80th Liberation Day Korea faces mounting calls for economic coalition with Japan

Kim Hyun-chong, left, then-deputy trade minister, shakes hands with Ichiro Fujisaki, Japan's deputy minister for economic affairs, during the first round of negotiations for the Korea-Japan free trade agreement (FTA) in Seoul, Dec. 22, 2003. Since the sixth round of negotiations in November 2004, the two countries have not resumed the FTA talks. Korea Times file

The proposal to form a coalition with Japan to establish an economic community similar to the European Union sparked a sensation earlier this year, when Korea Chamber of Commerce and Industry and SK Group Chairman Chey Tae-won introduced the idea.

For Koreans aware that the Empire of Japan used the term "annexation" in the treaty forcibly signed in 1910 to colonize Korea, the concept of a "coalition" with Japan may sound uncomfortable.

The intensifying U.S. protectionist trade policies under the Donald Trump administration, however, have justified Korea's renewed push for economic integration with Japan, propelling discussions on a free trade agreement (FTA) between the two neighboring Northeast Asian countries.

"In the face of growing global protectionism and U.S. reciprocal tariffs, Korea and Japan must expand economic cooperation and work closely together," Chey said in May after meeting Japanese Prime Minister Shigeru Ishiba in Tokyo.

Although this year marks the 80th anniversary of Korea's liberation from Japanese colonial rule, business leaders in both countries have placed greater emphasis on the 60th anniversary of normalized diplomatic ties between Seoul and Tokyo, as part of efforts to strengthen bilateral economic cooperation.

Korea-Japan Economic Association Chairman Kim Yoon, who leads Samyang Group, also called on Korea and Japan to form an economic bloc to counter U.S. trade pressure and China's rapid technological advancement.

"The leaders of both countries agreed to pursue Korea's participation in the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) before moving ahead with a Korea-Japan FTA," he said in May at the Korea-Japan Business Conference in Seoul.

The CPTPP, a multinational trade pact led by Japan, functions as a high-standard FTA among its member nations. It currently includes 12 member countries: Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore, the United Kingdom and Vietnam.

Kim Gyu-pan, a senior research fellow at the Japan and East Asia team of the Korea Institute for International Economic Policy (KIEP), dismissed the idea that Japan would oppose either a bilateral FTA with Korea or Korea's participation in the CPTPP. However, he said Korea would benefit more from joining the CPTPP than from a bilateral FTA with Japan.

"When KIEP analyzed the economic impact of a Korea-Japan FTA in 2003, the study concluded that such an agreement would negatively affect Korea, though Japan would benefit," he said. "Korea's economic growth over the past two decades has made it possible for the country to also benefit from a bilateral FTA with Japan, but the CPTPP would generate greater economic effects and is a more effective way to counter U.S. protectionism."

Korea Chamber of Commerce and Industry (KCCI) and SK Group Chairman Chey Tae-won, left, poses with Japanese Prime Minister Shigeru Ishiba at the prime minister's residence in Tokyo, May 27. Courtesy of KCCI

Hurdles remain to economic union

Still, skepticism persists over the feasibility of a Korea-Japan FTA in the near term.

"Both FTA-related parties in Japan and Korea are too much occupied in responding to Trump's inconsistent and unpredictable policies, lacking resources for other strategies," said Yukiko Fukagawa, professor at the School of Political Science and Economics at Waseda University.

"Japan has its own serious political uncertainty now, so that political resources for any foreign policies have to be very much limited."

Known for her strong interest in Korea's economic development, Fukagawa noted that Japan knows Korean society is so divided that political stability and consistency cannot be guaranteed.

Regarding Korea's efforts to join the CPTPP, she viewed political constraints in opening the agricultural sector as a remaining obstacle.

When Seoul and Tokyo were negotiating a possible FTA in the early 2000s, Japanese farmers expressed concerns over low-priced Korean agricultural imports. Since the 2011 earthquake and release of radioactive wastewater from the Fukushima Daiichi Nuclear Power Plant, civic groups and consumers in Korea have opposed Japanese seafood imports, citing this issue as a main reason for resistance to Korea's CPTPP membership.

"China and Taiwan are now at the frontline of negotiations, and Korea has come late," Fukagawa said. "Pushing Korea in front will complicate delicate diplomatic relations in Northeast Asia and will take time anyway."

Nam Ki-jeong, professor at the Institute for Japanese Studies at Seoul National University, pointed out unresolved historical issues between Korea and Japan.

"Negotiations for a Korea-Japan FTA have been stalled, largely because they are entwined with historical disputes," he said at a conference co-hosted by KIEP and the East Asia Institute in June.

Farmers and fishermen hold a rally at Seoul Station in July 2022 to protest Korea's plan to participate in the Comprehensive and Progressive Agreement for Trans-Pacific Partnership. Yonhap

Seoul highlights forward-looking approach

Despite the 22 free trade deals Korea has signed with 59 countries, negotiations for a Korea-Japan FTA have been dormant for two decades.

The two countries paused FTA talks in 2004, a year after their governments held the first meeting in Seoul. A three-way Korea-China-Japan FTA, first pursued in 2012, also collapsed in 2019.

Although both the liberal Moon Jae-in and conservative Yoon Suk Yeol administrations sought CPTPP membership, the process was halted by strong opposition from Korean farmers and fishermen.

Against this backdrop, President Lee Jae Myung has adopted a friendly approach toward Japan.

"Given the increasing challenges in the international trade environment and global affairs, it is even more important for Korea and Japan, as close and complementary partners, to collaborate in many areas," Lee said in June during a summit with Ishiba at the G7 Summit in Canada.

Foreign Minister Cho Hyun has reinforced signals that economic ties between Korea and Japan will deepen, expressing his intent to pursue a Korea-Japan FTA once again.

Asked about the most meaningful achievement in his career, the top diplomat cited his adoption of the final report calling for the immediate resumption of Korea-Japan FTA talks.