China, Japan, South Korea have been compelled by global economic slump to come together. This seems to be a tough time for even the best performing economies of the world, says Soroor Ahmed of NVONews.Com
Global recession has compelled the leaders of the second, third and 12th largest economies of the world to bury their differences and political ambitions to huddle together at a summit on Sunday.
China, Japan and South Korea agreed to launch negotiations for a three-way free trade agreement (FTA), which they felt could help keep away global economic downturn. However, talks among them are expected to be long and difficult because of decades of rivalry.
According to a feasibility study issued by their governments last year on the trade pact the three nations of north-east corner of the world are major traders, and together accounted for 19.6 percent of global gross domestic product and 18.5 percent of exports in 2010.
Chinese Premier Wen Jiabao told reporters after talks in Beijing with Japanese Prime Minister Yoshihiko Noda and South Korean President Lee Myung-bak that northeast Asia is the most economically vibrant region in the world.
“The establishment of an FTA will unleash the economic vitality of our region and give a strong boost to economic integration in East Asia,” he added.
The official Chinese Xinhua news agency said China is the biggest trade partner of Japan and South Korea. A free trade treaty could lift China’s GDP by up to 2.9 percent, Japan’s by 0.5 percent, and South Korea’s by 3.1 percent.
Yet intra-regional trade and investment levels between China, Japan and South Korea are much lower than levels in the European Union or across the North American Free Trade Agreement area.
Experts are of the view that agreeing on a full-fledged pact, which has been on the table for a decade, will not be easy because of prolong distrust and political rivalry. China’s expanding military and economic power add to the growing fear among the other two. Besides, the three northeast Asian neighbours are divided by trade barriers and diverging investment policies, as well as regionwide worries.
The proposed treaty must also compete for attention with the United States’ push for a broader Trans-Pacific Partnership, a trade liberalization initiative that has drawn in nine countries, with Japan also expressing interest. However, China and South Korea are not part of those negotiations yet.
Xinhua also said that at the summit in Beijing, the three leaders also agreed to a three-way investment treaty, which is considered as a stepping stone to the bigger and much more contentious goal of a free trade deal.
South Korean President Lee told a business meeting that took place parallel to the leaders’ summit that Japan, South Korea and China play an important role in the global economic recovery. When the economy is in crisis, it is more pressing to set up a free trade zone.
Japanese Prime Minister Noda said he saw no conflict between the two trade negotiation proposals.