China-Japan-Korea Trade Talks Delayed on Island Spat

With the row between Beijing and Tokyo over a group of contested islands showing little prospect of resolution in the short-term, an increasing number of officials and experts are predicting that free trade discussions between China, Japan, and South Korea will have to wait until at least next year.

Optimism over a possible trilateral FTA was replaced months ago by worry as to whether China and Japan would be able to overlook a heated political stalemate in the interest of increasing trade between the three Asian economic powers.

Disagreements between Tokyo and Beijing over the islands, known as Diaoyu in China and Senkaku in Japan, has have long since crossed into the economic arena, already affecting trade between the two nations. Despite urging from Seoul that both parties put aside their territory-based arguments and come to the negotiating table, progress on free trade talks has been stagnant since the island dispute ramped up earlier this year.

Launch of talks at upcoming ASEAN summit unlikely

Most recently, many had looked to this week’s Asia-Europe Meeting (ASEM) as an opportunity for the bickering nations to reconcile. However, in a telling move, Japanese Prime Minister Yoshihiko Noda and Chinese Premier Wen Jiabao failed to hold their customary ASEM bilateral talks at the meeting, which began in Laos on Monday.

Looking forward, this month’s Association of Southeast Asian Nations (ASEAN) summit, being held in Cambodia, is now being discussed as the last opportunity for leaders of the three nations to launch free trade negotiations this year, as was originally planned. However, according to a Japanese lawmaker with knowledge of the negotiation process who spoke to the Wall Street Journal, “the current atmosphere doesn’t allow political problems to be put aside for the sake of economic cooperation.”

Indeed, although discussions would require the approval of all three heads of government, a meeting between the leaders has yet to be arranged, according to officials.

Despite the territory dispute, China is soon expected to enter into another set of talks with both Japan and South Korea, as well as India, Australia, New Zealand, and the 10-nation ASEAN group, for a regional free trade bloc, according to recent comments by South Korean Trade Minister Taeho Bark. The formal announcement is slated for the upcoming ASEAN summit, according to Reuters, with participating governments hoping to clinch a trade liberalisation deal by end-2015.

The idea for such a regional deal - dubbed the Regional Comprehensive Economic Partnership (RCEP) - originated from the planned Japan-Korea-China trilateral talks, Bark said on Monday, after some ASEAN countries expressed interest in a wider agreement. How the territorial dispute might affect the so-called RCEP, however, is unclear.