Trade pact may boost China’s seafood exports

Negotiations between China, Japan and Korea on a free trade pact will begin this summer and are scheduled to be completed in two years. Chinese sources have suggested that the agreement could lift the country’s GDP by 2.5 percent.

The pact will give a significant boost to Chinese seafood producers if a deal is reached, said Li Li, director of the Northeast Asia Economic Development Research Centre at the Qingdao University of Science & Technology. He said “business growth will be very large” in Qingdao thanks to the pact, which will also help “upgrade and update” Qingdao’s industrial base due to an increase in trade across the Yellow Sea.

As well as being a seafood processing hub, Qingdao and surrounding Shandong province have long been a focus of Japanese and Korean investment. The city’s port is a key channel for trade out of China to northeast Asian markets like Japan and Korea.

Trade experts in Beijing predict that Chinese food exports to Japan will rise significantly on the USD 11 billion (USD 4 billion to Korea) recorded in 2011. This is because Chinese products are so much cheaper than Japanese, according to Zeng Yanchu, a professor at Renmin University in Beijing.

Zeng quotes figures that show Japanese rice (retail price) is 11 times more expensive that Chinese rice. China is a key processing base for Japanese seafood, with imports destined for Japan as well as Japanese product sent to China for processing and then shipped back to Japan.

Japan accounted for USD 579 million in China’s fish fillet exports from January to October 2011, according to U.S. Department if Agriculture data, putting it in second place behind the United States, which bought USD 962 million in Chinese fish fillets. Japan was the top destination for Chinese shrimp at USD 264 million, compared to USD 260 million shipped to the United States.

China, Korea and Japan accounted for 70 percent and 20 percent of Asian and global GDP, respectively, and 18.5 percent of global exports in 2010. The three nations together have an annual GDP of USD 14 trillion and together reported USD 6.5 trillion trade in 2011. However, only 20 percent of trade between the three neighbors is with each other, whereas EU members do two-thirds of their overall trade with each other.

Japan is hoping access to China for its high-tech exports will boost a stagnant economy. However, the country has stalled in negotiating an free-trade agreement (FTA) with Korea and has the option of negotiating a Trans Pacific Partnership proposed by the United States.

Xu Changwen, a researcher at the Chinese Academy of International Trade and Economic, said firms from Japan and South Korea have already been increasing their investments in China and ASEAN operations to tap the potential of the Chinese market. Xu said Japan has been vigorous about proposing an East Asia Community, but given such an EU-style community would require free flow of goods and labor over borders it’s “a long way off.” However, said Xu, an FTA would allow Asia to follow the path of integration in the meantime.

China is Japan’s No. 1 trading partner. However, political distrust continues to haunt relations. Ties are hampered too by territorial disputes — China and Japan both claim sets of islands in the East China Sea. In the past several years, Japanese products have been the subject of boycotts in China while sushi bars have been vandalized in Beijing after visits by Japanese leaders to the Yasakuni Shrine to Japanese military leaders.

Relations have thawed somewhat in the past year. On 10 May, Chinese and Japanese officials met in Hangzhou for the first session of the “maritime high level consultations” — Round 2 is set for Japan in the second half of 2012.

An investment agreement signed by China’s leaders last week singles out cooperation in fisheries and marine ecology. China Academy of Fishery Sciences and the Fishery Research Agency of Japan along with Korea’s National Fishery Research & Development Institute will work together on jelly fish and the Yellow Sea ecology as well as seafood safety.

It’s clear that a FTA with Japan and Korea has support in Beijing official circles. China’s normally jingoistic Global Times newspaper, a government mouthpiece, noted in an editorial on the pact that it’s “abnormal” that there’s no northeast Asia trade pact given all three countries have trade pacts with ASEAN. The paper also pointed out that the rise of the Asian consumption power will provide a thriving internal market for Asian trade.