Economic Integration in East Asia

Transcription

1 Asian Community Research Center International Symposium on Financial Crisis and economic integration in East Asia Economic Integration in East Asia Osaka Sangyo University Mei JI March 21st,

2 The East Asia has experienced remarkable economic dynamism. Their development in the 1970s and 1980s has been called the the East Asia miracle. Even through the Asian crisis accentuated the slowdown of growth that had followed the boom of the early 1990s, the region s real GDP grew at an average annual rate of 6.4%.per cent in East Asia here means the ten nations of Southeast Asia, which are organized in the Association of Southeast Asian Nations (ASEAN) and the three leading nations of Northeast Asia, namely, China, Japan and Korea. These are the nations involved in the process known as ASEAN+3. East Asia, in addition to being one of the most dynamic regions of the world, is also one of the most diverse, this diversity is manifest in its levels of economic development and income, political situation, culture, etc. Despite this diversity, several initiatives have been launched towards integration in the region. Since post-cold War, East Asia has witnessed a very complex way experienced ways of development, in terms of regional economic co-operation, Free Trade Agreement (FTAs) and now Financial Co-operation have become important trends. East Asia has made a significant progress in integrating into the global economy. At the same time, Integration within the region has also strengthened. This paper examines the recent procession of economic integration in the region. The 2

3 remainder of this paper is organized as follows: the first section looks at some features of recent development and integration in this region. Second, this paper analyzes the forces influencing the performance of the regional integration framework. The third section compare the process of EU with the East Asia integration, and in the concluding section, several initiatives have been launched towards integration. 1, The process of East Asian integration from ASEAN to ASEAN+10 Table 1 Major Steps towards ASEAN Integration Source: Author s compilation from ASEAN secretariat materials Since the Asian Financial Crisis of , the ten ASEAN countries have initiated a regular series of meetings at the cabinet and head-of-government levels with their 3

4 counterparts from Japan, China, and Korea. These have included annual meetings of the ASEAN ministers of foreign affairs, trade and investment, and finance, with counterparts of the three northeast Asian countries. In addition, heads of government from the 13 countries meet during ASEAN's annual Summits, gatherings which also usually include meetings between the 13 countries' ministers of trade, finance, and foreign affairs. These meetings take place both on a "10 + 3" as well as a "10 + 1" basis. They are generally held during scheduled annual meetings of the various ASEAN forums, although ASEAN and the +3 countries also meet at other points during the year on an ad-hoc basis. These meetings have been useful in fostering increased cooperation and consultation among the 13 countries. Table2 major steps towards ASEAN+3 Integration Year Key agreement and decisions 1997 institutionalized the involvement of the +3 countries 1998 Discuss the long- term cooperation in the region. Initiated An East Asia Vision Group (EAVG) 1999 ASEAN Summits were broadened from heads of government of the 10+3 to foreign, finance, and trade ministers 2000 An Initiative for ASEAN Integration (IAI) was agreed to be launched An East Asia Study Group (EASG) was established 2003 ASEAN Treat of Amity and Cooperation (TAC) signed, firm commitment to complete the China-ASEAN Free Trade Agreement on schedule by Source: Author s compilation from ASEAN secretariat materials 4

5 2 Market Integration in Trade, Investment and Finance The main force drive the East Asia integration is market. The appreciation of the Japanese Yen following the Plaza Accord of 1985 led Japanese firms to shift their production processes to south East Asia, a trend already underway in South Korea and Taiwan. As the opening of China s Economy began to take hold, Japanese, Korean, Taiwanese and HongKong as w ell as European and American companies. Although overall and intra regional trade liberalization has played some role in boosting regional trade, other developments have also greatly contribute to this process. One major factor that contributed to the development of production networks was the FDI flows from Japan and Asian newly industrialized economies (NIEs) to other East Asian countries after the 1985 Plaza Accord. Introduction of induced FDI in many East Asian countries also facilitated this process. Industrial network building has generated strong trade and investment flows. ASEAN s trade interdependence has been largely driven by integration of these economies into global production networks ( intra ASEAN trade is 1.5% in 2006, almost doubled in the past 15 years).the ASEAN+3 group s share has also been rapidly increasing, reaching 5.8% in East Asia s growing integration obviously makes eminent business sense. Exploiting 5

