The Potential of China-Japan-South Korea Free Trade Agreement

Abstract

This article explores the economic calculations behind the recent initiatives for the Free Trade Agreement (FTA) between the Governments of China, Japan and South Korea (CJK) and clarifies the implications for future regional economic integration. First, the proposed trilateral FTA signifies an advancement of China-centered regional economic integration. Regional economic integration led by China may also increase its political clout at the global stage. Second, the Governments of South Korea and Japan seek greater involvement in China's huge domestic market, but the former is concerned that a trilateral FTA will worsen its trade deficit with Japan, and the latter is afraid of losing its market shares in China and America to its Korean rival. Japan, therefore, seeks membership of both the CJK FTA and the Trans-Pacific Partnership (TPP). Third, China and the US' active involvement in regional economic integration will push the three countries to go forward towards greater economic cooperation. However, it will take longer for China-led Regional Comprehensive Economic Partnership (RCEP) and America-led TPP to bear fruit because of the large number of countries involved. Therefore, the conclusion of CJK FTA will be an important boost for the further progress of both RCEP and TPP. It will also be an important stabiliser for the trilateral political relations in the future.