Bilateral rewards from new FTA

Judging from the sixth round of FTA negotiations held recently in Busan, South Korea, it was clear both sides enjoyed a constructive atmosphere, thanks to Park's successful visit to China. This has also opened an opportunity to greatly narrow the differences between the two sides.

The two countries have made substantial progress on the basic principles and agreed to include agreements on technical barriers to trade, sanitary and phytosanitary measures, e-commerce, environment, industrial cooperation, agriculture, fisheries cooperation, government procurement and another nine areas in the China-ROK FTA negotiations. Guided by the current momentum of development, China-ROK FTA negotiations are likely to be finalized in 2015.

A China-ROK FTA once reached will undoubtedly touch a sensitive nerve in Japan. As a strong competitor against South Korea, Japanese industry will face tremendous pressure in the international market.

Japanese enterprises have longed to expand and deepen economic and trade cooperation with China, just like the South Koreans, hoping their government would do everything possible to create more favorable conditions, so they can bite off a big chunk of China's expanding domestic demand, and from China's transition from the "world factory" to "world market".

They also need China to inject positive energy into Japan's weak economic growth. A China-ROK FTA would give South Korean companies a huge competitive advantage in the Chinese market.

Indeed, Japan and South Korea are competitors in the Chinese market. Chinese trade and economic relations with Japan and South Korea are interchangeable. Therefore, China can use its economic and trade interaction with South Korea to mitigate and reduce risks stemming from any stagnation in Sino-Japanese economic relations.

South Korean companies can also take advantage of the preferential terms provided by China-ROK FTA to gain a deeper foothold in competition with Japanese companies, overturning Japan's competitive advantage in automotive and semiconductor electronics.

If the China-ROK bilateral FTA goes well, the Japanese government will face tremendous pressure from its industry. It will seek to be absorbed into the China-ROK bilateral FTA, which will eventually lead to the birth of a China-Japan-ROK FTA.

The author is a professor at the Beijing-based China Foreign Affairs University. The views do not necessarily reflect those of China Daily.