prospects and tasks
(1) Prospect for economic cooperation and change in political condition More opportunities for international competition are given to Northeast Asia.
This is because the region has become one of the world’s 3 biggest economic zones together with EU and NAFTA.
Intra-region trade and investment are expected to grow. The process of industrial division of labor will likely be accelerated by FTAs.
Chapter 1• Northeast Asian Regionalization: Trends and Issues 29
Recently, more positive than negative changes in the international political, diplomatic, and security conditions have been noted. This lays down the groundwork for China-Japan-Korea exchange and cooperation.
The successful promotion of the 6-Party Talks will likely lead to the abolishment of the nuclear development program in North Korea.
The South-North Korea relationship has taken a positive turn since the Inter-Korea Summit on June 15, 2000.
The US is likely to take an appeasing stand toward North Korea. This is because the presidential election is set to be held in 2008 in the US.
Such optimistic change in various conditions is aiding in the FTA promotion in Northeast Asia. It also enables the sustained economic growth in China, development of Far East Russia, economic recovery of Japan, and incorporation of Mongolia and North Korea into the Northeast Asian Economic Zone.
Furthermore, the regional economic zones are expected to depend more heavily on international trade. China’s direct investment in other countries in the region is also forecasted to surge in the near future.
Increased trade between the Northeast Asian Three will induce industrial specialization based on each country’s comparative advantage. The trends of expanding intra-region trade and cross investment will also boost the formation of Northeast Asian production systems. Such systems are partially underway under the leadership of MNCs of Japanese and Korean origins as FTA talks progress between the three countries.
Businesses and other private sector players pursue strengthened economic linkages. For this, overall system and policy reform are required in each country. The government needs to accept -- and adapt itself to -- the market-led processes of regionalization and economic integration.
(2) China-Japan-Korea FTA: prospects and strategy
The China-Japan-Korea FTA offers macroeconomic benefits to the three countries. Still, its economic effect on individual industries varies considerably. Thus, objection by certain individuals or organizations can have severe side effects.
There are still disputes and unresolved issues between the three countries.
Nonetheless, the conclusion of FTA is still recommendable and necessary despite the various obstacles.
The three countries’ service sector lacks competitiveness in the world market. In particular, the mass transportation system and wholesale and retail industry trade networks should be improved.
Stringent regulations on service trade between the three countries can prevent the region from fostering its service sector’s growth. This in turn will erode the relevant countries’
economic benefits.
The three countries are already involved in a number of FTAs.
Thus, the product origin regulations between the three may run counter to the existing policies. Inconsistent product origin regulation can ultimately hinder the establishment of an efficient production network in East Asia. The same can be said for the delay in tariff lifting for too many products.
(3) Exchange promotion strategy in FTA-related areas such as culture, tourism, logistics, and environment
The China-Japan-Korea FTA can result in the removal of tariff barriers. This in turn can cause a shift of tariff administrative works to non-tariff barriers.
Thus, the three countries’ customs system must immediately be simplified and coordinated.
For the IT industry, the three countries need to strengthen their cooperation in preparation for the China-Japan-Korea FTA through the following: ① cooperation on standardization; ② promotion of technology and human exchange; ③ establishment of the hyper-speed broadband global research network, and; ④ recognition of the need for trade and investment promotion in the IT industry based on policy cooperation works.
Chapter 1• Northeast Asian Regionalization: Trends and Issues 31
The liberalization of the transportation sector is further addressed by the General Agreement on Trade in Services (GATS), not by FTA. Specific details are discussed and agreed upon through additional bilateral or multilateral agreements.
With regard to energy cooperation, the China-Japan-Korea FTA may develop into energy integration or Northeast Asian energy system in the long run. Thus, the three countries should stay open to such possibility. From a short-term perspective, they need to focus on the opening of the energy market as well as on making preparations for the future.
Forging the China-Japan-Korea FTA will result in the creation of a regional economy. Both static and dynamic economic benefits can also be expected.
Still, concerns over various environmental issues will be raised. Thus, the three countries should build an official environmental cooperation system to strengthen their environmental cooperation works.
(4) Approach to the liberalization of the labor movement
Unlike commodity trade liberalization, not one country has a stronger foothold in the liberalization of trade in services. This is because the service industry has a more complex relationship between the three countries in terms of comparative advantage. Moreover, the labor movement is very important in its liberalization.
The lack of integrated link of the economic structure fundamentally limits the liberalization of the labor movement. Another hindrance is the inconsistency in the wage level between the three countries. Thus, there is a need for a strategic approach to the issue.
Areas for the liberalization of the labor movement between China, Japan, and Korea shall be narrowed down; this way, a certain trend revealed in different FTAs is reflected. Such trend includes the liberalization of the service-related labor movement as part of the liberalization of trade in services.
The issue of labor movement should be viewed from different perspectives.
In particular, the possible full-scale economic cooperation and regional economic integration should be considered.
Currently, there is a likelihood of manual labor movement between the three countries. Thus, China, Japan, and Korea should fully utilize the existing labor movement order and system. They should also discuss and agree on the additional details for multilateral liberalization schemes.
The conditions and influence as well as our response strategy for the general labor movement should be reviewed. The general labor movement encompasses the liberalization of manufacturing and agricultural labor as well as the service workers.
Chapter 3• Establishing Logistics and Transportation Linkages 33 C · H · A · P · T · E · R