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Analysis of a China-Japan-Korea Free Trade Area: A Sectoral Approach
Published May 25, 2011
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The trilateral joint research on economic cooperation among China, Japan, and Korea began following the agreement among the leaders of the three countries at their historic meeting in Manila in November 1999. The Development Research Center of the State Council of China, the National Institute for Research Advancement of Japan, and the Korea Institute for International Economic Policy have undertaken joint research since 2001. For the first two years, they focused on the issue of enhancing trade and investment among China, Japan, and Korea, and each year a summary of the joint research along with a set of policy recommendations has been submitted to the leaders of the three countries.

In 2003, the three institutes embarked upon the second phase of the joint research— long-term economic vision and medium-term policy direction—starting from a three year project on the economic effects of a possible free trade agreement (FTA) among China, Japan, and Korea. The joint study in 2003 showed that all three countries would benefit from a China-Japan-Korea (CJK) FTA. According to a model simulation of a CJK FTA, China’s economic welfare would increase by $4.7–$6.4 billion and its gross domestic product (GDP) growth rate would increase by 1.1–2.9 percent. Economic welfare gains and GDP growth for Japan would be $6.7–7.4 billion and 0.1–0.5 percent, and for Korea they would be $11.4–26.3 billion and 2.5–3.1 percent. In addition, the majority of surveyed businesspeople in the three countries looked favorably upon a CJK FTA.

In 2004, the three institutions conducted joint research on sectoral implications of a China-Japan-Korea FTA. That study addressed agriculture and manufacturing sectors. After a cross-sectoral analysis of the economic effects of the trilateral FTA, three industries—agriculture, automobiles, and electronics—were analyzed further. This paper summarizes the results of the study of agriculture, autos, and electronics, and it is complemented by interviews with businesspeople and specialists. Based on these analyses and discussions, policy recommendations are proposed.

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