China-Japan-Korea Trilateral Investment Agreement

Despite the effects of the COVID 19 pandemic, bilateral trade between China and Japan reached nearly $150 billion in the first half of 2020. Japan`s investment in China amounted to about $2 billion, which is essentially the same level as the previous year. These resistant flows reflect the deep foundations and enormous potential of Sino-Japanese relations. Currently, China is Japan`s largest trading partner and South Korea, and Japan and South Korea are China`s second and third largest trading partners, respectively. At the eighth China-Japan Summit of Heads of State and Government and last year, the heads of state and government of the three parties said they would work hard to achieve a free, fair, non-discriminatory, transparent, predictable and stable business and investment environment, and to keep markets open. South Korea and Japan have held similar negotiations since late 2004, but talks have stalled as Japan is unwilling to reduce tariffs on agricultural products. Economic relations between Japan and South Korea are relatively competitive and the two countries have often been divided due to historical issues. Bilateral relations have been frosty for more than a year, which is an obstacle to the development of the trilateral free trade agreement between China and Japan and South Korea. Although President Xi Jinping`s visit to Japan has been postponed due to the pandemic, warm relations between China and Japan have created good conditions for valuing and developing bilateral relations. China can also mediate trade negotiations with Japan and South Korea as part of a high-level high-level dialogue with Japan to strengthen the investment agreement and create a free trade agreement. The current bilateral investment agreement between China and Japan came into force in 1989 – relatively early. Although China and Japan have signed free trade agreements with many countries, China and Japan have not established a free trade mechanism due to external factors such as the rigidity of the U.S.-Japan alliance, U.S. strategic suspicions and volatile relations between South Korea and Japan.

In the context of enhanced china-Japan relations, the two countries should begin negotiations for an improved bilateral investment agreement as soon as possible and begin negotiations for a free trade agreement between China and Japan. China can also mediate trade negotiations with Japan and South Korea as part of a high-level high-level dialogue with Japan to strengthen the investment agreement and create a free trade agreement.