If the Japan-South Korea economic partnership agreement is reached first, South Korea should join the EAC as part of the "Japan-South Korea Axis", which means South Korea may or may not be the connecting point when North Korea is accepted into the EAC. If it joins the EAC as part of the whole Korean Peninsula after its economy merges with that of the north, South Korea will gain a greater voice.

The third risk is found in the fact that foreign investments now play the leading role in South Korea's financial market following its opening up in 1999. Unfortunately foreign investors are very sensitive to the political risks in North Korea.

As for China, the largest developing nation in the world, Japan and South Korea are the only two of the three developed countries in Asia. According to the World Trade Organization's (WTO) exceptional rules, when a developed country signs an FTA with a developing one, the former must include all its domestic markets in the agreement while the latter can open up some of its own later.

So far Japan has been able to circumvent the WTO constraints by choosing to sign economic partnership agreements with other countries. This not only helped Japan protect its less-efficient agriculture and some other industries but also allowed its edge in investment rules, service trade and technological standards to play a key role, putting it in the direction of becoming the leader in maintaining regional order.

Both Japan and the ROK insisted on making "investment agreement" and "intellectual property right protection" part of the precondition for FTA talks with China. This shows clearly their interest is not in trade but the power to make regional rules. It also means it will no longer be a technical issue when China, Japan and South Koreatry to ensure fair and reasonable conditions for trade negotiations.

(China Daily May 29, 2008)