Resumption of China-Japan-South Korea Trilateral Summit and the Future of Trilateral Cooperation

JIANG YUECHUNResearch Fellow and Director of the Department for World Economy and Development, China Institute of International Studies



Resumption of China-Japan-South Korea Trilateral Summit and the Future of Trilateral Cooperation

JIANG YUECHUN
Research Fellow and Director of the Department for World Economy and Development, China Institute of International Studies

LEADERS OF CHINA, JAPAN AND SOUTH KOREA MET IN SEOUL IN EARLY NOVEMBER 2015 FOR the first trilateral summit in three years.Although not so many substantial results were achieved, the resumption of the trilateral summit itself is of great significance and the leaders issued a joint statement and agreed to collaborate more on security and economic fronts, which will bring new opportunities for the trilateral cooperation.It should be noted, however, that the trilateral free trade talks are complicated.The three countries face different pressures in different fields and hold differing views on history.It remains challenging to push forward regional cooperation in East Asia.

CHINA-JAPAN-SOUTH KOREA TRILATERAL SUMMIT: A LANDMARK IN WORLD HISTORY

The China-Japan-South Korea leaders’ meeting is an important mechanism of cooperation between the three countries created in 1999 within the framework of ASEAN Plus Three (APT).In 2008, a China-Japan-South Korea trilateral summit was held outside the APT framework.As the highest level of meeting between the three countries, the summit has played a significant role in promoting trilateral cooperation.The trilateral summit was put on hold in 2012 as the relations of China and South Korea with Japan strained due to territorial disputes.

China-Japan relations gradually showed signs of improvement in 2014 after a four-point consensus had been reached.Following the meeting of the two countries’ leaders, both sides intensified efforts to “take good care of”the bilateral relations.On the sensitive issue of history, in particular, Japan behaved with more restraint and the Abe administration held back its desire to defame China.People-to-people exchanges between the two countries also picked up to some extent.The improving China-Japan relations held the key to resuming the trilateral summit.

The smoothly progressing regional economic integration in East Asia and the world to some extent inspired Northeast Asia.The Trans-Pacific Partnership (TPP) negotiators reached an agreement in October 2015.As planned, the ASEAN Community will be established at the end of 2015.In addition, the Regional Comprehensive Economic Partnership (RCEP) negotiations led by ASEAN countries are also expected to be concluded.However, of the world’s three major economic blocs, only East Asia has not seen the signing of a regional free trade agreement.Since ASEAN has signed a free trade agreement respectively with China, Japan and South Korea, the success of China-Japan-South Korea FTA negotiations determines that of economic integration in East Asia.Moreover, the world economy remains sluggish, facing downward pressure.Against such a background, increasing economic cooperation should be the best choice for China, Japan and South Korea.

Chinese Premier Li Keqiang attends the sixth China-Japan-South Korea summit held in Seoul, South Korea, November 1, 2015.This is the first trilateral summit in three and half years.

In November 2015, the China-Japan-South Korea trilateral summit resumed in Seoul and produced important results in multiple fields.Leaders of the three countries expressed hope for continued development of political and security cooperation mechanisms, agreed that the meeting should be held on a regular basis, and planned to actively advance the development of over 50 intergovernmental consultation mechanisms.They reaffirmed that it would serve the common interests of the three countries to maintain peace and stability in the Korean Peninsula and Northeast Asia, and that the three countries would collaborate on addressing international security issues such as cyberspace, terrorism and violent extremism.The trilateral investment agreement came into effect.The three countries would continue to collaborate on innovative technology, energy, standardization, information and communications technology, and logistics, and would focus on promoting the establishment of the China-Japan-South Korea free trade area as an important goal.Leaders of the three countries also reached agreement on people-to-people exchanges and other cooperation projects.Their stance on deepening cooperation is bound to provide considerable momentum for pragmatic cooperation.

CHINA-JAPAN-SOUTH KOREA FTA PROCESS: A LONG WAY TO GO

I.Stronger competition in some industries may hinder negotiations.

Over the years, Japan has been a leader in high-end manufacturing while South Korea and China have been at the lower end of the industry chain.Such an industrial structure is mainly characterized by clear complementarity.However, the structure has been changing in recent years, particularly since the outbreak of the international financial crisis.China has improved its industrial competitiveness somewhat; in some fields, there are signs of China’s going neckand neck with or even overtaking Japan and South Korea.China, Japan, and South Korea have seen their world market share of exports grow considerably and the competition among them in all industries is getting increasingly intense.The conclusion of a China-Japan-South Korea FTA means even tougher competition in some industries so Japan may not be motivated enough to push forward the signing of China-Japan FTA.

In recent years, China has improved its industrial competitiveness somewhat and in some fields, there are signs of China’s going neck and neck or even overtaking Japan and South Korea.The photo shows the new type of locomotives ready for delivery in the core production zone of CRRC Zhuzhou Locomotive Co., Ltd.on March 27, 2015.

II.The issue of history remains the political constraint.

Although China, Japan and South Korea have had rounds of negotiations, no real progress has been made in the FTA process.This is partly because the three countries have competing interests in the economic sphere, and to some extent because Japan’s denial of facts on historical and territorial issues has seriously hurt the feelings of Chinese and South Korean people.The issue of history concerns popular and national sentiments.Popular sentiment is an important basis for China-Japan-South Korea cooperation.The ability to look at history objectively and justly has a direct bearing on the friendship between people of the three nations and on the process of cooperation among the three countries.On the part of Japan, facing history, looking objectively and justly at its acts of aggression and colonial rule in the past, and refraining from shirking its historical responsibility and indulging people who seek to glorify war is of crucial significance to the trilateral cooperation.The common interests of China, Japan and South Korea will be expanded only if they can build up trust in one another on the basis of looking correctly at history.

