SHANGHAI – China is expected to finalize free trade agreements (FTAs) with both South Korea and Australia in November this year, concluding what have been two years of negotiations with the former and almost ten years with the latter. The agreements would be struck just seven months after South Korea and Australia signed a FTA with each other and would be a major lift for several important sectors in all three of the countries involved.
For South Korea and China, the deal would see the elimination of tariffs on 90 percent of all goods and 85 percent of imports by value, providing a massive boost to various industries in both countries. Other, more sensitive and complicated terms of the agreement are still to be ironed out, but South Korea’s Trade Minister, Yoon Sang-jick, confirmed that the FTA should be finalized before the Asia-Pacific Economic Cooperation summit is held in Beijing on November 10.
The Australia-China FTA would reduce or remove tariffs that impact trade in goods; restrict regulations that impede services; and implement measures that encourage more foreign direct investment (FDI) between the two countries. After signing the Australia-South Korea FTA earlier this year, Prime Minister Tony Abbott declared that an agreement with China would follow as soon as possible. His remarks were reinforced this week by China’s ambassador to Australia, Ma Zhaoxu, who told The Australian that negotiations are now speeding up and, once concluded, could be worth up to US$10 trillion over the next five years. The FTA is expected to be finalized during this year’s G20 summit, also in November.
For Australia, the FTA would bring to an end almost ten years of protracted negotiations. Having begun in 2005, talks with China repeatedly stalled following disagreements on numerous aspects of the deal, including investment, services, agriculture and government procurement contracts. Completion of the agreement would represent a major breakthrough in bilateral relations between the two countries.
Although the length of time taken to conclude the China-South Korea FTA will be far shorter – talks began in May 2012 – its overall impact may be more significant. Negotiations over the deal had previously been complicated by China and South Korea’s competing jurisdictional claims in the East China Sea. That it is now nearing its conclusion perhaps represents a shift in emphasis away from political animosity and towards economic cooperation.
If so, the deal may have a direct effect on both trilateral FTA talks between China, South Korea and Japan, which have experienced similar difficulties over political friction, and the much broader Regional Comprehensive Economic Partnership (RCEP), of which China, South Korea and Australia are all key partners. In this way, the South Korea-China and Australia-China FTAs may prove to be two important building blocks in the future creation of an economically integrated Asia-Pacific.
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