2015 Summer International Political Economy
Professor Nobuhiro Hitawari

What Makes a Deadlock of KJFTA
Economic or Political reason?

2015. 07. 29. Wed.
Ah Ram Han
Seoul National University, GSIS
University of Tokyo, GrasPP
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Research Topic & Questions
A study on the causes of deadlock of Korea-Japan FTA
Research on the overall assessment (Economic & Political) of KJFTA

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Types of obstacles for KJFTAInternational constraints surrounding KJFTA
Domestic constraints: economic & political aspect-Japanese side-Inherent problem of “iron triangle”
Relevance to KCJ FTA ?
Political or FTA policy Implications
Future of economic integration in EA
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Structure
1. Introduction
2. Background of KJFTA- Current progress & past discontinuation- Each govt’s national strategy
3. Existing analyses on KJFTA- Theories of IPE- Economic benefits and losses
4. Determinants to the achievement of KJFTA- Constraints on international political & economic environments- Japan’s domestic constraints for KJFTA
5. Connection points of domestic obstacles and FTA Politics- Japanese domestic political tasks – “iron triangle”
6. Conclusion- Economic or Political reason?
- Future economic integration in EA
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Hypothesis
 Independent variable = Economic incentives regardless ofpolitical barriers Dependent variable = Achievement of FTAs
 Control variables ＝Different characteristics of political sy
stem in three countries, exceptional domestic and international incidents
 Hypothesis
Economic
Political Incentives
Motives

Agreement of FTA

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Background Current progress of KJFTA
June.25, 2012

3rd round of 「Manager-Level Consultation on the Korea-Japan FTA」(Tokyo, Japan)

May. 29~30, 2012

2rd round of 「Manager-Level Consultation on the Korea-Japan FTA」(Seoul, Korea)

Apr. 25~26, 2012

1st round of 「Manager-Level Consultation on the Korea-Japan FTA」(Tokyo, Japan)

May. 9, 2011

2nd round of「Director-General-Level Consultation on the Korea-Japan FTA」(Seoul, Korea)

Sep. 16, 2010

1st round of「Director-General-Level Consultation on the Korea-Japan FTA」(Tokyo, Japan)

Dec, 21. 2009
Jul.1, 2009
Dec.4, 2008

4th round of Working Level Consultations (Seoul, Korea)
3rd round of Working Level Consultations (Tokyo, Japan)
2nd round of Working Level Consultations (Seoul, Korea)
1st round of Working level consultations to consider and create a favorable environment for the resumption of the Korea-Japan FTA negotiations (hereinafter Working Level Consultations), (Tokyo, Japan)
6th round of the Korea-Japan FTA negotiations (Tokyo, Japan)

Jun.25, 2008

Nov.1~3, 2004

Discontinuation
1) 2005 – 2008
2) 2012 – Now

Aug.23~25, 2004

5th round of the Korea-Japan FTA negotiations (Kyungju, Korea)

Jun.23~25, 2004

4th round of the Korea-Japan FTA negotiations (Tokyo, Japan)

Apr.26~28, 2004

3rd round of the Korea-Japan FTA negotiations (Seoul, Korea)

Feb.23~25, 2004

2nd round of the Korea-Japan FTA negotiations (Tokyo, Japan)

Dec.22, 2003Oct.20, 2003

1st round of the Korea-Japan FTA negotiations (Seoul, Korea)
Korea-Japan agree to launch the Korea-Japan FTA negotiations

Jul. 2002~Oct. 2003

Joint Study Group meetings

Mar, 2002

Korea-Japan agree to launch the Joint Study Group for the Korea-Japan FTA

Dec.1998~Apr. 2000

Study group meetings

Nov. 1998

Korea and Japan agree to launch the 21st century Korea-Japan Economic Relations Study Group5

Background Past discontinuations

1. 2005 – 2008 2005: “Takeshima Day” established by Shimane prefecture(Japan)
 PM Koizumi’s visits to Yasukuni Shrine since 2001 No mutual visits between Japan and Korea since June 2005
2. 2012 – Until now
 PM Abe’s multiple visits to Yasukuni Shrine since 20136

Summary of Determinants
DomesticInternational

Political“Iron triangle”(LDP, bureaucrats, interestgroups)
Negative public opinion

Negative relationship ofJapan and Korea(Diplomatic & Political)

EconomicLess beneficiary actors(industry)
Agriculture, fisheries,
textile, …etc

KC FTAKCJ FTATPP
Economic Rivalry

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Existing Literatures
 IPE & FTA politics

1. Robert Keohane and Helen Milner (1996)
“Since economics and politics are so closely linked, domestic politics
in countries around the world show signs of the impact of the worldeconomy.”

