three nations, so they first need to thoroughly "calculate what are the gains and losses." She stressed that the negotiations had already taken long but the very process of creating FTA was also a huge challenge itself.

"Also, not any third party, but they should convince their own people for the free trade agreement," she added.

HISTORICAL, TERRITORIAL DISPUTES

Along with conflicting economic interests, complicated historical past and disputes in the East and South China Sea may also stand in the way of the FTA negotiations between China, Japan and South Korea.

"Very often the governments use unsettled historical or territorial issues to draw public's attentions when the domestic market encounters difficulties, which interrupts the trilateral talks," Lurong Chen, an economist with Economic Research Institute for ASEAN and East Asia (ERIA), told Sputnik.

As an example of the recently-reemerged historical disagreements, professor Takeshita of University of Shizuoka's School of Management and Information, mentioned Seoul's demands for compensation for forced labor during Japan's colonial rule.

Tensions between China and Japan may put further strain on the relations within the triangle.

"Security issues. Japan is always in doubt of China's intent. It is difficult to solidify a pact when you know that the opponent is trying to nudge into your territory all the time," Takeshita suggested.

He added that even though everybody knows that "free trade talks is what we need in the wake of Mr. Trump's acceleration on protectionism and bilateral trade talks," both Japan and South Korea "cannot go too far" into building relationship with China as long as they remain under the US security umbrella.

The US-inspired protectionism and the wish not to "antagonize Trump" emerge as another factor that may prevent Washington's key regional partners from embracing the ambitious free trade project, professor Jeffrey Kingston, the director of Asian Studies at the Temple University, Japan Campus, told Sputnik.

"Seoul and Tokyo understand Trump's preferences and penchant for punishing those who cross him. They know Trump will be pissed if they cut a deal and he will make life hard for them if they do," he said.

Professor Choi, however, opined that it would be "difficult" for the United States to publicly oppose the potential FTA agreement.

"I can imagine that 'officially' they should welcome because free trade agreement means the three countries are connected to each other institutionally and it is a good news for the regional security and peace which they worked for the last years. Moreover, the agenda is heavily on 'economy' because it is 'free trade agreement,'" she said.

Former South Korean deputy foreign minister Kim, in turn, believes that Washington will only "welcome" the FTA talks as United States itself wants Japan to lower its trade barriers "as early as possible."

Pettis, a nonresident senior fellow in the Carnegie Asia Program and professor at Peking University's Guanghua School of Management, meanwhile, did not rule out "some opposition from the US," suggesting that "Japan and South Korea will use US opposition as excuses for not doing things they don't want to do, but in the end they will do whatever they think is in their best interests."