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Cover Stories Series 2013> Japan Consolidates Leadership> Archive
UPDATED: May 13, 2013 NO. 20 MAY 16, 2013
Keen for Free Trade
Cooperation and competition coexist as a China-Japan-ROK free trade area emerges
By Shi Yongming

Political competition

The trilateral FTA will play a crucial role in future Asia-Pacific regional economic cooperation. The cooperation of the three countries bears on the choice of a regional cooperation path, which may affect regional political and security landscapes.

There are several targets and path choices in regional cooperation given differences in economic structures and development levels. The United States has been attempting to raise the Asia-Pacific region's free trade mechanism to a higher level. But its aggressive attitude has continually been met with strong resistance in East Asia. Most East Asian countries' economic development levels are not high enough to participate in full economic competition. Protecting the right of development of relatively weaker countries is still a major key to regional cooperation.

There are two possible models for regional cooperation: building a regional mechanism as a pioneer of a global mechanism and enhancing regional comprehensive competitiveness through cooperation. The first focuses on full competition regardless of national differences and the establishment of a completely consistent system, while the second pays more attention to ensuring the fairness of development, addressing differentiation and pushing forward regional cooperation step by step.

Likewise, there are two paths to boosting free trade in the Asia Pacific. One is through Trans-Pacific Partnership (TPP) agreement negotiations, which the United State is powerfully pushing. The TPP attempts to come up with a zero-tariff FTA with high standards on a series of systems including labor and intellectual property, so as to make a model for a global trade system. The other is through the RCEP negotiations of the 16 East Asian countries. The RCEP places more value on enhancing comprehensive competitiveness and internal cohesion in the region. As the United States has politicized regional cooperation and considered the TPP as a tool to disrupt East Asian cooperation so as to maintain Washington's advantage against China, competition over the two paths has turned into competition between China and the United States over dominance in the Asia-Pacific region.

Many East Asian countries, including Japan, have taken a two-pronged tactic by participating in both negotiations. In the past, Japan signed economic partnership agreements with other East Asian countries to restrict free trade to non-agricultural sectors, because of its domestic political need to strongly protect agriculture. However, during a visit to the United States in February, Prime Minister Shinzo Abe decided to join TPP negotiations based on international political needs. In Japan, Abe's action was perceived as the beginning of an attempt to weave an economic network to besiege China, after trying to diplomatically surround the country. Meanwhile, the trilateral FTA was considered as China's attempt to win over Japan.

Further complicating the matter are deep-seated political disputes that continue to cast a shadow over trilateral economic cooperation. For instance, Abe's recent push to make changes to Japan's pacifist Constitution has jeopardized mutual trust among the three countries.

China's priorities

While seeking an FTA, China must consider its own demand along with the international environment. Free trade, which helps bring into play different countries' complementary advantages and promote fair competition, is conducive to propelling development. But the level of free trade must suit a country's economic development. China faces challenges in its choice of a free trade pattern at a time when the country undergoes an economic transition and the world economy enters a new phase of technological innovation.

China's economic transition is not a problem of being driven by internal or external demands, but rather one of economic development capability being internal-oriented or external-oriented. During the past 30-plus years, China's pace of reform has lagged far behind the pace of opening up. It has overly depended on low resource costs and imported technology, while neglecting independent innovation. Now it has lost its low-cost advantage, and tariffs will no longer be a major trade obstacle.

The next round of global economic competition will focus on technology, systems and social governance levels. Under the new conditions, developed countries may regain their lost frontier of industrial production following a new round of production transfer in a low-tariff free trade environment. China should therefore consider FTA negotiations as an impetus for driving the progress of its own undertakings.

The author is an associate research fellow with the China Institute of International Studies

Email us at: yanwei@bjreview.com

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