On May 27, the leaders of China, Japan, and South Korea held a meeting in Seoul, South Korea after a four-year hiatus. From the perspective of the Chinese Communist Party (CCP), the biggest gain was the resumption of negotiations for a trilateral free trade agreement between China, Japan, and South Korea. If the trilateral free trade agreement is successfully negotiated, it can not only help maintain a certain level of stability in the deeply adjusting economic relations between the three countries, but also hinder the “de-risking efforts against the CCP” led by the United States.
The US has gradually developed a whole set of practices to “de-risk” its economic and technological relations with the CCP. The CCP is extremely nervous and is trying every means to “counter de-risking” in order to remain intertwined with the US. Whether in terms of short-term goals – to stabilize the Chinese economy amid market turbulence, or long-term goals – for the Chinese economy to surpass the US, the CCP is heavily reliant on the funds, technology, and markets provided by the US and the West.
How to stay intertwined with the US? The CCP has found that the Asia-Pacific Economic Cooperation (APEC) platform can be utilized. APEC, established in 1989, has both China and the US as members. In 1994, APEC leaders in Indonesia proposed the goal for developed member countries to achieve trade and investment liberalization by 2010, and developing member countries by 2020. Overall, the APEC “Bogor Goals” have been mostly achieved. In November 2020, APEC leaders passed the “Putrajaya Vision,” aiming to establish an open, dynamic, resilient, peaceful Asia-Pacific community by 2040, known as the Free Trade Area of the Asia-Pacific (FTAAP). If the FTAAP roadmap is implemented thoroughly, the CCP will have the US tied up.
Currently, there are two pathways for promoting the FTAAP. One is the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP). Originally, the Obama administration led some Asia-Pacific countries to sign the Trans-Pacific Partnership (TPP), but the Trump administration withdrew from the agreement in 2017. Japan stepped up and reached an agreement with TPP members outside the US, turning it into the CPTPP with eleven countries including Japan, Canada, Australia, New Zealand, Singapore, Malaysia, Vietnam, Brunei, Mexico, Chile, and Peru. In 2023, the UK became the first new member of the CPTPP. Initially resistant, the CCP later applied to join the CPTPP in 2021, while South Korea is also in the process of joining.
The other pathway is the Regional Comprehensive Economic Partnership (RCEP). Initiated by the Association of Southeast Asian Nations (ASEAN) in 2011, the RCEP includes China, Japan, South Korea, Australia, New Zealand, and India (although India later withdrew), and officially took effect on January 1, 2022. Over a 20-year period, the RCEP aims to eliminate tariffs on over 90% of goods traded among member countries. This agreement also opens up to external economies.
The RCEP holds special significance for China, Japan, and South Korea. The three countries account for over 80% of the RCEP’s overall GDP and trade volume. However, only China and South Korea have a bilateral free trade agreement since 2015, with no such agreement between China and Japan, or Japan and South Korea. Before the RCEP, only 8% of China’s imports from Japan were “tariff-free” goods, and Japan’s imports from South Korea had just a 19% “tariff-free” proportion. The intra-regional trade ratios among the three countries have struggled to exceed 20%, far below the EU’s 64%, the North American Free Trade Area’s 50%, and ASEAN’s 24%. The RCEP for the first time includes China, Japan, and South Korea in a mutual open market, lowering tariffs within a free trade zone system, showing great potential.
In the joint statement from the recent China-Japan-South Korea leaders’ meeting, it was emphasized that “we acknowledge the importance of the Regional Comprehensive Economic Partnership (RCEP) as the basis for the transparent, smooth, and effective implementation of the China-Japan-South Korea free trade agreement. We will continue discussions on expediting the negotiations for the China-Japan-South Korea FTA to achieve a free, fair, comprehensive, high-quality, mutually beneficial, and valuable free trade agreement. We reiterate that the RCEP is an open, inclusive regional agreement, and encourage the RCEP Joint Committee to accelerate discussions on the accession procedures for new RCEP members.”
This is what the CCP has been aggressively pursuing, as it includes at least four ulterior motives against the US.
Firstly, with the North American economic circle led by the US, the European economic circle core centered around the UK, Germany, and France, and the Asian economic circle with China, Japan, and South Korea, standing in a triangle formation. In the current situation, the CCP cannot dominate the Asian economic circle (its attempts to dominate the East Asia 10+3 FTA negotiations have repeatedly failed), so it must adopt a strategy of “integration-reformation” to gain influence through active participation in regional cooperation negotiations. For the CCP to “integrate-reform,” it must engage with Japan and South Korea.
Secondly, the US, Japan, South Korea, and Taiwan have formed the chip alliance (chip4), while the US, Japan, the Netherlands, and seven other countries have reached a chip agreement. This forms an encirclement against the CCP. Through the China-Japan-South Korea free trade negotiations, the CCP can influence Japan and South Korea.
Thirdly, out of the 15 countries in the RCEP, 11 have joined the US-led Indo-Pacific Economic Prosperity Framework (IPEF). The condition for these countries receiving the US’s push for supply chain relocation is that they must accept “export controls, investment security reviews, and restrictions on technology transfer.” If the CCP can hold onto Japan and South Korea to effectively implement and negotiate new trade issues within the RCEP, actively expand the RCEP (promoting the inclusion of Chile, Peru, Mexico, Papua New Guinea, Fiji, etc.), and establish a higher-level China-Japan-South Korea free trade zone based on the RCEP, then the CCP need not worry too much about the IPEF weakening the RCEP.
Fourthly, with Japan leading the way in the CPTPP negotiations, if the China-Japan-South Korea free trade agreement is successful, the likelihood of the CCP joining the CPTPP increases. On the other hand, Japan also aims to bring the US back into the CPTPP. If both China and the US join the CPTPP simultaneously and participate in FTAAP negotiations, this would be welcomed by the CCP.
Therefore, the CCP has high hopes for the resumption of the China-Japan-South Korea free trade negotiations.
However, since the initiation of the China-Japan-South Korea free trade agreement negotiations in November 2012, sixteen rounds of negotiations have been held, showing that the negotiations themselves are very difficult. Moreover, with the current unpredictable state of the Chinese economy, its attractiveness to Japan and South Korea is decreasing. In the past two years, trade volumes between China and Japan, as well as China and South Korea, have been declining, while both Japan and South Korea emphasize economic security.
Most importantly, the rapidly evolving strategic confrontation between China and the US, along with the high uncertainty in China’s policy towards Taiwan, could lead to at least a cold war between the US, Japan, South Korea, and China if a conflict erupts in the Taiwan Strait. This situation makes it impossible for Japan, South Korea, and especially Japan, to tie their economies closely to China.
The progress that can be made in the resumption of the China-Japan-South Korea free trade negotiations remains uncertain.
Source: Epoch Times (Translated and Rewritten)