Comparative Study On FTA Strategy Of Japan And South Korea

Though FTA started late in East Asia,it has developed rapidly since 1997 Asian financial crisis.Even like Japan and South Korea,who originally held negative,even critical attitude to regional and bilateral free trade,implementing‘One-side WTO'foreign trade policy,have paid more attention to FTA and carried forward it as a national strategy.China has formulated and implemented the FTA strategy after recognizing the importance and urgency of executing it.As China's neighbors,with similar cultural traditions,Japan and South Korea are important trading partners and competitors.Therefore,in order to further improve FTA strategy,it is significant that China make a comparative study of FTA strategy in Japan and South Korea from a theoretical and practical sense.In this paper,similarities and characteristics of two countries'FTA strategies and lessons learnt would be summarized,moreover,countermeasures and suggestions for China in view of the development trends of FTA strategy in Japan and South Korea would be provided.First of all,research purpose and significance were expounded under domestic and overseas research background in terms of Japan FTA strategy,South Korea FTA strategy,China FTA strategy andthe comparison of FTA strategy between Japan and South Korea.Then,on the basis of related research at home and aboard,this paper adopted research methodssuch as literature research methods,qualitative and quantitative approaches,comparative methods,and historical analysis,and clarified the innovations and deficiencies of itself.Secondly,customs union theory,unconventional income theory,axle-spoke theory,transaction cost theory and other related theories were illustrated based on the definition of FTA connotations and the analysis of development features and relationshipsbetween FTA and regional economic integration.To be specific,members of FTA and customs union have traded freely with each other without trade barriers and implemented trade protectionism to non-member states,resulting in trade creation and trade transfer effects.In unconventional income theory,strategic targets of FTA are diversified,including traditional benefits like expanding trade,intensifying competition and increasing investment,as well as some non-traditional benefits.In axle-spoke theory,because‘axle'states,compared with‘spoke'states,have more advantages in expanding trade,attracting overseas investment and making rules,every country would try to construct the FTA network with itself as the‘wheel axis'state.From the perspective of transaction cost theory,every country would measure the income generated from and the expense incurred in the conclusion of FTA,because as a specific transaction,the conclusion itself would produce costs,though it could reduce transaction costs in economic exchanges.Thirdly,FTA strategies of Japan and South Korea were compared from historical development,strategic objectives,strategic content,strategic measures,promoting effects,and development trend.Moreover,reasons why Japan's FTA strategy is less effective than South Korea's were analyzed based on their similarities and characteristics.A.Historical DevelopmentInitially,due to different driving forces,Japan started FTA strategy passively,while South Korea pushed forward more actively but relatively conservatively.During the accelerating phase,South Korea surpassed Japan by concluding high-level FTAs with different major economies simultaneously.In the promoting stage,Japan,which has lagged behind in the development of FTA,expanded its strategic focus from East Asia to Asia-Pacific region and concluded high-level super FTAs.At the same time,South Koreaplayed a‘central axis'in the process of economic integration in Asia-Pacific region,not only focusing on super FTAs,but also attaching importance to FTAs with emerging economies.B.Strategic Objectives&Partner Selection&FTA Scope&Liberalization DegreeBoth Japan and South Korea have multiple strategic objectives including economic and non-economic targets.In detail,Japan pays more attention to non-economic goals,while South Korea attached greater importance to economic objectives for its extremely high degree of dependence on foreign trades.Consequently,due to the diversificationof strategic targets,partner selection criteria for both countries are multiple.For now,Japan has changed its strategic partners from small countries to major economies,while South Korea has begun to appreciate emerging economies.In terms of the scope of strategic content,both Japan and South Korea have broken the traditional range of FTA and involved new issues in 21^stcentury.In particular,due to disadvantages in agriculture,Japan is more willing to take economic cooperation in other fields.Besides,two countries are more liberal in terms of industry,service trade and investment than in agriculture.However,the overall level of liberalization in Japan is a bit lower than in South Korea.C.Strategic MeasuresIn this paper,strategic measures were compared through three aspects,including promotion mode,promotion system,and domestic aid policies of FTA.Firstly,in terms of promotion mode,both Japan and South Korea have given priorities to those countries with less difficulties in concluding FTA in initial stage.However,during accelerate stage,South Korea has collaborated with different major economiessimultaneously,while Japan only concluded FTAs with members of ASEAN at one time.In the promoting stage,like South Korea,Japan also strengthened to advance the conclusion of FTAs with different major economies simultaneously.Then,in terms of the propulsion system,both countries have set up FTA specialized agencies,while South Korea has higher efficiency than Japan with its propelling system institutionalized through legislations.Finally,in terms of domestic aid policies of FTA,both countries have set agricultural and forestry water industry as the main aid target,but South Korea's domestic aid polies are more comprehensive and timely.D.Promoting EffectsBased on FTA strategic trade effects,we compared promoting effects from effective FTA partners,FTA utilization rate of enterprises,coverage rate of FTA and non-economic effects.Through trade gravity model,we made an empirical analysis of trade effects from FTA strategy between Japan and South Korea.Firstly,changes before and after the protocol taking effect were compared through static trade gravity coefficients calculated from static perspective year by year.Secondly,parameters before and after the protocol taking effect were compared through time series of variables.Finally,parameter estimations of without dummy variables and with policy changes as dummy variables were compared.Moreover,on the basis of the above analysis,this paper made a detailed study on major reasons why the overall effects of FTA strategy are smaller in Japan than in South Korea.E.Development TrendFrom the point of development trend,Japan will actively promote CPTPP come into effect,conclude Japan-European FTA as soon as possible,seek to dominate RCEP,try to build high-level FTA with China and South Korea,and urge the United States to join in CPTPP through cold treatment to FTA between two countries.South Korea's new government will advocate free trade,vigorously promote RCEP,attach more attention to FTAs with China and Japan,response to the proposal of Korea-US FTA,prepare for Korea-Europe and Korea-UK FTAs,and accelerate to conclude FTAs with emerging economies.According to current development,coverage rate of FTA in Japan is expected to surpass Korea.Finally,we analyzed the enlightenments for China and suggested some relevant countermeasures.On the one hand,after summarizing the experience of FTA strategy in Japan and South Korea and analyzing the historical evolution and promoting situation of FTA in China,especially the existing problems of China's strategy itself,we gained some enlightenments for China.On the other hand,referring to the development trends of FTA strategy in Japan and South Korea,we suggested that China should play a leading role in promoting Asia-Pacific regional economic integration,orderly conclude FTAs with states along‘The Belt and Road',attach importance to the conclusion of FTAs with major and emerging economies,and accelerate the construction of free trade test sites.