Japan, ROK could gain by boosting trade with China

Although China, Japan and the Republic of Korea are all optimistic about the prospect of the Regional Comprehensive Economic Partnership and their cooperation under the RCEP framework, their economic and trade cooperation face some challenges, despite the opportunities. One such challenge comes from Japan and the ROK joining the US-led "Indo-Pacific Economic Framework for Prosperity" and adopting policies to "decouple" from China and thus stoking geopolitical tensions.

Should China, Japan and the ROK deepen their cooperation in line with market rules, or should they adopt an exclusivist attitude due to their different ideologies? The answer is simple: they should adhere to market rules and inject new impetus into regional and global economies.

The RCEP will promote Asia's economic integration, as it provides the first common platform for China, Japan and the ROK to boost free trade amid rising geopolitical tensions and global turmoil, and help increase global growth.

But for that to happen, the three countries will have to use the RCEP platform to communicate regularly and strengthen cooperation, make greater efforts to safeguard the multilateral trading system based on market rules and bolster the regional value and supply chains, as well as stabilize the global trade order. They also have to work together to overcome challenges, including lowering geopolitical risks and resolving the structural contradictions in industry chains.

However, Japan and the ROK seem to have chosen to "decouple" their economies from the Chinese economy due to their so-called differences in values. And some enterprises, think tanks and politicians are blindly supporting their unwise decision, negatively affecting their trade with China.

But if the three countries were to engage in open, mutually beneficial cooperation based on market rules, they could unleash the full potential of their respective economies. Although it is normal for an economy to be part of different trade cooperation blocs or agreements, it should not take advantage of one bloc or agreement to provoke "de-risking" or "ally-shoring" sentiments, because that will deal a blow to cooperation and increase the risks to the regional and global industry and supply chains.

After the implementation of the RCEP, Japan and the ROK had a trade deficit with China. But that was because of trade protectionism, not economic factors, with the most important reason being their restrictions on the export of semiconductors to China.

Since the three countries were, are and will be beneficiaries of market-oriented free trade, "decoupling" will hurt open trade. Trade among the three sides has suffered a big blow because of the United States' efforts to "decouple" from China. The US imposed restrictions on the export of semiconductors to China and coerced Japan and the ROK to do the same in the name of "safeguarding" their national security.

But if Japan and the ROK do not stop blindly following the US' diktats, they will lose their competitive advantages in the chip industry, because the China-Japan-ROK trade structure shows their complementarity in service trade has surpassed that in goods trade.

Since the three countries have huge potential for deepening cooperation in areas such as semiconductors and digitalization, Japan and the ROK should read the economic trend, and stop trying to "decouple" their economies from China's. Instead, they should try to make service trade more open, fulfill their respective commitments on trade in services, as inscribed in the RCEP agreement, to deepen trilateral cooperation in service trade.

Japan and the ROK have noticed the potential of China further opening up its services market. But rather than deepening cooperation with China, they are supporting and promoting the IPEF, thereby making it difficult to upgrade the trilateral trade structure.

It is true that Japan and the ROK are under pressure to "de-risk" if not "decouple" from China. But by trying to do so, they are promoting protectionism and violating free market rules. Some in Japan and the ROK think that dependency on China in any field is dangerous. This idea, in fact, is a kind of protectionism, because it views the regional division of labor as a source of risk when the fact is that the division of labor can make production more efficient and boost development.

Therefore, the three countries should resume their talks on a trilateral free trade agreement, and cooperate in fields such as e-commerce, logistics and environmental protection. Since an FTA among the three sides will help boost the development of the RCEP, Japan and the ROK need to abandon their polarized thinking, and instead safeguard free trade policies and establish a solid cross-border mechanism to protect their investment.

Also, Japan should support China and the ROK to join the Comprehensive and Progressive Agreement for Trans-Pacific Partnership, so the three countries can promote the integrated development of the RCEP and the CPTPP.

As China has been promoting openness in the services market and upgrading its trade standards, the region as well as the world will benefit if all stakeholders put aside the geopolitical and historical issues to objectively view China's opening-up, promote dialogue and accelerate the process of China's accession to the CPTPP.

The author is an assistant researcher of Asia Global Institute at The University of Hong Kong. The views don't necessarily represent those of China Daily.

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