China, Japan, South Korea united on North Korea denuclearization

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Japan's Prime Minister Shinzo Abe, South Korea's President Moon Jae-in and China's Premier Li Keqiang attend the 6th Japan-China-Korea Business Summit in Tokyo on Japan May 9, 2018. Photo: Reuters/Toru Hanai

The first trilateral summit since 2015 between China, Japan and South Korea took place in Tokyo, Wednesday. While North Korean developments were center stage, the three leaders attending also discussed trade, technology and sportive and cultural cooperation, and pledged to make the summit a more regular affair.

However,  the Joint Declaration  did not address contentious issues, such as the territorial and historical disputes which divide the three nations .

Alongside the host, Japanese Prime Minister Shinzo Abe, the participants in the one-day event were Chinese Premier Li Keqiang and South Korean President Moon Jae-in.

Chinese President Xi Jinping did not attend. He was in the Northeast Chinese port city of Dalian, where he held his second surprise meeting with North Korean leader Kim Jong-un, and is expected to watch the sea trials of a new aircraft carrier – two factors unlikely to be lost on Abe, who is wary of North Korea and who is beefing up his own maritime defense forces.

In praise of North Korean denuclearization

With the formerly reticent Kim on a diplomatic charm offensive – he has met Xi twice and Moon once in the last three months, and is preparing for his nation’s first-ever summit with a US president – the big ticket item was North Korea and its pledges to both China and South Korea that it was ready to denuclearize. The summit endorsed the recent “Panmunjom Declaration” between the two Koreas.

“At the inter-Korean summit, Moon Jae-in exerted great efforts and I praise that,” Abe said in the televised briefing, referring to last month’s landmark meeting in Panmunjom. “Developments on the Korean peninsula are moving toward stability in Northeast Asia and complete denuclearization.” Calling for “firm actions” by North Korea, Abe said  he anticipated further cooperation among the three countries on the issue, adding, “If North Korea walks toward the right path, then we can establish normalized ties with North Korea.”

That development could be hugely significant for cash-strapped North Korea. When Japan normalized ties with South Korea in 1965, it offered a financial aid package of soft loans and colonial-era reparations worth US$800 million that provided the start-up capital for the country’s “economic miracle.”

Tokyo is the regional player that arguably feels most threatened by North Korea – particularly given that so many North Korean ballistic missile tests overfly the island nation (albeit, through the stratosphere, rather than Japanese airspace). However, in its policy, Tokyo is hostage to domestic pressures and Abe cautioned that the dicey issue of abductees – Japanese kidnapped by North Korean agents in the 1970s and 80s – would first have to be dealt with.

“We welcome and celebrate the third inter-Korean summit which was held successfully,” added China’s Li. “I expect the US-North Korea summit will also be held successfully… I hope each party can take this opportunity to resume dialog to realize denuclearization and peace on the Korean peninsula… China will join these efforts.”

China seeks stability and security on its strategic northeastern frontier. While North Korea is frequently a diplomatic embarrassment, it provides China with a convenient buffer against South Korea’s raucous democracy and resident GIs. While China has recently applied sanctions with more stringency, it has customarily taken a light-handed approach. The central importance of Chinese trade to the North Korean economy makes Beijing a key adjudicator of any outcome.

Moon thanked his two counterparties for their endorsement of the Panmunjom Declaration, noting, “We are crucial partners when it comes to peace and prosperity.” While Moon seems determined to move in lock-step with Washington and US President Donald Trump’s policy of “maximum pressure,” it looks likely that, with Washington insisting that it will not reward the North, the role of offering Pyongyang incentives to denuclearize will fall to Seoul.

It has been revealed that during the inter-Korean summit, Moon gave Kim a USB containing the outlines of the benefits his country can anticipate if it gives up strategic weapons and becomes a law-abiding, rather than a pariah state. The plan reportedly offers North Korean transport and logistics infrastructure on the west coast, energy and transport infrastructure on its east coast, and South Korean tourism.

