Hidden behind the nuclear issue at the Northeast Asian summit last week was the agreement to resume efforts to form a free trade area. Another reason the news failed to attract public attention could be because it was not exactly news, in view of the protracted, on-and-off process commenced in the early 2000s.
There are signs, however, it could be different this time. Above all, Japan, which has been the least willing to discuss a free trade agreement with Korea and China, has turned most positive among the three upon the inauguration of a new Cabinet.
Of course, the East Asian Community on the basis of an economic bloc was a key campaign pledge of Japanese Prime Minister Yukio Hatoyama. If the European experience is any guide, one can presume some reasons behind Hatoyama's moves, such as the need to keep the ever-expanding influence of China in check by forming a multilateral bloc, as Britain and France wanted to do with Germany.
More immediately, the three countries, all of which are export-led economies, need to find an alternative ― in one another ― that can replace the rapidly shrinking U.S. market. For Japanese exporters in particular, Korea could make up for at least part of the high-end market they have lost in the United States. That would help realize the new Japanese leader's diplomatic policy of taking some distance from America to get nearer to Asia, if he really meant it.
As seen by the tough process in the bilateral approaches between Korea on the one hand and Japan and China on the other, an FTA between Seoul, Beijing and Tokyo may prove to be harder than those of any other three-country groupings, not just from a political viewpoint including historical and territorial disputes, but also from purely economic considerations, demonstrated by different economic structures and gaps in the levels of industrialization.
To sum up, Japanese manufacturers can devastate their Korean and Chinese counterparts, while Chinese farmers can demolish the agricultural sectors of Korea and Japan. At its worst, Korea's awkward status, long dubbed as being sandwiched between high-tech Japan and low-cost China, could even be aggravated. On a positive note, however, the country can deftly minimize losses and maximize benefits, depending on how it performs, especially in reducing its huge trade deficit with Japan. Some studies actually describe Korea as the biggest beneficiary of an eventual Northeast Asian FTA in terms of economic growth.
To turn the goal into a reality, the three countries are advised to start with easier measures, such as lowering tariff and nontariff barriers by making investment guarantees and respecting the intellectual property rights of one another. If the three countries fail to meet even these basic requirements, they better not dream of the far more difficult and complicated job of signing an FTA for the time being.
At stake is where they should start once the preparatory work is done, and they could gain some lessons again from the experiences of European countries, which started their decades-long task of economic union with cooperation in the coal industry. That was six decades ago, however, when no one had heard of global warming. So it would be good if the three Northeast Asian nations find a clue in the opposite of Europe ― clean energy and other environment-related industries.
Korea's role as a bridge between two giants will be more important than ever in this rapidly integrating part of the world. As an analyst said, ``A shrimp can be crushed not only when two whales fight but also when they make love.''