Tag Archives: free trade agreement

Taiwan Free Trade Deal Would Inch US Closer to China’s Redline

THE POSSIBILITY OF a free trade agreement between Taiwan and the United States has been discussed fitfully for years, if not decades. The recent visit of US Health Secretary Alex Azar, the highest-ranking US official to visit Taiwan since diplomatic relations ended in 1979, has given it new life.

Earlier this week, Taiwan’s President Tsai Ing-wen told a virtual meeting hosted by two US think tanks that it was now a priority for her government.

Taipei would be the primary beneficiary politically and economically from any such agreement. Washington would get little out of beyond it providing another point of provocation with Beijing. The Trump administration has been more supportive of Taipei than its immediate predecessors. However, any promotion of Taiwan’s autonomy takes the Trump administration a step closer to one of China’s ruddiest redlines — and the inevitable retaliatory response.

That would go beyond Beijing’s efforts to block Taiwan’s participation in international organisations, as it is successfully managing against the US-lead effort to re-integrate Taiwan into the World Health Organization, along with chipping away at Taipei’s few remaining official ties with other countries.

At this point, Beijing would stop short of military action, even if it sustains the possibility of it. In May, for example, Premier Li Keqiang omitted the customary word ‘peaceful’ when he spoke of China’s intention to reunify Taiwan with the mainland.

Taipei has just announced a 10% increase in defence spending, regardless. In recent months, the United States and France have approved additional arms sales to the island.

However, there is a risk that the growing incursions by PLA Air Force warplanes into Taiwanese air space will lead to unintended conflict. That might prove challenging to de-escalate while US-China relations remain febrile.

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Filed under China-U.S., Taiwan

Beijing, Tokyo and Seoul Chat Chummily About An FTA

Despite the diplomatic tensions over disputed islands in the East China Sea, trilateral talks between China, Japan and South Korea on setting up a Northeast Asia free-trade agreement (FTA) are continuing. The second round of working talks among officials from the three countries was held this week in Qingdao. The goal remains to start the formal negotiations on the agreement by the end of this year.

As is always the case with free trade agreements there are plenty of potential pitfalls ahead as domestic vested interests rear their heads. One example is Japan’s farmers who have stalled a mooted bilateral deal between Tokyo and Seoul for almost a decade. But Tokyo won’t want to be cut out if Seoul and Beijing  complete their proposed bilateral deal. Nor will Beijing want to do anything to drive Tokyo towards the Washington-led TransPacific Partnership.

The three countries are already closely tied by trade and investment as well as physical proximity. No matter how rough the diplomatic waters between the three get, all have an interest in plainer sailing on trade.

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Beijing, Tokyo and Seoul To Start Formal Free Trade Pact Talks

As regular readers will know, we have been following the progress on a potential free trade agreement between China, South Korea and Japan for some time–and the shadow play for economic influence in the Asia-Pacific region being acted out through trade agreements by Beijing and Washington. The leaders of the three Asian neighbors have now agreed to start formal negotiations. We thought it timely to republish our post from last December.

China, Japan and South Korea have been discussing creating a free-trade zone for some years. Every time their leaders meet, in pairs or collectively, the language used to describe progress is increasingly purposeful. Prime Minister Wen Jiabao and his visiting Japanese counterpart, Yoshihiko Noda, now say the discussions have reached the point where formal negotiations could start next year.

The three countries are already closely tied by trade and investment as well as physical proximity. Japan and South Korea are China’s largest trade partners after the U.S. and the E.U. The agreement to settle yuan-yen trade currency conversions directly, also announced during Noda’s visit, will only help boost economic ties.

Similarly Beijing’s approval for the Japan Bank for International Cooperation (the old Ex-Im Bank) to issue yuan-denominated bonds in China–a first for a foreign government agency– and Tokyo’s plan to hold a small amount of Chinese government bonds in its official reserves support the internationalization of the yuan, and thus provide a growing alternative to the dollar as the working currency of any trilateral free-trade zone.

Those existing and coming economic links make it more likely that a free trade agreement can be stuck between the three before agreement is reached on setting up the much larger proposed Trans-Pacific Partnership (TPP) that the U.S. now wants to join and promote but from which China is being excluded. Indeed the TPP may have provided some impetus to China, Japan and South Korea’s discussions. Together the trio account for 16% of world GDP, so a free trade agreement between them would create a formidable bloc just by dint of their economic size alone.

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Filed under China-Japan, China-Koreas, China-U.S., Economy

East Asia Free-Trade Area Comes Nearer

China, Japan and South Korea have been discussing creating a free-trade zone for some years. Every time their leaders meet, in pairs or collectively, the language used to describe progress is increasingly purposeful. Prime Minister Wen Jiabao and his visiting Japanese counterpart, Yoshihiko Noda, now say the discussions have reached the point where formal negotiations could start next year.

The three countries are already closely tied by trade and investment as well as physical proximity. Japan and South Korea are China’s largest trade partners after the U.S. and the E.U. The agreement to settle yuan-yen trade currency conversions directly, also announced during Noda’s visit, will only help boost economic ties.

Similarly Beijing’s approval for the Japan Bank for International Cooperation (the old Ex-Im Bank) to issue yuan-denominated bonds in China–a first for a foreign government agency– and Tokyo’s plan to hold a small amount of Chinese government bonds in its official reserves support the internationalization of the yuan, and thus provide a growing alternative to the dollar as the working currency of any trilateral free-trade zone.

Those existing and coming economic links make it more likely that a free trade agreement can be stuck between the three before agreement is reached on setting up the much larger proposed Trans-Pacific Partnership (TPP) that the U.S. now wants to join and promote but from which China is being excluded. Indeed the TPP may have provided some impetus to China, Japan and South Korea’s discussions. Together the trio account for 16% of world GDP, so a free trade agreement between them would create a formidable bloc just by dint of their economic size alone.

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Filed under China-Japan, Trade