2. Helen Milner (1992)
“Domestic politics tells us how preferences are aggregated andnational interests constructed.”

3. Helen Milner and Peter Rosendorff (1996)
“The role of interest groups in the domestic political process and ininternational negotiations in an environment characterized byuncertainty.”
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Existing Analysis
 Economic benefits & losses• Small contraction  production in all other sectors finally expands because ofhigher income  higher demand for all products  stimulate investment higher capital stock (Mckibbin, Lee, and Cheong, 2004)• Japan: increase in real GDP – 0.1%, but both will benefit in any way
9Existing Analysis
 Economic benefits & losses• Not much change in real GDP in short run (Korea – 0.29%), Korea – 1.09% andJapan – 0.02% increase in the long run (Nakajima, 2002)• Positive impression in terms of equivalent variance10

Existing Analysis
 Economic benefits & losses
Figure 4. < Effects of a Korea-Japan FTA on Production by Industries > (Unit: % changes)• Production expansion for Korea’s
major industries & production
contraction for its primaryindustries (Cheong, 2000)• Significant gains : transport
equipment, machinery, electricand electronic and steel industries
with annual growth rates of 5-13%• primary industries : the effects
will be minimal (slight increase of
0.2% for forestry and fisheries /small decline11

Determinants International circumstances (Munataka, 2005)
 Historical issues with neighboring countries Diplomatic deadlock (halt of Korea-Japan Summit) Multiple ongoing economic relations (TPP, AIIB, RCEP, KCJ-FTA, etc)
 Complex relations among economic rivalries

12Determinants
 Japan’s domestic constraints

1. Conflicting issue on agriculture sector- Both Korea and Japanese agriculture’s advantage is quite low sensitive issue (But, Japan > Korea)- Japan: more difficulties because of economic effects (1.5% ofGDP & 3.9% employment) & political importance (history ofprotecting its agricultural sector)- The highest average tariff & higher-level of Korea’s agriculturalexports
 No consensus on necessity of agriculture sector liberalization

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Determinants
 Japan’s domestic constraints

2. Japan’s FTA policymaking process: continuity of “irontriangle”(1) LDP – the Principal-Agent model & Particularism(Okimoto, 1989)(2) Bureaucrats – Diffused coordination & Vertical allianceof sub-governments (Ito, 2005)(3) Interest groups – the Pork-Barrel Politics (Calder, 1988)

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Domestic Constraints
 Japan’s domestic political tasks & Agri. issues-relationship of the LDP, bureaucrats and interest groups Compensation politics – LDP’s traditional “carrot and thestick”strategy (Calder, 1988)
 Corporatism – “Japan, Incorporated” (Okimoto, 1989)
 Most conflicting issues: agricultural sector – lack ofstrong top-down authority & inter-sectroal coordination
ability by top-layer of govt
 Pragmatism of Japan’s FTA politics

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Public Opinion
 2010 NHK-KBS Survey

 Face to face interview (Respondents: Japan: 1,473, Korea:1,000)• Those in favor of the plan: Japan– 68%, Korea -63%
• The proportion was slightly greater for Japan (majority)
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Conclusion & Implications
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FTA is controlled by the combined situations of economic and politicalissues surrounding domestic and int’l environments.
The achievement of FTA is more controlled by domestic political reasons,rather than economic factors.
The case of KJFTA has been experiencing more domestic difficulties.
Japan’s domestic FTA politics on policymaking process can be represented
by the “iron triangle” interactions of the LDP, bureaucrats, and interest
groupsThe key of future KJFTA largely depends on how to solve the domestic
tasks in Japan.
The KJFTA will lead a much more solid relationship, not controlled bydiplomatic or historical issues.
The strongest push force comes from political initiatives by national
leaders with political incentives.

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Future Solutions
See the issue of KJFTA with the idea of separation of politics
and economic issues, not controlled by domestic conflicts andpolitical struggles every time Useful tool to improve the bilateral relations
 Political initiative by national leaders – to make domestic
consensus & support policy / pushing forces Good stimulus for the progress of KCJFTA Better political environments leading a higher-level ofcooperation in the long-term18

Thank you 19