East Asian powers agree on trade pact talks

Sun May 13, 2012 4:04am EDT
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By Chris Buckley and Sui-Lee Wee

BEIJING (Reuters) - China, Japan and South Korea agreed at a summit on Sunday to launch negotiations for a three-way free trade pact they said could help fend off global economic chills, but the talks are expected to be long and difficult because of decades of rivalry.

The three nations are major traders, and together accounted for 19.6 percent of global gross domestic product and 18.5 percent of exports in 2010, according to a feasibility study issued by their governments last year on the trade pact.

"Northeast Asia is the most economically vibrant region in the world," Chinese Premier Wen Jiabao told reporters after talks in Beijing with Japanese Prime Minister Yoshihiko Noda and South Korean President Lee Myung-bak.

"The establishment of an FTA will unleash the economic vitality of our region and give a strong boost to economic integration in east Asia."

China is the biggest trade partner of Japan and South Korea. A free trade treaty could lift China's GDP by up to 2.9 percent, Japan's by 0.5 percent, and South Korea's by 3.1 percent, the official Xinhua news said in a commentary, without citing the basis for its estimates.

But agreeing on a fully-fledged pact, which has been on the table for a decade, will not be easy.

The three northeast Asian neighbors are divided by political distrust, trade barriers, and diverging investment policies, as well as regionwide worries about China's expanding economic and military power.

The proposed treaty must also vie for attention with the United States' push for a broader Trans-Pacific Partnership, a trade liberalization initiative that has drawn in nine countries, with Japan also expressing interest. China and South Korea are not part of those negotiations yet.   Continued...

Japan's Prime Minister Yoshihiko Noda (back) looks on as Japan's Trade Minister Yukio Edano (R) attends a signing ceremony of the fifth trilateral summit among China, South Korea and Japan at the Great Hall of the People in Beijing, May 13, 2012. Chinese Premier Wen Jiabao urged northeast Asian powers to cooperate more in the face of global economic headwinds, as China, Japan and South Korea agreed at a summit on Sunday to soon launch negotiations on a three-way free trade pact. REUTERS/Petar Kujundzic