FTA talks may lead to trading bloc
By Song Quan (China Daily)
Updated: 2005-04-22 08:59

Prospects of free trade in Asia are promising as a dazzlingly complicated network of free trade deals is expanding.

Nations on the continent have signed dozens of agreements about bilateral or multilateral free trade agreements (FTA) and they are in talks for more.

Asia's three biggest economies - China, Japan and the Republic of Korea (ROK) are all in respective talks with the Association of Southeast Asian Nations (ASEAN) about FTA.

What is more exciting is that the respective FTA deals the three countries are involved in might end up in a trade bloc that includes the three of them as well as ASEAN countries.

Experts mandated by governments earlier this week have begun a study looking at the building of a free trade area that covers the 13 nations.

The FTA could be even bigger because both Australia and New Zealand have expressed intentions to join FTA deals with the so-called 10 plus 3 countries.

South Asian countries have also signed a number of FTA deals.

Between East Asia and South Asia, China and Pakistan have started FTA negotiations; China and India also pledged to build a FTA.

However, there are still no signs that such an FTA that covers China, Japan and the ROK could emerge any time soon.

As the biggest economies in the region, their close economic ties would be very favourable for economic co-operation of the entire region, said Xu Changwen, a senior researcher with the China Academy of International Trade and Economic Co-operation, a think tank under the Ministry of Commerce.

Both China and ROK are willing to build an FTA among the three, but Japan has shown less commitment.

"Japan's attitude is the key. It does not intend to have talks with China soon," said Jiang Ruiping, a professor at China Foreign Affairs University.

"It (Japan) puts lots of emphasis on the fact that China is a new member of the World Trade Organization (WTO). It wants to see how well China can adjust to its WTO membership."

Openly, Japanese officials have also disclosed their roadmap for their pursuit of free trade with regional trading partners.

Last year, they finished talks with Singapore. Now they are in talks with ROK, some ASEAN countries individually and ASEAN as a whole.

China seems to be at the very bottom of Japan's namelist.

The benefits of a three-way FTA for Japan are obvious because its enterprises are the strongest in the three countries. In fact, Japanese enterprises lobbied very hard for it.

Zhao Jinping, a veteran Japan expert with the State Council's Development Research Centre, said the Japanese Government does not want to engage in direct FTA talks with China partly because it is wary about the latter's emerging economic power.

Japan also worries that FTA talks with China and ROK would force it to open up its agricultural market, which is a very sensitive sector for Japan.

Closer co-operation needed

In view of their uncertain FTA prospects, China, Japan and ROK should seek to take more orchestrated actions in international economic affairs, Zhao said.

The three economies have increasingly more in common in terms of industrial structure, so they should have closer co-operation in sectors such as energy and steel and on issues such as standards of information technology products.

The recent international disputes over ore prices highlighted the need for co-ordination among the three. Like many issues concerning international trade, being in a bloc puts a trading nation in a better position than being alone in the negotiations, Zhao said.

In fact, China, Japan and ROK all have strong steel industries and are all big ore importers. They will definitely have a bigger say in negotiations if they joined forces.

Within Northeast Asia, strengthening trade ties among the three countries also demands more consultation and discussion.

Mechanisms have been set up for three-party talks on issues such as public finance, macroeconomic management, finance and quarantine.

In the non-governmental sectors, exchanges between industry associations and enterprises from the three countries are also increasing.

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