Takashi Terada: CHINA-JAPAN-KOREA -FTA

I think China should move to realize its own trade and economic interests in the form of regional FTAs. As such a big economy, China’s move would inevitably have a considerable impact on any nation including the United States. 

 By Ying Li(李颖)

 YING LI: What may be the possible obstaclesagainst forming a China-Japan-Korea FTA?

TAKASHI TERADA:There is a regulation on foreign investment that requires a consolidation with local companies,and principallyitdoes not approve the shareholding ratio of more than 50% when foreign companies construct an automotive factory, to which the Japanese industry has expressed complaints that the regulation is not always clearly defined and the requirements for approval get changed without notice. Hence, Japan and Korea both had the common issue of complaints and requests from companies, which led them to request China for the trilateral investment arrangement, including the transparency of the regulation and the strengthening of the protection of intellectual property.

FTA means an industrial adjustment between contracting parties, and, therefore, Japan and Korea, who are less competitive than China in terms of the price of agricultural products, were cautious about the trilateral FTA.

YING LI: How can we narrow the difference over political and economic values between China and Japan?

TAKASHI TERADA:There are many differences: human rights, democracyand so on.Many people may say that we need more discussionsanddialoguesto talk. At least,we acknowledge the mutual differences.So if we find it almost impossible to narrow the political differencesand values, why don’t we go without narrowing them? We can simply find theareas or fields in whichChina and Japan cancooperate witheach other, for instance,regionalfinancial architecture and less dependence on the US dollars.In this case, we don’t need to narrow such different politicalsystems and values.

YING LI:What should China do to establish a regional FTA framework?

TAKASHI TERADA:While the negotiation for the U.S.-led TPP was progressing, China was claiming more strongly than before for the promotion of Japan-China-Korea FTA. When Japan decided to participate in the TPP negotiation in November 2011, China accelerated the movement towards the conclusion of Japan-China-Korea FTA. This means China’s FTA interest, especially the trilateral one, has been inspired by the United States through TPP. I think China should move to realize its own trade and economic interests in the form of regional FTAs. As such a big economy, China’s move would inevitably have a considerable impact on any nation including the United States. 

YING LI: How should China improve its labor standards and environmental protection to join the TPP? 

TAKASHI TERADA:A labor section in TPP would request member states to follow the rules set up in the International Labor Organization (ILO),includingcollective bargaining, freedom of association, prohibition of forced and child labor, and discrimination in employment. Yet,I don’t think the Chinese government would allow companies, especially state-owned ones, to set up labor unions to negotiate the wages and other issues.

YING LI: What do you think about the rise of Chinese-style state capitalism in other countries? (As you mentioned in the article: <Games Changes in Economic and Strategic Order in East Asia>)

TAKASHI TERADA: I think the Chinese capitalism means the governmentinterventionin the market. Beijing’s quick and decisive injection of a four trillion-yuan package in November 2008 was touted as a crucial state intervention which lifted China out of the global economic doldrums in double time.Thismodel has attracted many admirers from developing countries whichsoughtto copythe Chinamodel.. For instance, a strong indication of an ideological shift, is how the crisis has intensified the relationship between the four developing BRIC (Brazil, Russia, India and China) countries.

At a meeting to discuss the global financial crisis in Russia in June 2009, the BRIC countries reportedly advanced the possibility of dumping the U.S. dollar as the world’s reserve.But in western countries, thedecision-makingprocess of democracy needs quite a long time toimplement a policy to rescue their people urgently.This is a reason why the China model became attractive. Yet China and Japan differ over political and economic values such as the promotion of democracy, human rights or intellectual property rights, and this fundamental difference will never allow Japan to fully join the Beijing Consensus camp, leaving Japan in a delicate position in its relations with China.

YING LI:What’s your own attitude tothe maritime disputes between China and its Asian neighbors?

TAKASHI TERADA: If China wants to solve maritime issues, I thinkChina would have no choice but abide by international law which is UNCLOS. This is an international rule on maritime territorial disputes and I think Chinaas a global responsible stateshouldlegitimize its territorial claimsby providing evidencesbased onthisinternational law.I believemany countriesand peoplewant to know what thelegalbasis ofChina’s territorial claims inSouthChinaSeais. I am awarethatthe so-called cyber nationalism has been growing andthatpeople in this group would like to accuse the government of its weak stance towards foreign affairs, especially territorial disputes.To cope with orcontrolthecyber-nationalismis substantially difficult for any state,especiallywhenthe internet makes it possible to express radical opinions anonymously.

YING LI:Shanghai is now aiming to become an international trade center. Is the city’s existing trade infrastructure and government support suitable for this goal?

TAKASHI TERADA: I think so. Shanghai and my hometown Osakaare sister cities andboth have international airports. But in my hometown, thelanding fee is very high, and the government’s financial support was not sufficient so far, it is yet to develop as an international hub airport. This is a bad example. Kansai Airport is now changing though by reducing the landing fee to attract more foreign planes, including low-cost carriers. I think, in this case, Singapore may be a goodexample for Shanghai.