China-Japan-Korea trilateral cooperation and the East Asian Community

Author: Joel Rathus, Adelaide University

Since its inception on the sidelines of the ASEAN Plus Three (APT) summit over a decade ago, China-Japan-Korea trilateral cooperation has deepened significantly.

Former Japanese Prime Minister Yukio Hatoyama, Chinese Premier Wen Jiabao and South Korean President Lee Myung-bak before the third trilateral summit in South Korea, May 2010

The trilateral cooperation is an important development in regional politics and economics. But the way in which it will affect an East Asian economic community remains uncertain.

Cooperation between China, Japan and Korea has historically been stunted. In 1999, an agreement was reached for heads of state from each of the three countries to meet on the sidelines of the APT summit. This agreement initially constituted little more than an annual informal breakfast, and was established more to right perceived imbalances between the ‘plus three’ countries and ASEAN within the APT than because of any desire to improve problematic relations. In any case, Japan’s worsening relations with its neighbours under the Koizumi administration precluded any deepening of the process.

In December 2008, the trilateral cooperation finally formally separated itself from the ASEAN Plus Three process and acquired its own identity. But the scope of the trilateral cooperation remained relatively limited, focusing upon annual meetings at Head of State and Foreign Minister level, discussions in the areas of environment, energy and education, and continued informal study of a trilateral free trade area. Even as a separate forum, it seemed unlikely that the trilateral cooperation would prove to be able to lead the creation of an East Asian community and therefore be of any great significance.

This all changed in 2009, when Japan, China and Korea were forced to coordinate and cooperate more closely to manage the regional effects of the global financial crisis. In their joint statement on the crisis, the trio identified the need to cooperate on global issues (such as financial risk) and in global institutions, including at the G20. While a reaction to global events, this cooperation began to significantly affect the management of East Asia. Over the course of 2009, the three nations resolved their long running dispute over contributions (and thus voting weight) in the Chiang Mai Initiatives, the first major ‘success’ of the ASEAN Plus Three process. The three nations also worked together to push through a general capital increase at the Asian Development Bank to help it fight the effects of the global financial crisis, a decision mandated by the G20 but about which the US appeared ambivalent.

The fact that 2009 was the tenth anniversary of the establishment of the trilateral cooperation also provided an opportunity to make the trilateral cooperation more meaningful. Japan’s then newly installed PM Yukio Hatoyama provided impetus by proposing that the long-delayed China-Japan-Korea FTA be subject to an official international study. Hatoyama’s offer represented a major break from Japan’s previous policy to avoid negotiations over an FTA without actually having to say no. Between 2002 and 2009 Japan requested that further domestic and unofficial study be undertaken as an excuse not to start the negotiations. Indeed, some the economists involved in informal FTA studies declined to participate after becoming aware of this delaying strategy.

By contrast, the 2010 (official) study appears to be a concrete step towards a plus three FTA that has been undertaken in good faith. The first round of research is already complete, and a commitment is in place to conclude the study before the trilateral summit in 2012. Additionally, trade ministers from Japan, Korea and China met on the 23rd of May with a view to getting some preliminary agreement in place for the trilateral summit the week after. The agreement focused on business, climate and similar issues.

But even if a trilateral FTA is signed down the track, what will be its significance for the establishment of an East Asian economic community?

Certainly, as China, Japan and Korea represent 90 per cent of the APT’s total economic size, any agreement reached between these three nations would almost automatically become the benchmark for the East Asian FTA under discussion, thereby calling further into question ritualized statements about the centrality of ASEAN in regional cooperation. But it will be the actual content of the trilateral FTA that will determine how significant a development it will be. Agriculture is a sensitive sector for both Japan and Korea and, China has already exhibited flexibility in relation to the agriculture sector in its FTA with ASEAN. It is therefore possible that the trilateral FTA will exclude trade in agricultural goods. If this exclusion is carried over to negotiations on an EAFTA, it would represent a significant watering down of regional free trade.

The trilateral cooperation is a significant development in regional politics and economics. But advocates of a comprehensive regional FTA will necessarily view its deliberations with some caution.

Joel Rathus is a Phd candidate at Adelaide university, a Monbusho Scholar at Meiji university and researches East Asian regional integration.

This is an article from the most recent edition of the East Asia Forum Quarterly: ‘Next generation on Asia’.