Asia-Pacific launch trade pacts amid tensions

Posted at 11/20/12 10:14 PM

PHNOM PENH – Asia-Pacific nations launched negotiations on Tuesday for two giant free trade pacts that diplomats said may foster warmer ties at a time of deep tensions over multiple territorial rows.

China, Japan and South Korea, embroiled in maritime disputes that have frayed diplomatic ties, began talks for a free trade agreement when their trade ministers met on the sidelines of an Asian summit in Cambodia.

Talks will start in earnest early next year, the three said in a joint statement announcing the start of the negotiations.

Negotiations for a separate Regional Comprehensive Economic Partnership (RCEP) involving the three Asian economic powerhouses and 13 other nations were also launched almost simultaneously at the East Asia Summit.

China is locked in a series of territorial disputes with four planned members of the RCEP -- the Philippines, Vietnam, Malaysia and Brunei -- and tensions over those rival claims flared yet again at the Cambodia talks.

But Surin Pitsuwan, head of the Association of Southeast Asian Nations (ASEAN) which hosts the annual summit, said all parties understood that they could not afford to let the disputes hold back lucrative trade agreements.

"The effort is to try to isolate the two issues. Economic integration will have to go forward... because everybody is going to benefit from this new architecture," he told AFP.

The launch of talks for both trade pacts came amid a particularly deep strain in ties between China and Japan, Asia's two biggest economies, over competing claims to islands in the East China Sea.

Their trade relationship, which is worth well over $300 billion a year, has suffered as the escalation in tensions fanned nationalist flames.

Anti-Tokyo riots shook Chinese cities in September, with the violence leaving some Japanese businesses in ruins.

A Chinese consumer boycott of Japan-brand goods also left the likes of the Japanese auto giant Nissan forecasting a large drop in sales in the world's largest car market.

Meanwhile, Japan and South Korea are locked in another row over islands in waters between their countries.

Tensions boiled over in August after a surprise visit by South Korean President Lee Myung-Bak to the Dokdo islands, known as Takeshima in Japan.

But, if successful, the three-way talks would create one of the world's biggest free-trade zones. Trade between the three countries already totaled $514.9 billion in 2011, according to the Japanese government.

The Chinese government, which has eschewed top-level talks with Japan amid the rise in tensions, nevertheless sees the advantage of pursuing the free trade agreement.

"We have to take the FTA of Japan, China and South Korea in a broader context, that is East Asia cooperation," Chinese foreign ministry spokesman Qin Gang told reporters in Phnom Penh.

"We believe that the FTA will be a very important vehicle in forging a broader trade arrangement in this region."

The RCEP offers potentially even greater riches, with the 16 nations involved currently accounting for half of the world's population and a third of global economic output.

It would cover all 10 ASEAN members, as well as China, Japan, South Korea, India, Australia and New Zealand, and would be the world's biggest free trade deal if realized.

All the countries have bilateral FTAs with ASEAN on which they can build.

However, as with the proposed South Korea-China-Japan free trade pact, no timetable has been set for the completion of negotiations.

Iman Pambagyo, Indonesia's director-general for international trade, told AFP that he expected closer trade ties between the rival nations would help them better manage their decades-long territorial disputes.

"At the end, it is economic development and improvement of well-being that matters the most... with improved welfare comes moderation," he told AFP.

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