Wonk Alert: Transcript for CNAPS Forum on “Economic Integration in East Asia and Its Implications for Japan and the United States”, Panel 1.
Panelist Wonhyuk Lim talked about the KORUS FTA in the context of Japan-US relations and East Asian economic integration. He used a colorful phrase that’s useful to characterize ROK-US relations since 2003-4, “uneasy coexistence of cold politics and hot economics”. It succinctly captures the conflict between the Roh administration’s “balancer” rhetoric and the recent KORUS FTA negotiations.
So what does the KORUS FTA mean for regional integration in East Asia and for U.S.-Japan relations? Some observers contend that the KORUS FTA would create a domino effect that, due to trade divergence, will instigate an increasing call for a Japan-U.S. FTA, but in my view, the risks of trade divergence for Japan need to be weighted against the adjustment costs in vulnerable sectors. In fact, now I am sure how serious this trade divergence effect is going to be due to the KORUS FTA because the U.S. tariff rate, on average, is quite low, and Japan is producing many products within the United States, for instance automobiles. On the other hand, there is the chance that the KORUS FTA might create an impetus toward a domino effect in the political direction. A China-Korea FTA or a Japan-Korea FTA might receive a boost due to the conclusion of the KORUS FTA.
As I mentioned at the outset, KORUS FTA might mean that the old vision of an East Asian free trade area has now largely faded. There is continuing concern over the China-U.S. rivalry and the China-Japan rivalry, and, as Mr. Yabunaka mentioned, there is always controversy over the scope of membership. It seems to me that these days, the big question is whether to include India, Australia, and New Zealand; that is, to really expand the notion of East Asia.
Lim argues that the 90s vision of an integrated East Asian economic zone, similar to the EU, is dead. Beijing’s economic success has challenged that vision, and now the US needs to observe its economic relationship with Japan strategically, or risk losing a place at the regional table. It’s a tricky choice between regional economic integration and political alliances against Beijing.
I think the question most Korea-watchers are asking is if the December 2007 elections in South Korea will usher in a new era in ROK-US relations, or will this era of “cold politics and hot economics” endure? How long will the US and South Korea keep us waiting to know how each will decide the contest for the vision for an East Asian economic zone or a political alliance against Beijing predicated on bilateral trade agreements?