Brittany Billingsley, Program Manager and Research Associate, CSIS Freeman Chair in China Studies, and Jeffrey D. Bean, Research Assistant, CSIS Freeman Chair in China Studies

The three leaders, Wen Jiabao of China, Naoto Kan of Japan, and Lee Myung-bak of Korea, hold a press conference following the Trilateral Summit in Tokyo. Korean Government photo in the public domain.

The 4th annual Trilateral Summit between China, South Korea, and Japan from May 21-22 provided an opportunity for the Chinese leadership to focus the attentions of its Northeast Asian neighbors on economic issues. Much of the press coverage has focused on the new nuclear safety agreement and efforts to improve disaster relief coordination, but the Summit was most notable for renewed attempts to mend this past year’s damage to China’s relations with its neighbors, with a heavy dose of economics as a basis of common interest.

In a speech on May 22 at the Trilateral Business Summit luncheon in Toyko, Wen’s talking points emphasized the benefits of expanding economic cooperation among the three countries, and announced that preliminary negotiations on a trilateral free trade zone would begin in 2012, with “sincere Chinese participation.” Wen’s forward-leaning position apparently came as a bit of a surprise to the Lee and Kan governments, given that the three governments had not seriously broached the subject of formalized trade negotiations for some eight years, since the collapse of trilateral investment treaty negotiations in 2004. The governments had previously agreed the investment treaty would act as a prerequisite to negotiating a trilateral FTA. Despite Wen’s rhetoric and joint promises to complete the investment treaty agreement by the end of the year, however, a China-South Korea-Japan free trade zone is still a long way in the offing.

For one thing, barriers in Japan’s agricultural sector and Korea’s trade imbalance with Japan will prove significant hurdles. So too will the intellectual property protection challenges South Korea and Japan both face with China. China also has significant defensive interests with respect to Korean and Japanese trade that FTA negotiations would expose through a public airing of sharp differences. In addition, given that the Koreans have been through comprehensive FTA negotiations with the United States and others, it is unlikely that they (whether or not Japan would participate) would be comfortable with the incremental, early harvest approach to FTA consummation generally favored by China.

As Beijing’s economic priorities have evolved, China’s willingness to enter into FTA negotiations with its neighbors demonstrates a growing perception that such agreements have utility as both economic as well as diplomatic tools. The Chinese are also clearly laying potential policy tracks to respond to the Trans-Pacific Partnership (TPP), which many in China perceive as a U.S- driven trade architecture for Asia in part designed to curtail Chinese economic leadership in the region. This perception may have fueled Chinese interest in pushing forward the FTA at this time. Yet Wen’s trade proposals at the Trilateral Summit seem less a mandate to achieve the commercial ends of a trilateral FTA than a means to correct China’s shorter-term regional strategic missteps.

Timing is everything. The past year has been marked by apprehension among several of China’s neighbors, chief among them South Korea and Japan, at perceived assertiveness on the part of China. Following the natural and nuclear disasters in Japan in March, leaders in all three countries have toned down their rhetoric out of regional solidarity, though beyond rhetoric it is uncertain how far efforts to relax tensions will go. In any event, Wen’s most recent attempt to emphasize cooperation at the Summit reflects an important shift in tone and a recognition by Beijing of the limits on its exercise of newfound relative power in the region. Wen’s FTA proposals, even if they lack a realistic mandate, are a sign that China seeks a productive partnership with its northeastern neighbors.

Whether high-level discussions such as this most recent Trilateral Summit and an emphasis on economic cooperation are enough to reassure China’s neighbors is yet to be seen. However, China’s attempts to re-build its relationship with its neighbors through economic and non-traditional cooperation will likely be a common theme throughout 2011 and deserves continued observation.  As for imminent prospects for a China-South Korea-Japan free trade zone, the jury is still out.