TOKYO -- Asian countries are under increased pressure to hammer out bilateral free-trade agreements following South Korea's deal with the United States and as global trade talks falter, analysts say.

If the deal survives opposition in both countries' legislatures, South Korea will be the first major Asian economy to seal a free-trade agreement (FTA) with Washington, giving its firms a competitive boost in the U.S. market.

The deal could galvanize political momentum elsewhere in the region for free-trade deals, said Motoshige Ito, an economics professor at the University of Tokyo.

"It could set a trend of deals between major countries in Asia, such as a tripartite FTA between China, Japan, and South Korea, or deals with the United States," said Ito.

"Asia has developed a cross-border production network without huge free trade deals, but after the South Korea-U.S. deal, leaders in the region may well be compelled to seek freer trade," he said.

Japan last week signed a free-trade agreement with Thailand and said it would study an FTA with the United States. It plans trade talks this month with Australia and also aims to restart negotiations with South Korea.

Tokyo has also previously floated the idea of a free-trade zone involving 16 Asia-Pacific nations - the 10-member ASEAN Southeast Asian bloc plus Japan, China, South Korea, India, Australia and New Zealand.

Could find life tougher

Chinese Prime Minister Wen Jiabao's visit to Japan this week will provide a potential opportunity for discussions on trade with his Japanese counterpart Shinzo Abe, although few expect any tangible progress given strained relations.

In contrast, Wen has called for talks with South Korea on a free trade area to be fast-tracked ahead of his visit to Seoul next week, Chinese state press reported Friday.

Analysts said that Asian companies, particularly in the high-tech sectors of Japan and Taiwan, could find life even tougher after the U.S.-South Korea deal.

At the same time, however, they noted that South Korean companies such as Samsung and Hyundai Motor are also feeling the squeeze, caught between up-and-coming China and Japan whose exporters benefit from a weak yen.

Kakutaro Kitashiro, chairman of the Japan Association of Corporate Executives, warned last week that the South Korea-U.S. deal would negatively impact on Japanese firms, particularly auto and electronics manufacturers.

"We want the government to accelerate trade talks," he said.

However, Shujiro Urata, an economics professor at Waseda University, said that Japanese automakers should be able to cope relatively well from the South Korean competition as they have been shifting production to the United States.

Experts said the pressure may be more acute for Taiwanese firms, which compete more directly with South Korea.

Pressure building

"For Taiwanese manufacturers, the U.S.-South Korea deal may see even greater pressure to move offshore, especially (to) China, to retain a price advantage," said Phil Deans, an East Asia specialist at Temple University in Tokyo.

"The deal does increase pressure for other Asian countries to seek similar agreements," he said.

Taiwan is desperate for a free trade pact with the United States, its key investor and trading partner, to avoid economic isolation, but such a deal faces major political hurdles due to China's claims to the island.

Whether Japan and other Asian countries can manage to strike trade deals depends on whether there is enough political will, analysts said.

Historically, Japan's efforts to liberalize its trade have been hampered by the strong political influence of its small farming community and by agriculture's deep roots in the country's culture.

With Abe facing falling approval ratings, he may be reluctant to upset the rural communities, Deans said.

"The big Japanese manufacturers will respond by shifting even more production overseas," he said.

(Source: Fin24.co.za)