With South Korea and China due to begin their negotiations on a bilateral free trade agreement (FTA), a trilateral agreement to include Japan will also be under discussion at a prior meeting of the three countries’ trade ministers.

The first round of negotiations in Beijing between South Korea and China on their bilateral FTA has been postponed from a previously-expected May 10, 2012, to a re-arranged date of May 14, at the reported request of China. That round will now be held after a trilateral meeting to discuss trade and investment issues between the trade ministers of South Korea, China and Japan, which is due to be held on May 12.

After a meeting on May 2, the Chinese Minister of Commerce Chen Deming and South Korea’s Trade Minister Park Tae-ho formally announced the official launch of the countries’ bilateral FTA talks, as had been expected following the positive completion of previous feasibility studies. The two ministers agreed to try and conclude those negotiations quickly, possibly within two years.

While the issue of sensitive goods and services could be challenging, particularly tariffs on agricultural products for South Korea, the ministers recognized that, if a deal could be reached, the mutual benefits arising from the FTA could be substantial. China is already South Korea’s largest trading partner, while the latter also ranks as China's fourth-largest foreign investor.

While positive talks had been held earlier this year on a possible tripartite FTA to also include Japan, it had been expected that a bilateral FTA between China and South Korea would probably get the go-ahead first, largely because the two governments were so well advanced in their preparations. Nevertheless, Japan would suffer the most, in terms of lost trade, if China and South Korea were to finally conclude an agreement and went ahead on their own.

However, the agreement by China to accede to South Korea’s request to start bilateral FTA negotiations has been seen as a means of putting pressure on Japan, which has also asked to join the United States-led talks on an extended Trans-Pacific Partnership. It appears that China would much prefer Japan to join an East Asian trade area, which could include the Association of Southeast Asian Nations with which China, South Korea and Japan already have existing trade treaties.

It was, in fact, the Chinese Ministry of Commerce that arranged the tripartite trade ministers meeting on May 12, to also include the Japanese Economy, Trade and Industry Minister Edano Yukio.

Recent tripartite meetings between the three countries have looked to increased cooperation in many areas, including reaffirming their commitment to the early signing of an investment agreement. The latter will also be on the agenda of the May 12 trade ministers meeting, the ninth between the countries, but they can be expected to concentrate on the possibilities of an FTA between them all.

May 8, 2012

Source: Tax News

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