Northeast Asia's Free Trade Dream


Amid a storm of bluster and posturing in East Asia, there has been scarce analysis on recent attempts at regional integration. Despite this, the rising tensions on the Korean Peninsula have actually served to temporarily move the microscope away from maritime security issues and territorial disputes in favor of punditry over Pyongyang’s nuclear wish list. This has subsequently provided diplomats in region, especially those in Beijing and Tokyo, with the necessary breathing room to soften the tone of their vitriolic exchanges of the past year.

Last month, senior trade officials from China, Japan and Korea met in Seoul for the first round of talks aimed at concluding a massive trilateral free trade agreement (FTA). The trade pact would combine the region’s two biggest economies along with a booming South Korea market that has cracked the top fifteen globally (as measured by GDP). The initial round of discussion in Korea was more perfunctory than anything but this development should not be dismissed as a fool’s errand. After talks with his counterparts in Seoul, South Korean Deputy Trade Minister Choi Kyong-Lim stressed that this meeting was crucial for “establishing trust between negotiators from the three countries, which may play the most important role as negotiations move forward."

Critics will point to the fact that the China-Japan-S.Korea FTA has been an elusive dream for decades as a result of a multitude of factors, including disagreements over market access, exorbitant tariffs and political issues. Granted, much of this still holds true – especially the latter. China’s relationship with Japan has suffered incrementally over the past few years due to renewed clashes over the Senkaku/Diaoyu islands in the East China Sea. Moreover, Japan and Korea have been unable to fully repair frayed ties over history and their own territorial dispute, despite the near simultaneous election of two new leaders. 

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But while some parts of the story remained more or less the same, others have changed. On the trade side, there is urgency for all three countries – to varying degrees – to get ahead of the curve amid a proliferation of free trade pacts and talks in the Asia-Pacific. The fast-moving Trans Pacific Partnership (TPP), a U.S.-led free trade agreement in Asia, has set off alarm bells in Beijing which is thus far excluded from the pact. Indeed, China may have the most to gain from a trilateral pact because it would allow Beijing to combat pressure and dependence on the Western market, while simultaneously undercutting the emerging TPP.

The dividends, however, would not be limited to China. A trilateral agreement would be a lift to the Japanese economy due to the fact that it would secure a privileged status with its two most prominent trading partners in the region. South Korea benefits too as it would be able to erode competition from the Association of South East Asian Nations (ASEAN) and – ironically – Japan for access to the Chinese market.

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