Deal could spark other similar negotiations: analysts
China and South Korea are inching closer to implementing a bilateral free trade agreement (FTA) with a draft agreement, the two countries announced on Wednesday, a move that experts said will help promote China’s similar negotiations with other countries and regions.
China and South Korea confirmed the draft agreement on Wednesday, China’s Ministry of Commerce (MOC) announced on its website on Wednesday, noting all FTA negotiations have been completed.
The English-language draft agreement will be translated into Chinese and Korean before being signed, South Korea’s Yonhap News Agency reported on Wednesday.
The two governments have agreed to work toward signing the FTA in the first half of 2015, South Korea’s Ministry of Trade, Industry and Energy was quoted as saying.
The bilateral FTA, which covers 17 fields including e-commerce and government procurement, will remove tariffs on 90 percent of all products traded between China and South Korea, -China’s Ministry of Commerce said in November 2014 on its website, when the two countries concluded the substantive negotiations which began in 2012.
Some new provisions have been added into the agreement, Yonhap reported.
The agreement now has a new clause which forbids both sides from increasing or adopting new customs duties on any products or services, Woo Tae-hee, South Korea’s deputy trade minister, was quoted as saying by Yonhap.
The report also said that South Korean officials regard the FTA as the most significant trade deal for the country, considering China is already its largest trade partner.
Trade between China and South Korea was worth about $290.5 billion in 2014, up 5.9 percent year-on-year, according to data from China’s General Administration of Customs.
“In addition to tariff reduction, the two countries will also benefit from complementary industries to reach a win-win result,” Bai Ming, a research fellow with the Chinese Academy of International Trade and Economic Cooperation, told the Global Times on Wednesday.
The two countries have advantages in different industries, such as South Korea’s electronics manufacturing and China’s textiles production, Bai said, noting China and South Korea have greater potential as trade partners.
Common free trade agreements usually only reduce or remove tariff or non-tariff barriers for commodity trade, but the China-South Korea FTA is a high-level and comprehensive one which also includes investment and services trade, He Weiwen, co-director of the China-US-EU Study Center under the China Association of International Trade, told the Global Times on Wednesday.
Meanwhile, if the FTA is successfully implemented, it will serve as the impetus for free trade negotiations with Japan, both Bai and He said.
There have been six rounds of negotiations among China, South Korea and Japan as of the end of 2014, but Japan rejected a joint proposal from China and South Korea in December 2014, media reports said.
But it is hard to tell how much -encouragement the China-South Korea FTA can bring to Japan because Japan still attaches great importance to the Trans-Pacific Partnership Agreement (TPP) led by the US, according to Bai.
The TPP, a regional investment treaty proposal, has 12 Asia-Pacific countries and regions in negotiations, including Japan and the US, but China is not involved.
Martin Jacques, a visiting senior fellow at the London School of Economics, described the TPP as “a US attempt to reset the trade template in the Asia-Pacific and marginalize China in the process,” in his article posted on the website of research institute Transatlantic Academy on January 30.
However, compared with members of the TPP, China and South Korea are more important trade partners to Japan, regardless of its geographic location or trade volume, Bai said.
After China and South Korea announced the conclusion of FTA substantive negotiations in November 2014, Sun Lih-chyun, the spokesman of Taiwan’s administrative authority, said that it is Taiwan’s “biggest worry” because South Korea is Taiwan’s main trade competitor and the Chinese mainland is the market all exporters want to enter, Taiwan newspaper China Times reported in November 2014.
As for Taiwan, which suspended a mainland-Taiwan services trade pact in 2014 due to local student protests, Bai said the longer Taiwan wanders out of the free trade network the mainland promotes, the more Taiwan will suffer.