III.The TPP may be a benchmark.

It is fair to say that the TPP plays a part in promoting the China-Japan-South Korea FTA negotiations because without the TPP it would be hard for Japan to give full consideration to the cooperation with China and South Korea.The U.S.-led TPP is a top-level free trade agreement reached in the Asia-Pacific region in recent years.Despite some limitations and even a certain degree of exclusiveness, the agreement shows some important trends in the world economy such as free trade, lower tariffs, intellectual property protection and green development.Therefore, it is, to some extent, a benchmark for existing regional trade cooperation frameworks in Asia-Pacific.China and South Korea have signed an FTA and Japan is a member of the TPP.If the China-Japan-South Korea FTA adopts the model of China-South Korea FTA, the negotiations will be less difficult, more efficient, and likelier to be successful.However, in the TPP negotiations on reducing tariffs, Japan made an unexpected compromise over the tariff-free import quota for rice, one of the “five sacred areas” to the country.Therefore, Japan would like to basethe China-Japan-South Korea FTA negotiations on the more liberal TPP.If the TPP is indeed taken as a benchmark, South Korea would not have any big problems but China may need to make serious efforts.

FACTORS INFLUENCING CHINA-JAPAN-SOUTH KOREA COOPERATION

China, Japan and South Korea are important countries as well as major economies in Asia.Enduring good relations between them are crucial to regional peace and stability.On the whole, there are favorable factors for promoting China-Japan-South Korea cooperation as well as crucial factors that determine whether progress will be made in a short time.

I.Favorable factors

First, there is a good foundation for cooperation.The three countries are deeply dependent on one another economically.Japan is one of China’s largest sources of FDI as well as one of the countries that have provided the greatest help for China in pursing economic development.China is an important export destination of Japanese goods.The economic and trade ties between the two countries have been weakened along their strained bilateral relations in recent years.Since domestic demand in Japan is limited, how to expand export directly affects its economic stability.China and South Korea have signed an FTA so they have very close economic and trade ties.Japan and South Korea have always been close economically.Maintaining and promoting the steady and healthy development of the three countries’ economic and trade ties serves their fundamental interests and will play a part in driving regional development and regional economic integration.The studies on the China-Japan-South Korea FTA have continued for many years.The resumption of negotiations is no doubt a good beginning for deepening the economic and trade cooperation among the three countries.

Second, the three countries’ development strategies offer possibilities for collaboration.Given the sluggish global economic recovery, China, Japan and South Korea are all accelerating economic transformation and all have enormous demand for expanding overseas investment and export.It is in their interests to promote economic growth by deepening pragmatic cooperation.In particular, the three countries are having more and more in common in terms of economic development strategy, offering more possibilities for collaboration.For example, the potential for cooperation is enormous in such fields as technology innovation, international production capacity, innovation economy and information technology.

Third, the economies of the three countries remain complementary to one another in some aspects.In the late 1970s, China was the initial stage of industrialization and thus took in some production capacity from Japan and South Korea.Since then, China has gradually grown into a processing trade and manufacturing center for Asia and even the world.Although China is somewhat competitive to Japan and South Korea in such industries as automobiles, steel, and petrochemicals, Japan still has its unique advantages in the high-end parts manufacturing.The three economies still have complementarity to some extent.The outlook for Chinese investment in Japan is good.The potential for trilateral cooperation is great in such aspects as trade in services, new energy and low-carbon technologies.

II.Crucial factors

First, stable China-Japan relations.In the second half of 2012, then Japanese Prime Minister Yoshihiko Noda announced the plan to “nationalize”the Diaoyu Islands, seriously straining China-Japan relations.Following a two-year deadlock and coolingoff, the two countries reached a fourpoint consensus and leaders of the two countries eventually met in 2014.Despite the improved relations and constraint by both sides on sensitive issues, the territorial dispute between China and Japan and other issues are yet to be addressed.In such a context, the two countries need more effort and wisdom to clear up misunderstanding and build up trust in each other.Governments of the two countries are faced with the important task of figuring out how to maintain the steady development of bilateral relations and prevent them from being undermined once again by any particular issues so as not to influence the China-Japan-South Korea economic cooperation process and domestic economic development.

Second, Japan’s policy.To some extent, Japan directly affects the process of China-Japan-South Korea cooperation.This is because Northeast Asia is where the interests of major Asia-Pacific countries intersect.Japan chooses its policy based on its own interests as well as the interests of its allies, particularly the U.S.Over the years, no progress has been made in economic cooperation across Northeast Asia.An important reason is that Japan adopts a negative “no-friend-only-business”attitude.Moreover, the wrong views of history held by right-wing forces and deep-rooted nationalism in Japan have brought the issue of history, territorial dispute and other sensitive issues to the fore, provoking antagonism between the people and governments of the two countries.All these will interfere, to some extent, with China-Japan-South Korea cooperation.

Third, the U.S.policy for Asia-Pacific.In the short term, it is rather hard to change the dependence of Japan and South Korea on the U.S.on the security front.Therefore, the two countries will be inevitably restrained by the U.S.in promoting the China-Japan-South Korea FTA process.The U.S.seeks to strengthen its alliance with Japan, South Korea and Southeast Asian countries one the one hand, and on the other, works to accelerate the TPP process it leads.This makes an impact on the existing cooperation framework in East Asia and to some extent, hinders the China-Japan-South Korea FTA process.In the future, the biggest challenge to China, Japan and South Korea will be still to deal with the U.S.properly.