6 geographic contiguity, Japanese capital, technology, and links to international markets combine with China s labour, land and domestic market to improve efficiency and productivity and low costs-an economic synergy that benefits both sides. 3 From Market-driven Integration to the Creation of Institutional Frameworks After World War II there were three waves of regional integration in the world. The first wave was a regional integration of Europe from the end of the 1950's to the 1960's, European Economic Community (EEC) was founded, and the customs union was completed in The second wave is from the latter half of the 1980's to the first half of the 1990's. Europe completed the joint market, and the United States founded North American Free Trade Agreement ( NAFTA) in 1994 on the base of the U.S. Canadian Free Trade Agreement. The third wave is progressing now, and East Asia joins Europe and U.S. state. EU expanded in 2004, and NAFTA negotiated countries is increased to 34 countries. And East Asia countries joined the wave of the regional integration to sign the FTA agreement. Comparing with the Europe and East Asia integration, in fundamental terms, in both cases the primal forces are derive the political and economic benefits from the integrating regional economy. However, the two processes have obviously been quite 6

7 different. The basic difference is this, Market compulsions, together with the implicit concern over the potential conflict, are almost unconsciously drawing East Asia closer together, whereas the EU has been and is being deliberately built on formal treaties, regional institutions and region-wide law. East Asian integration did not start out with a clear articulated vision or the establishment of regional institutions or the conclusion of treaties. In another word, The primal forces that are impelling East Asian regionalism is the economic benefits to be derived from an integrating regional economy. East Asia has experienced market-driven integration based on enterprise development, while in the EU, the institutional frame work led the integration process. Table3 Major steps towards EU Integration Source: Author s compilation from EU secretariat materials 7

8 Until late 1990s East Asian countries were ambivalent about institutionalization itself. While they appreciate problem solving, they exhibit inherent skepticism towards rigid, top-down institutions, and tend to prefer consensus building over confrontation. They tend to avoid institutionalization and opt for easier, more flexible and (occasionally) less fundamental solutions. On the other hand, when they are faced with serious regional problems that require effective solutions, institutionalization will gain momentum, including legally binding agreements that constrain sovereignty Efforts to build institutional framework in the region have so far developed in four distinct stages. However, different forces and different balances in the spectrum of attitude came into play at each stage. History tells us that ignored or frustrated factors or interest will eventually catch up and affect ensuring developments. Stable development of regional institutions in East Asia requires a careful design that take the different dynamics into consideration. 4. The Conclusion East Asia economies have spontaneously formed an economic block as a result of enhanced trade, investment and financial transactions under a relatively soft institutional framework. Consequently, and in contrast to the EU, regional integration is being driven essentially by the market rather than by official initiatives. 8

9 It is doubtless that an East Asia-wide integration, such as FTA would be economically desirable. Yet current initiatives to establish FTAs involvetually, on the other might eventually produce an East Asia with competing trade arrangement. To maximize potential benefits, the regional economies need to draft a clear road map to establish a region wide FTA in East Asia. Regional trade arrangements that ensure greater coherence of trade, FDI and aid policies need to be created to promote the regions growth and development. With the changing landscape of the global economy, the East Asia countries are now facing the challenges of how to remain competitive. Many East Asian economies have in common long-term policy challenges that deserve much more serious attention in coming years. To meet these crisis challenges, East Asian societies need to take forward-looking, more coherent approaches. It is necessary to build the institutional framework to enhance integration.stronger integration and the growing number of initiatives imply a need to create an institutional framework to co-ordinate views between countries and more effectively implement the existing economic initiatives. A well-structured frame work will minimize co-ordination costs and help harmonize standards and procedures. 9

10 Bibliography OECD, (2009), Shaping Police Reform and Peer Review in South-East Asia Integrating Economies amid Diversity Rodolfo C. Severino (2008), The Emerging Region Of East Asia, Asia Europe Journal 5, p447~