Competition Between China and Japan for ASEAN and FTA Heated.

China and Japan are competitively stepping forward in joining the Association of South-East Asian Nations (ASEAN) and signing additional free trade agreements (FTA).

The competition between the two countries is, however, likely to provoke South Korea to swiftly take countermeasures and to not loosen its grip in trying to become a leading economy in East Asia.

Japan agreed Wednesday at the economic ministers` conference held in Phnom Penh that it will begin negations in 2005 on a free trade agreement that rids restrictions over investment on goods and services. Japan plans to sign the agreement at the summit meeting, which will be held in October in Bali, Indonesia and, from next year, it will start to work out conditions of adopting a tariff-free agreement.

Japan also agreed to sign a free trade agreement with 6 early boomers, including Thailand, Indonesia and Malaysia by 2012 and with 4 late boomers, including Vietnam and Cambodia by 2017.

China, which signed a framework accord with ASEAN for establishing itself as a free trade region, also plans to accelerate its negotiations over the FTA, aware of Japan’s chase, ASEAN noted.

For the preparation of the FTA, China plans to drop tariffs on agricultural products dramatically from next year, while increasing duty-free items to 600 by 2006. Unlike Japan, which is in agony over opening its agricultural market, China does not have to worry much about the losses of opening its agricultural market, even if it joins ASEAN and signs the FTA.

The Japanese government, on the other hand, plans to limit China’s influence, by taking advantage of the ‘China-phobia’ among ASEAN member countries and increasing funds of its Official Development Assistance (ODA) towards South-East Asian countries,

If China and ASEAN member countries unite as a giant free trade area, the combined population and the Gross Domestic Product (GDP) will be, respectively, 1.7 billion and 2 trillion dollars. On the other, if Japan and ASEAN member countries unite as a giant free trade economic community, the combined population and the Gross Domestic Product will be, respectively, 590 million and 4.9 trillion dollars.

parkwj@donga.com