The establishment of China-Japan-South Korean FTA will produce a great industrial effect, as well as be beneficial for their industrial restructuring, and would gradually upgrade the area's industrial division level and resource allocation efficiency. In the pattern of world labor division based on industrial transfer, Japan will be the biggest capital exporter and also a main source of high technology at the same time. South Korea is both an "absorber" of Japanese capital and high technology and also plays a role of providing China with some investment, medium technology and some intermedium products. While absorbing capital and technology from Japan and South Korea, China provides them with a large number of natural resources and primary products. An easy flow and integration of production factors like commodities, capital and labor within these three countries will help reduce their production cost, enhance the general contentment and social welfare of their consumers, as well as upgrade the Asian division level of value chain, thus further promoting the area's comprehensive economic partnership and the development of economic integration of the whole Asia-Pacific region.

Although China-Japan-South Korea FTA has enjoyed a general consensus in the economic and industrial fields, it is still hampered by political factors and so on. In particular, Japan's territorial disputes with China and South Korea have become a big obstacle to the promotion of China-Japan-South Korean FTA, and have actually stalled the FTA negotiation plan. Looking into the future development, however, for the sake of their real economic interests, China, Japan and South Korea will still maintain their bilateral trade pattern of "economy comes first and politics second", and China should actively take initiative and play a leading role in the negotiation.

In choosing free trade strategy, it is possible to "do the easy part first, that is, establishing FTA with South Korea first and with Japan afterwards." Negotiations of an FTA between China and South Korea could be accomplished first. Because of heavy reliance on trade with China, South Korea is actually more concerned about the bilateral FTA negotiation with China while at the same time giving attention to TPP. South Korea has clearly taken the bilateral FTA negotiation as the most preferred option. Currently, FTA negotiation between China and South Korea has started and both sides have shown a positive attitude, making the bilateral negotiation easier than that of China-Japan FTA and Japan-South Korea FTA, even much easier than that of China-Japan-South Korean FTA. Therefore, the negotiation between China and South Korea is most likely to be accomplished first with a substantive result. In view of the fact that Japan and South Korea have similar sensitive industries and demands in the areas of investment and service, negotiation of China-South Korea FTA will contribute to seeking a reasonable negotiation way and gaining experiences, as well as forming a model of dealing with all sorts of sensitive industries and sensitive products, thus providing lessons and paving the way for establishing China-Japan-South Korea FTA.

Zhang Monan is a researcher at the China Center for International Economic Exchanges.

This article was first published at www.chinausfocus.com. To see the original version please visit http://www.chinausfocus.com/finance-economy/where-is-the-breakthrough-in-asias-regional-cooperation-strategy/

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