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Recently free trade agreements have been making a breakthrough, driven by three main factors in East Asia. Firstly, market-driven economic interaction has solidified. Secondly, the North America Free Trade Agreement and the European Union have motivated East Asian countries to pursue their own regional integration. Thirdly, the Asian financial crisis of 1997-1998 warned these countries of the need to establish cooperative economic and financial relationships.
According to Samsung Economic Research Institute, as China has grown to become a major exporter and has expanded its markets in East Asia, the region's economies have become substantially more dependent on China and less on the United States than they were before. In this respect, the rise of China's economy has functioned to pull together East Asian nations, inducing them to seek further internal market integration.
The Asian financial crisis planted the idea of an East Asian Community throughout the region. However, it seemed very difficult for this idea to become a reality. Market integration seemed inconceivable for Asian countries at varying degrees of economic development.
What has heightened the possibility of such a community is the vigorous FTA activities in the region. Not to mention Southeast Asian nations, China, Japan, and South Korea have changed the focus of their pursuit of trade liberalization from the World Trade Organization to FTAs, which have enabled East Asian nations at different levels of economic development to select proper partners for economic integration.
The Association of Southeast Asian Nations appears to be moving smoothly toward establishing its FTA network with South Korea, Japan and China -- ASEAN + 3. An ASEAN-South Korea FTA came into force in 2006, and, ASEAN has proceeded with negotiations for FTAs with Japan and China.
ASEAN and China began negotiations in 2001 and plan to begin their FTA in 2010 for six members of ASEAN, and in 2015 for the remaining four members. ASEAN and Japan finalized their negotiations last year for their Comprehensive Economic Partnership Agreement, which comprehensively covers trade, investment and services; it was signed last month.
ASEAN-led efforts to build FTA networks have been paying off and the East Asian Community has better prospects than it used to. But uncertainty remains surrounding the question of how other major players such as China, South Korea and Japan will cooperate with each other for economic integration. This is because, although they share a common vision of East Asia's economic community, they have sought their own initiative for shaping the regionalization.
By choosing Singapore as its first FTA partner in 2002, Japan set the stage to shift its trade policy from a multilateral to a regional approach. Japan's ambition to be a central player shaping East Asia's economic integration has solidified in its new scheme.
Japan's Ministry of Economy, Trade, and Industry expressed its intention to pursue an "East Asia Economic Partnership Agreement" in 2006, which aims to include the Asia-Pacific region with a view toward establishing comprehensive economic cooperative relationships. Japan has set the starting date for the EPA negotiations as 2008.
China also has been an energetic participant in the FTA race, establishing many FTAs since 2001. China also has an ambition to take the leading role in economic integration in East Asia, and has sought an FTA with ASEAN since 2001. And now a newcomer has joined the competitive race for the initiative: South Korea.
South Korea has pursued its dream of emerging as an economic hub in East Asia. This idea has been one of the centerpieces of its FTA policy. After concluding FTAs with Singapore, Chile and ASEAN, South Korea vehemently joined the FTA era by concluding an FTA with the United States -- KORUS FTA -- in 2007. This FTA has jolted Japan and China, who are serious stakeholders in the U.S. market, but whose FTAs with the United States are unlikely in the near term to urge South Korea to put their halted formal discussions of FTAs back on track.
In this respect, in addition to the KORUS FTA that seems to grant South Korea the upper hand in negotiations for FTAs with China and Japan, it has become a catalyst to promote economic integration in Northeast Asia by rendering South Korea a much more attractive FTA partner to Japan and China than previously.
Although South Korea, Japan, and China are in a position to compete with each other for the initiative in East Asia regionalization, their FTAs are highly likely to materialize. In fact, a South Korea-Japan FTA and a South Korea-China FTA are the most likely among the conceivable set of FTAs. They have a long history, over five years, of negotiations. The South Korea-China FTA negotiations will begin soon after South Korea finalizes its FTA with the European Union. The South Korea-China FTA remains just a matter of time, though it could be bumpy.
On the other hand, South Korea and Japan have struggled to find a way out of their impasse; Japan's agricultural protection stance allows little room to yield in negotiations. However, Japan may have difficulty enduring after South Korea and China become FTA partners.
What about a South Korea-Japan-China FTA? A trilateral trade pact has long been proposed for its potential economic benefits to these countries. Their economic needs for an FTA have been deepening along with their growing economic interdependence.
Skeptics have claimed for a long time that this FTA-driven regional economic integration poses a grave threat to World Trade Organization-led multilateralism. However, although the WTO system has ceased to play an important role in trade liberalization, FTAs have taken its place by supplementing trade liberalization, particularly in East Asia.
And, it seems that the slogan of multilateralism cannot deter these FTA initiatives in East Asia because the East Asian community already has become the more realistic and desirable goal than the multilateral world economy for ASEAN and other countries including China, South Korea and Japan.
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(Lee Jae Young is a freelance writer and citizen reporter for Ohmynews International. He has a master's degree from Cornell University Law School in Ithaca, New York. ©Copyright Lee Jae Young.)
