Monday 23 Jul 2018 | 12:03 | SYDNEY
Monday 23 Jul 2018 | 12:03 | SYDNEY

Is the season right for a new Sino-Japanese agreement?

8 May 2008 12:00

Guest blogger: Shiro Armstrong is a Research Scholar at the East Asian Bureau of Economic Research, Australian National University.

This week Hu Jintao is visiting Japan, the first such trip by a Chinese president in 10 years. It could produce a breakthrough in the important yet rocky relationship between the two neighbouring East Asian powers.

The mood of the bilateral relationship has improved significantly in the past year. Former Prime Minister Abe, despite his hawkish inclinations, turned the page in Sino-Japanese relations with his ice breaking visit to Beijing October last year at the end of the Koizumi administration. Premier Wen returned the favour with his trip to Tokyo in April last year. The current Japanese leader, Fukuda, is seen as friendly towards China and made a visit to China last December.

Both sides attach political priority to the economic relationship. Two-way trade continues to reach record highs and was US$236 billion last year. Investment from Japan to China was US$4.6 billion in 2006, and had already reached US$3.9 billion by the end of July last year.

All of this is happening under a Long Term Trade Agreement (LTTA) signed in 1978 and a Bilateral Investment Treaty (BIT) from 1988, both out of date and barely relevant to the circumstances of trade and investment today. The resumption of annual ministerial visits, alternating between Tokyo and Beijing, is long overdue. Despite China’s importance to Japanese trade and investment, Japan has not granted market economy status to China – a political stance that mirrors that of the US and Europe.

But the scale of the economic relationship now seems to be propelling the political relationship in positive directions, with talk of updating the agreements which have governed the relationship for 30 years. Both sides are actively seeking to avoid conflicts and promote areas of cooperation. Both sides have put out feelers for a Free Trade Agreement (FTA) or an Economic Partnership Agreement (EPA). In the last few years there was an agreement to begin study of a South Korea-Japan-China investment arrangement with the aim of negotiating a broader Economic Partnership Agreement down the track. However, neither country is yet ready to move into any agreement that will discriminate against other economic and political partners and give preferences to their rival.

One issue at the forefront of the agenda is the environment and climate change. Any significant global progress on climate change needs to include China, and Chinese airborne pollution directly affects Japan. When the skies over Kyushu started to turn yellow from dust storms and pollution in China, finding a solution became an urgent priority in Japan.

Japan is in a unique position to work with, and influence, China on environmental energy issues. China is seeking assistance from Japan on energy efficiency and environmental standards. Last year saw the creation of the China-Japan Forum on Energy Conservation and Environmental Protection, fostering technology cooperation between private enterprises. Japan and China have since made environmental issues the focal point of their bilateral relationship and these issues are likely to be centre-stage in any new bilateral agreement between the two countries.

There has been a huge expansion of exchanges at all levels, from grass roots cultural exchanges to leadership visits, encouraging a convergence of political and economic relations. The academic commission to reach agreement on the interpretation of history is moving to put the history backstage in the relationship between both countries.

The coincidence of the 30th anniversary of the Long Term Trade Agreement, the 20th anniversary of the Bilateral Investment Treat and the Beijing Olympics makes 2008 a significant year in Japan-China relations. The relationship looks headed for a new season in the northern spring. The timing is right for an initiative that could not only shift the bilateral relationship onto a new and positive course but also fundamentally change the tone of East Asian politics.