Joint Report and Policy Recommendations
Towards a CJKFTA: Visions and Tasks
Since 2003, a joint research project on the "Economic Effects of a Possible FTA between China, Japan and Korea" has been undertaken by the three representative institutes of the three countries. The Research in 2003 focused on the impact of the CJKFTA on the macro-economies of the three countries. Following an overall analysis of this subject, the three research teams conducted a joint research on the "Sectoral Implications of a China-Japan-Korea FTA" in 2004, analyzing cross-sector impacts in general, and the three sectors of agriculture, automobiles and electronics in details.
Based on the research of the last two years, the theme of joint research in 2005 is "Towards a CJKFTA: Visions and Tasks". The research is mainly concerned with the following three sectors: fishery, textile and steel. A general analysis on implication of the FTA on the services industries of the three countries has also been initiated.
After three years of cooperation, the joint research on the CJKFTA has achieved some significant results. The three representative institutions participating in the joint research project hereby jointly submit a comprehensive report of the current phase to the leaders of China, Japan and Korea, and would like to put forward the following policy recommendations:
CJKFTA should comply with WTO Rules.
China, Japan and Korea account for a large share in global trade. Especially in the areas of automobiles, steel, electronics, textiles and agricultural products, the proportion of imports and exports of the three countries in the global market is even higher. Therefore, the establishment of a free trade relationship between the three countries should pursue not merely the maximization of mutual interests, but also jointly promote the multilateral trade liberalization process. CJKFTA in the future should follow WTO rules concerning the regional trade agreements (RTAs), promote comprehensive and substantial liberalization and facilitation in such fields as trade in goods, trade in services and investment, and strengthen the economic and technological cooperation in broad areas. While opening markets to one another, the three countries need to consider opening markets to other East Asian countries and participating actively in the feasibility study on East Asia Free Trade Area (EAFTA), so as to play constructive roles in achieving the long-term goal of establishing an "East Asian Community".
Accelerating structural adjustment in sensitive sectors through external pressure and setting timetables.
Although all three countries have sectors with weak international competitiveness such as agricultural, manufacturing and services industries, long-term dependence on market protection is likely to slow down the pace of structural adjustment and miss out the huge economic benefits brought about by trade liberalization. For those sensitive sectors (namely, sectors that are likely to suffer from competition and relatively high costs of structural adjustment in employment after losing protection), it is necessary to reduce the social costs by such means as compensation schemes, job training and social safety net, etc. On the other side, to counter pressures from the interest groups in the vulnerable sectors, there is a necessity to propose plans for structural readjustment and timetables for market opening in an effort to accelerate the structural readjustment in these sectors.
The CJKFTA Should Be Set as the Mid-Term Goal.
Most of the East Asian countries are APEC members, according to the trade liberalization timetable of APEC, trade liberalization shall be realized before 2020. ASEAN FTA plans to reduce the tariff rates to zero among member states before 2015. China, Japan and Korea have signed or have been negotiating FTA or EPA with ASEAN countries respectively and all of them will be implemented within next 5 to 10 years. However, as the three largest economies in East Asia, China, Japan and Korea are relatively lagging behind in forging mutual free trade relationship. Without substantial progress in this aspect, the process of regional economic cooperation in East Asia would be slowed down. Since the EAFTA is being studied as a long-term goal, it is necessary to set CJKFTA as a medium-term objective and implement it before the establishment of EAFTA. In order to show the political will of the three countries to actively promote the establishment of CJKFTA, it is recommended that the Tri-Party Committee should hold serious dialogues over the official joint research on CJKFTA.
The active participation of the business community and the support of governmental officials are beneficial for The Joint Research.
Model simulation and statistical analysis are obviously insufficient for analyzing such a complicated issue, the possible implications of the CJKFTA. The opinions from the business community are invaluable for perfecting the joint research. It would be a good trail to make interaction between the two mechanisms, the joint research and the trilateral business forum, by introducing the progress of the joint research on CJKFTA to the business forum and inviting the forum's organizers of the three countries to attend the workshops of the joint research. During the process of the trilateral joint research, if the governments of the three countries could provide more support with necessary information, consultation and constructive opinions, it would be of great benefits to the trilateral research teams to pursue the ways towards the CJKFTA and put forward positive and pragmatic joint policy recommendations. At the same time, it is recommended that China, Japan and Korea should disclose its information regarding the FTA they have concluded as much as possible.
The trilateral research teams shall continue to conduct joint research on the CJKFTA.
Mutual trust, cooperation and win-win aspiration built among the three representative research institutions in the past three years has laid down a sound foundation for the joint research of the next stage. The Joint Research on CJKFTA shall continue to be policy-oriented. Based on the analysis of the sectoral implications of tariff cuts for trade in goods of the three countries, the contents of the CJKFTA research shall be expanded further to the cost and benefits of trade liberalization. Trade in services including producer services, non-tariff barriers, protection of IPR, investment, the framework of CJKFTA and implementation steps, will also be important research topics.
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