The Optimal Path of aChina–Japan–KoreaFTA: Multilateral Path or Sequential Path?

Abstract

This study aims to analyze the possibility of a multilateralNortheastAsian free‐trade agreement (FTA), aChina–Japan–KoreaFTA(CJK FTA), and estimates the optimal path towards achieving it. Although there have been a number of studies examining why aCJK FTAshould be formed given its likely welfare‐enhancing effects, studies on precisely how and through what paths it might be formed are extremely scarce. Investigating the influences from industry interest groups and national security relations amongChina,Japan andSouthKorea, this study finds that a multilateral path (rather than a sequential path) whereinSouthKorea plays a key role as a hub (rather than a leader) is the optimal route for establishing aCJK FTA. Although two possible bilateralFTAs (aChina–KoreaFTAand aJapan–KoreaFTA) are more likely to be feasible, in particular, they are less likely to serve as a stepping‐stone to multilateralFTAformation. Consequently, this study mainly argues thatChina,Japan, andSouthKorea, the three main economies inNortheastAsia, should simultaneously participate in a single round of trade negotiations in order to establish aCJK FTA.