Thailand and the China-Japan-South Korea FTA
The leaders of China, Japan and South Korea have agreed to start negotiations to develop a free-trade agreement that has the potential to rival the world's largest free-trade zones. If the talks are successful, this will likely boost Asian economic integr
According to World Bank data, China, Japan and South Korea accounted for 20 per cent of global GDP in 2010, compared with 27 per cent for Canada, the US and Mexico (Nafta) and 26 per cent for the EU. The free-trade accord would create a market of 1.5 billion people.
China has proposed coastal Shandong province as its base for a regional economic cooperation zone, while Japan and South Korea are still waiting to nominate their locations.
The components of such a trade deal are incredibly complex, which is why we shouldn’t expect an FTA to be announced in the immediate future.
Nonetheless, the leaders of the three nations are strongly advocating an early conclusion to FTA discussions.
Chinese Premier Wen Jiabao said “the free-trade agreement will unleash the eco?nomic vitality of the region and boost eco?nomic integration”, while Japanese Prime Minister Yoshihiko Noda said the talks are “an extremely important piece” of Japan’s economic strategy, especially after China replaced the US in 2009 as Japan’s largest export market.
Like most cooperative FTAs, the move may also help to reduce current and historical political tensions – a growing area of concern for many people in Southeast Asia, and for international governments and investors.
The deal makes tremendous sense for the three nations, as they look to help bring the “Decade of Asia” to greater fruition. China’s industrial base and low-cost, efficient manufacturing combines well with the sophisticated R&D of Japan and South Korea.
I believe we will see great strides made in the Chinese car industry, for example, with the FTA helping forge strong alliances between Chinese companies and Korean and Japanese auto companies.
It’s likely that cars sold around the world will be imbued with a distinct Asian flavour.
This presents a great opportunity for Thailand’s auto and electronic manufacturing sectors. However, business models must stay market relevant, and products remain highly competitive.
The agreement also offers Thailand the opportunity to stand up as an Asean leader, and extend its role as a gateway to East Asian trade.
In a broader geopolitical sense, Thailand should manage its international affairs carefully, as over the past couple of years both China and the US have been open in their desire to have greater influence over the future of Asia’s economic development.
If the East Asian free trade negotiations are successful, I believe we will see a dramatic boost in economic integration and a defusing of political tensions in the Asian region.
Thai businesses should also flourish with the evolution of the world’s next trading powerhouse.
