Free trade zone for China, ROK, Japan to produce hefty benefits
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While regional integration is breaking down the walls dividing adjacent countries, free trade is thickening the web of their economic interdependence between them with potential benefits.
After concluding their third round of trilateral summit on Sunday in Jeju island, South Korea, leaders from China, South Korea and Japan have agreed to complete a joint research task by 2012 on the feasibility of grouping the three nations into a free trade zone.
To list the benefits of a free trade area, countries concerned are obliged to eliminate tariffs and quotas, allow faster flow of goods, as well as lower manufacturing costs and product prices.
Additionally, a free trade zone could also facilitate the free flow of human resources, capital and services, and promote a favorable environment for investment, thus strengthening political communication.
As the world is maneuvering to remove the remaining woes of the international financial crisis while facing a possible second dip amid the turmoil of the eurozone debt crisis, regional economic blocking up gains momentum.
Under such circumstances, China and the ASEAN Free Trade Area, the world's largest of its kind, came to birth on the first day this year. It has a 1.9-billion-population with 6,000 billion U.S. dollars in terms of the GDP and 450 million dollars in trade.
The motions to materialize free trade zone proposals are also found in Russia and Latin America.
Russia is advancing on the track of constructing a free trade zone within the members of the Commonwealth of Independent States, while the Community of Latin American and Caribbean nations is also in the making.
According to the data of China's Ministry of Commerce, the number of free trade areas worldwide will rise to some 400 by the end of 2010.
However, the idea of such an economic bloc between the three economic powers in the Northeast Asia is still preliminary, requiring sufficient deliberation.
If grouped, it would include Asia's first, second and the forth largest economies and account for 70 percent of Asia's GDP or 20 percent of that of the world, standing next only to the European Union and the North American Free Trade Area.
With China as the biggest trading partner of South Korea and Japan's second, bilateral trade between the three nations, which totals about 200 billion dollars, is also considered as a catalyst for building the free trade zone.
Meanwhile, studies by some non-governmental research groups of the three countries have come to two conclusions: first, a free trade zone could further promote their economic growth; second, a trilateral free trade zone would outperform such an economic group as composed by any two countries of the three.
Moreover, China's competitiveness in natural resources and labor-intensive industries, which contrasts to that of South Korea and Japan in capital and technology-intensive sectors, could underpin the formation of the trade circle.
Nevertheless, shortcomings of free trade zones should not be neglected.
Once such a free trade zone is built, China has to consider the impact on some of its industries, the economic and social costs it has to pay and the liberalization of such areas as agriculture.
At present, the establishment of such a trilateral free trade zone has a long way to go. Along the way, not only a thorough exploration is needed, but also a practical attitude to push the process forward.
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