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Political trust key to promote free trade in East Asia


08:24, May 14, 2012

A decade of researching whether a free trade area (FTA) among China, Japan and the Republic of Korea (ROK) is feasible has been no means an easy journey. And any sign of progress to push forward the talks deserves applause.

Trade ministers of the three nations are meeting in Beijing Saturday to finalize a trilateral investment accord and push FTA negotiations up on each country's agenda.

The conclusion of the feasibility study in 2011 and the nearly finalization of the three-way investment treaty has paved the way for launching the FTA talks, but that only marks one step forward along the long negotiation journey.

But there is no excuse for inactivity in pressing ahead with the agenda, as previous research has proved that the FTA will benefit the people of East Asia.

With combined economic output accounting for one-fifth of the world's total, China, Japan and the ROK are not only geographically-tied but also interdependent in trade.

From 1999 to 2011, trilateral trade grew more than four-fold from $130 billion to $690 billion. China has been Japan and the ROK's largest trading partner for years while Japan is China's fourth biggest trading partner and ROK is China's sixth largest.

Research has shown the FTA will boost China's GDP by up to 2.9 percent, and up to 0.5 percent for Japan and up to 3.1 percent for the ROK. While the US and Europe are struggling to overcome economic malaise and volatility, the FTA is a protective screen to shield external turbulence.

There is no need to shy away from disagreements. Thorny issues such as the sensitive product list and foreign investor's national treatment should be handled with care, courage and compromise. Lowering tariffs will probably hurt domestic industries in the short-run, but it will foster healthy industry reshuffling and promote new efficiencies.

Conversely, any attempt to manipulate the agenda to gain bargaining chips will slow the negotiations and may have a detrimental affect on the outcome.

More importantly, political trust is badly needed in this sensitive region, not only in political affairs but also in economic ties. The three countries need to realize that, and under the FTA framework, their common interests will be larger than temporary losses.


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