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China, South Korea, Japan Make Tripartite FTA Progress

by Mary Swire,, Hong Kong

29 March 2013

On March 28 in Seoul, after three days of meetings that were said to have made the expected progress, China, Japan and South Korea concluded the first round of negotiations on their proposed trilateral free trade agreement (FTA).

The economic and trade ministers of the three countries had announced the launch of FTA negotiations in November last year, following three preliminary working-level consultations. Subsequently, in February this year, officials from South Korea, China and Japan held a preparatory meeting for the first round of talks.

During that first round, only the detailed rules, scope and the working groups of future negotiations were under discussion. Substantive tariff and other issues will be discussed in subsequent rounds, a further two of which will be held in China (in June or July) and Japan later this year. According to the Chinese Ministry of Commerce, all three countries agreed to work together to create a positive environment for the talks, and to achieve a successful conclusion as soon as possible.

Despite the current political problems in East Asia, all three countries appear to agree that, if a deal can be reached, the mutual benefits arising from a trilateral FTA could be substantial. With a market of 1.5bn people, the total gross domestic product of the three countries was USD14.3 trillion in 2012, accounting for about one-fifth of world output, while their total trade reached approximately USD5.4 trillion, or 35% of the total global trade.

While China is the main trading partner for both Japan and South Korea, Japan and South Korea are China’s fourth and sixth trading partners, respectively. The three countries cooperate closely in industrial supply chains, and it is said that establishing an FTA between them would merely reflect the present need to strengthen their economic and trade ties.

As in the recently-announced application by Japan to join the Trans-Pacific Partnership, the extension of which is being led by the United States, it has also been recognized that the issue of tariffs on sensitive goods and services could be challenging for all three countries and, while Japan and South Korea are competitors in the supply of many manufactured and technological goods to China, tariffs on the import of agricultural products, like rice, from China would be a problem for both those countries.

At the same time, South Korea has been pursuing its own separate bilateral FTA talks with China, after their launch in May 2012. The fourth round of those talks was held between October 30 and November 1 last year, and it is hoped that further progress will be made in a fifth round of negotiations later this year.

TAGS: tax | free trade agreement (FTA) | tariffs | China | food | agreements | manufacturing | Korea, South | import duty | trade | Japan | services

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