China-Japan-ROK FTA has bright outlook yet problems remain

The establishment of a free trade zone between China, Japan and the Republic of Korea (ROK) would definitely help the regional economy. Yet talks surrounding the free trade agreement (FTA) face many uncertainties.

As part of an East Asian economic and trade framework, the FTA was launched in November 2012, with its first round of trilateral talks in Seoul in March.

The second round of talks in Shanghai in July covered topics such as the cargo and service trade, rules of origins, customs procedures, trade remedies, intellectual property rights and e-commerce. The third-round is due in Japan at the end of the year.

Gao Yan, vice minister of commerce, said the three countries had pinned many hopes on the talks, which remain in an early stage.

Regional economic cooperation has not come to fruition in Northeast Asia, as the talks over China-Japan-ROK FTA and China-ROK FTA are ongoing, Gao said at the 9th China-Northeast Asia Expo in Changchun, capital of northeast China's Jilin Province.

"China is willing to work with other countries to optimize trade structure and cooperate in fields like energy and resources, high-end manufacturing, finance, tourism and agriculture," Gao said.

Countries in the region should consolidate consensus and promote the establishment and perfection of a cooperative mechanism through such platform as the Summit Forum on Northeast Asian Cooperation, he added.

Ichiro Moritani, chairman of IBC Japan Co., Ltd., told Xinhua that he personally welcomed the establishment of the China-Japan-ROK free trade zone.

"The free trade zone would help Japan's trade balance in the Pacific Rim and the Northeast Asia regions," said Moritani, who offers consultancy services for companies which want to invest abroad.

Compared with the Trans-Pacific Partnership (TPP). which covers more countries, trade among countries of proximity is more likely to be active, he added.

For ROK businessmen, the FTA will bring big opportunities, said Hee Joong Na, director of Global Business Team, Samkwang Glass Co. Ltd.

"We hope that the FTA will be signed soon so that the tariff is lowered and our products become more competitive," Na said.

In 2012, the three countries' combined gross domestic product totalled 14.3 trillion U.S. dollars, accounting for about 20 percent of the world's total and 70 percent of Asia's total. The economic scale of the three countries is only behind European Union and North America.

Meanwhile, the combined import and export volume totalled 5.4 trillion dollars, or 35 percent of the world total.

Once the free trade zone is in place, the super-large market with 1.5 billion people will help economic development.

However, experts warn that the talks over the FTA face political, economic and social obstacles.

Zhang Yushan, a researcher with the Jilin Academy of Social Sciences, said while China has advantages in agriculture and the textiles industry, Japan and ROK have advantages in traditional industries as well as in service sector.

"The three parties must resolve their existing differences, give consideration to each other's sensitive industries, and expand mutual openness on the above basis," Zhang said.

Moritani said the lack of political trust is the biggest obstacle to the free trade zone.

"If leaders of the three countries can not visit each other frequently and communicate directly, it will be hard to realize the FTA," Moritani said.

Mutual trust among enterprises at social levels are likewise important, said Mutsuo Imaizumi, CEO of EnMan Corp.

"If Chinese and Japanese entrepreneurs can build mutual trust, the success of economic and trade cooperation will not be impeded by occasional political hiccups," Imaizumi said.