I forward this email from Dr Shen, because it draws attention to the evolving Free Trade Area of China, South Korea and Japan. As the three Premiers just met for the first time for three years to promote this very project, we should keep our eye on it.
If these three nations were to form a Free Trade Area and it were to work with the ASEAN Free Trade Area then we would need to reassess the direction of travel of Asia and TPPA.
One might conceive of an Asian Union evolving, but it would be economic rather than political.
The nations of Asia would learn from the EU, not copy it.
On behalf of Dr. Jianguang Shen:
China-Japan-South Korea trilateral trade relations
- The three largest countries in Northeast Asia – China, Japan and South Korea – combined account for 20% of the world’s population, 20% of global GDP and 70% of Asia’s GDP. Despite their size and proximity, so far there is no free-trade agreement (FTA) that is exclusive between these countries. In this week’s issue, we discuss their trade structures and their considerations toward signing a trilateral FTA.
- A major reason for the lack of a trilateral FTA, we believe, is that their export portfolios are more competitive than complementary, especially in the case of Japan and South Korea. Recently, as a result of production upgrades, China exports are now also on a closer par to that of Japan and Korea. Other possible reasons for the lack of an FTA include the US’s strategy of returning to Asia, as well as ongoing territorial disputes among the participants.
- As global economic growth slows, we believe closer economic cooperation is essential. A China-Japan-South Korea FTA would promote the opening of their respective markets and push forward the development and prosperity of the region. FTA negotiations could start with bilateral negotiations. Recently, China and South Korea signed a landmark agreement that awaits approval by their respective legislatures.
October economic indicators released this week confirm our view that the recovery in 4Q is off to a slow start. While valued-added of industry (VAI) and retail sales, at 5.6% YoY and 11.0% YoY respectively, were in line with our expectation, fixed asset investment (FAI) weakened further to 10.2% YoY YTD. We observe, however, that there are bright spots in the data, including rapid growth of high value-added industries.
Jianguang Shen Mizuho Securities Asia Limited