In a bilateral meeting after the televised briefing, Li and Moon agreed that North Korea needed to be rewarded. “The two leaders agreed that the international community, including the United States, must actively take part in ensuring a bright future for North Korea through a security guarantee and support for its economic development in case North Korea does completely denuclearize, instead of demanding North Korea unconditionally denuclearize,” Yonhap reported.

Unintegrated trade

Speaking at the briefing, Li noted, “we have benefitted from globalization.” With China seeking to position itself as a free trader – particularly vis a vis the United States – Li continued, “We have seen a lot of problems in trade recently, but we should continue to pursue globalization and solve relevant problems related to trade and trade protectionism. This is the right direction.” Li also stated that “… the three countries are complementary.”

The Chinese premier did not clarify his meaning, but in trilateral trade – while there is considerable interchange of components and unfinished goods – the three nations are fierce global rivals in sectors including consumer electronics, construction, metals and shipbuilding. Both Japanese and Korean brands are wary of the rise of giant Chinese competitors.

This could explain why the three economies are on very different pages when it comes to macro integration.

Northeast Asia is the world’s third largest zone of economic activity beyond North America and the European Union, representing one fifth of global GDP and one quarter of global trade, but while a free trade zone between the three was proposed in 2002, an outcome has been elusive: Twelve sets of negotiations have taken place since then, the last being held in 2017.

Li urged the three countries to “expand the trilateral FTA and RCEP consultations.”  The Joint Declaration called for “…accelerating negotiations in the trilateral FTA…with the goal of achieving a comprehensive, high-quality mutually beneficial agreement.”

China is pushing the nascent Regional Comprehensive Economic Partnership, or RCEP format, to which both Seoul and Tokyo are party. It has so far been through 22 rounds of negotiations, but has been criticized for its weak intellectual property rights protection. While the Joint Declaration called for accelerated RCEP negotiations, it also called for improvements to “the intellectual property system in the region….and better development of the trilateral cooperation in this area.”

Tokyo is the key promoter of the competing Trans-Pacific Partnership. Seoul is not in the latter but does have a bilateral FTA with Beijing. Yet even that FTA has been dismissed by a trade negotiator as “bronze” rather than “gold standard.” While the agreement was implemented in 2015, it will be another 17 years before all provisions take effect.

On the technical front, Abe said that there would be greater trilateral cooperation in artificial intelligence and digital technologies. Moon added that there would be increased cross-border interchange of energy and information and communications technologies.

The Joint Declaration called for “improved cooperation in areas such as supply chain connectivity (SCC), e-commerce, content industry and standardization to enhance competitiveness.” It also called for a Memorandum of Understanding between the three governments “to improve the transparency and liquidity of the LNG market in Northeast Asia.”

To manage unusual cross-border financial flow, the Joint Declaration called for strengthening of the CMIM – The Chiang Mai Intitiave  a multilateral currency swap arrangment – and the establishment of the Asian Bond Market Initiative (ABMI).

More summits, more exchanges

Six trilateral summits have been held since 2008, with the last one being in 2015. “We have reaffirmed our determination to hold regular trilateral summits,” Moon said.

Li promoted the idea of regularizing the meetings. “The three countries have common interests and through this summit, we can further expand our common interests and solve some conflicts,” he said. “In this regard, China hopes to hold this meeting regularly and next time we will hold this meeting in China.”

Both Li and Moon mentioned the importance of people-to-people – including cultural, educational and sport exchanges – contacts.

With the 2018 Winter Olympics having just taken place in South Korea, the next Summer Olympics being hosted by Tokyo in 2020 and the 2022 Winter Olympics being held in Beijing, Moon noted that there was considerable scope for these activities.

The Joint Declaration called for 30 million human exchanges by 2020 and a campaign to promote all three countries, the Visit East Asia Campaign. In order to foster regional youth cooperation, CAMPUS Asia and Youth Summits were mentioned.

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