BEIJING — China, Japan and South Korea agreed at a summit yesterday to launch negotiations for a three-way free trade pact they said could help fend off global economic chills, but the talks are expected to be long and difficult because of decades of rivalry.
The three nations are major traders, and together accounted for 19.6 per cent of global gross domestic product and 18.5 per cent of exports in 2010, according to a feasibility study issued by their governments last year on the trade pact.
"Northeast Asia is the most economically vibrant region in the world," Chinese Premier Wen Jiabao told reporters after talks in Beijing with Japanese Prime Minister Yoshihiko Noda and South Korean President Lee Myung-Bak.
"The establishment of an FTA will unleash the economic vitality of our region and give a strong boost to economic integration in east Asia."
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 per cent, Japan's by 0.5 per cent, and South Korea's by 3.1 per cent, the official Xinhua news said in a commentary, without citing the basis for its estimates. But agreeing on a fully-fledged pact, which has been on the table for a decade, will not be easy.
The three northeast Asian neighbours are divided by political distrust, trade barriers, and diverging investment policies, as well as regionwide worries about China's expanding economic and military power. The proposed treaty must also vie for attention with the United States' push for a broader Trans-Pacific Partnership, a trade liberalisation initiative that has drawn in nine countries, with Japan also expressing interest. China and South Korea are not part of those negotiations yet.
At the summit in Beijing, the three leaders also agreed a three-way investment treaty — a stepping stone to the bigger and much more contentious goal of a free trade deal — said Xinhua. China's Ministry of Commerce said on its website that the investment agreement will help smooth tax, dispute resolution and other issues among the three nations.
"Japan, South Korea and China play an important role in the global economic recovery," said South Korea's President Lee. "When the economy is in crisis, it's more pressing to set up a free trade zone," he told a business meeting that took place parallel to the leaders' summit. Intra-regional trade and investment levels between China, Japan and South Korea were "much lower" than levels in the European Union or across the North American Free Trade Agreement area.