Wei Jianguo: Can the China-Japan-South Korea FTA be reached by the end of the year? Wei Jianguo, Vice Chairman of CCIEE
After the official signing of the Regional Comprehensive Economic Partnership Agreement (RCEP) on November 15, China and Japan achieved a historic breakthrough by reaching a bilateral tariff reduction arrangement for the first time, which will help promote a high level of trade liberalization in the region.
Wei Jianguo, a special expert of CGGT, former Vice-Minister of Commerce, and Vice-Chairman of the China Center for International Economic Exchanges(CCIEE), believes that the signing of RCEP has laid a good foundation for the negotiation of the China-Japan-South Korea FTA. It is still possible for the three countries to close the deal before the end of this year.
The signing of the RCEP made many people realize that despite the difficult circumstances, China has not only concluded the world’s largest free trade agreement but has also brought confidence and hope to global economic recovery and the fight against the epidemic.
At the same time, many people are asking whether the China-Japan-South Korea FTA can be reached by the end of the year. My answer is yes.
At present, all countries hope that the RCEP can be implemented as soon as possible so that the world’s largest FTA can become the engine of global economic growth after the epidemic. The Japanese and South Korean business circles also attach great importance to it. For example, China and Japan have reached a bilateral tariff reduction arrangement for the first time after the conclusion of the RCEP, which will abolish more than 90% of the tariffs on industrial products. In the future, Japan will enjoy zero-tariff on seafood, beef, daily chemical products, alcohol, agricultural and sideline food, auto parts and rice. In return, Japan will gradually remove tariffs on more than 50% of agricultural products from China and South Korea. As a result, the bilateral trade volume between China and Japan is expected to grow rapidly from the previous 320 billion US dollars.
Japan is the fourth-largest trading partner of China, but its trade only accounts for about 7% of China’s total foreign trade. In the next few years, the Sino-Japanese trade will grow rapidly and account for 10-12% of China’s total foreign trade. Also, the trade between the two countries will increase from the current 27% of the Asia-Pacific region to 35%. South Korea also attaches great importance to the signing of the RCEP. The trade volume between China and South Korea is close to 300 billion US dollars, slightly behind the trade between China and Japan. At present, South Korea’s exports to China are growing rapidly, even during the COVID-19 pandemic. South Korea is eager to increase imports of the semi-finished products formed by the processing of primary products in ASEAN countries through China, such as textiles, medical fabrics, electronic products and agricultural products.
Many experts and scholars believe that the signing of the RCEP will facilitate negotiations on the China-Japan-South Korea FTA. I believe that the FTA can be concluded by the end of this year for the following reasons.
The greatest success of RCEP is that it shows the world that trade liberalization and investment facilitation advocated by China is recognized by ASEAN, Japan and South Korea. In the next step, the regional and multilateral economic and trade system proposed by China will be appreciated by more countries, especially the “Belt and Road” countries. China advocates an inclusive, open, balanced, cooperative, and win-win globalization, which is also supported by the Japanese and South Korean business communities.
The current pandemic in Europe and the United States has brought a tremendous challenge to the economic recovery in the future, therefore, the global economic development is bound to move to the east. If China, Japan and South Korea can further reduce tariffs and promote the development of technology, finance, services, medical care, environmental protection, tourism, digital economy, cloud computing, smart manufacturing, and green economy, their economies will undoubtedly become stronger and stronger. The RCEP has achieved more than 90% tariff reduction arrangements for the above-mentioned products and services. It will be a win-win for all the parties if the “RCEP + China, Japan and South Korea” free trade zone can be formed as soon as possible.
After 10 years of research and 8 years of negotiations on the China-Japan-South Korea FTA, the three parties realized that they have a lot in common. Forming a higher-quality China-Japan-South Korea FTA will not only play an important role in promoting the economic cooperation of the three countries but also contributes to the building of a rules-based trading system and Multi/bilateral free trade agreements.
This year is the closing year of China’s 13th “Five-Year Plan”, which will lay a good foundation for the beginning of the 14th Five-Year Plan. China’s policies for the new pattern of dual circular economy development will become more open, and China needs closer cooperation with its neighbors to create an open, stable and secure industrial and supply chain in East Asia. If Japan and South Korea can see this opportunity as well, they will be happy to join China’s dual circular economy development and enjoy rapid development opportunities with China, which will soon become the world’s largest economy.
There is not much time left until the end of the year, but I firmly believe that as long as the three parties make overall arrangements, strengthen cooperation, overcome difficulties, and reach an agreement on the China-Japan-South Korea free trade framework, they will eventually create a miracle in world and regional economic cooperation.