North Asian FTA, Japan, China, South Korea

Top diplomats of China, Japan and South Korea are scheduled to meet on Wednesday in Beijing as the Tokyo-Seoul trade dispute adds uncertainty to the regional economy.

China is unlikely to take sides in the Japan-South Korea trade dispute. East Asia’s economic picture has grown increasingly complex, but the region needs cooperation instead of outside interference. At a sensitive moment, when both Tokyo and Seoul look for allies amid the trade conflict, China should seize the chance to promote negotiations on the trilateral free trade agreement (FTA). Recent decades have witnessed the rise of global value chains that link Asian manufacturing bases with large consumer bases in the US and EU. In the Asian production network, economic interdependence is a reality, while fierce competition exists among countries such as Japan and South Korea, whose manufacturing sectors are highly homogeneous.

With US President Donald Trump’s efforts to reduce the US trade deficit, export markets for Asian companies are weakening, so competition between Japan and South Korea has intensified. The rise of trade protectionism in the US is the deep-rooted cause of the Japan-South Korea trade dispute.

If Japan and South Korea escalate their trade war, the US can benefit and encourage manufacturers to move production to the US. However, Asian economies, especially Japan and South Korea, may suffer as a result. What can be done to avoid this scenario? There is still room for Japan and South Korea to sit at the negotiating table and achieve a win-win result. Hopefully, they can seize this opportunity.

The fundamental solution is to create a new export market for companies involved in the Asian supply chain as Trump cuts the US trade deficit. Shrinking domestic demand in Japan and South Korea is pushing companies in the two countries to look overseas for growth.

China’s consumption market has remained stable in recent years. The Nikkei Asian Review reported in January that China is expected to overtake the US to become the world’s largest consumer of goods this year despite a slowdown in the economy.

A trilateral FTA will further open the Chinese economy to Japanese and South Korean enterprises. This will be an important aspect of the reorganization of the Asian supply chain amid the trade wars. In this process, the US’ role is being weakened by its trade protectionism, while China is serving as an important export destination.

China is a staunch supporter of free trade. We believe Beijing is willing to promote negotiations of the trilateral FTA with Tokyo and Seoul. The question remaining is how Japan and South Korea will respond to China’s sincerity.

The author is a reporter with the Global Times.

(In association with Global Times)