Thorny Progress in the Institutionalization of ASEAN+3: Deficient China Japan Leadership and the ASEAN Divide for Regional Governance

Policy and Governance Working Paper Series No.49 Thorny Progress in the Institutionalization of ASEAN+3: Deficient China Japan Leadership and the ASEAN Divide for Regional Governance Takashi Terada* July 2004 The 21 st Century Center of Excellence Program Policy Innovation Initiative: Human Security Research in Japan and Asia Graduate School of Media and Governance Keio University, Japan A paper originally prepared for Creating an East Asian Community: Prospects and Challenges for Fresh Regional Cooperation Conference at National University of Singapore, 8-10 January 2004. * Department of Japanese Studies, Faculty of Arts and Social Sciences, National University of Singapore (jpstt@nus.edu.sg)

Thorny Progress in the Institutionalization of ASEAN+3: Deficient China Japan Leadership and the ASEAN Divide for Regional Governance Takashi Terada Abstract It is widely acknowledged that closer bilateral relations between Japan and China are vital in the development of ASEAN+3 and the subsequent formation of an East Asian community for regional governance, but both nations are often depicted as rivals and their unpleasant relations, may hamper the development of the ASEAN+3. This paper initially argues that there are signs of improvement in Sino Japanese relations, partly because of their awareness of mutual dependence in promoting East Asian policy, providing a foundation for their possible shared directional leadership in the institutionalisation of ASEAN+3, essential body for policy governance in East Asia. The paper then focuses on the areas to be associated with the ASEAN+3 institutionalisation including: 1) an East Asian FTA; 2) the establishment of an ASEAN+3 secretariat and the development of the ASEAN+3 leaders meeting into an East Asian summit; and 3) membership problem between ASEAN+3 and an East Asian community, with a view to illustrating members different views about the institutionalization of ASEAN+3. This paper argues that the ASEAN divide issue, which causes the more diversified policy interests in the institutionalization of ASEAN+3, is a major factor affecting Japanese and Chinese leadership interest in the further institutionalization of ASEAN+3. Key words: ASEAN+3, Japan-China relations, East Asian regionalism, institutionalisation, directional leadership.

1 Introduction Community has become a popular term in Southeast Asia. The Association of Southeast Asian Nations (ASEAN) summit meeting in Bali, October 2003, agreed to create a unified ASEAN by constructing three communities as pillars: economic, social and cultural, and security. The Asia Pacific region also once aimed to create an Asia Pacific economic community. The 1994 APEC Eminent Persons Group Report (EPG 1994: 54) defines it as a like-minded group that aims to remove barriers to economic exchange among its members in the interests of all. The report states that the term big family, translated from a Chinese original, captures the concept, embracing activities of the Asia Pacific Economic Cooperation (APEC) forum. The application of the word community to regional institutions has, however, occasioned controversy, since it carries overtones of inward-looking approaches associated with the European Community (EC). This generated a negative image of a regional community, which haunted the Asia Pacific region for a while. This sort of concern seems to have disappeared since Japanese Prime Minister Junichiro Koizumi (2002a) started urging regional countries to act together and advance together, envisaging the creation of an East Asian community in his speech in January 2002 in Singapore. A regional institution around which the community in East Asia is expected to evolve is the ASEAN+3 framework, established in 1997 in Kuala Lumpur, making the best use of [ASEAN+3] to secure prosperity and stability in East Asia, as Koizumi suggested. As in Europe and Southeast Asia, institutionalization of ASEAN+3 is crucial to successful community-building and proper management of a variety of emerging regional problems in East Asia. The Tokyo Declaration launched by Japanese and ASEAN leaders in December 2003 describes, with regard to the creation of an East Asian Community, the ASEAN Plus Three process as an important channel to promote cooperation and regional economic integration networks in East Asia to attain the goals of sustainable development and common prosperity. Yet a fully-fledged East Asian organization in which member countries participate on an equal footing is still to emerge. As long as the name ASEAN+3 remains, it will suggest an ASEAN-sponsored regionalism. Is there any positive development that could transform ASEAN+3 into an East Asian regionalism, a foundation for efforts towards an East Asian community? It is widely acknowledged that closer bilateral relations between Japan and China and shared visions of a new regional order in East Asia are vital in the development of ASEAN+3 and the subsequent formation of an East Asian community, as Singapore Prime

Minister Goh Chok Tong implies: If we can find a way for Japan to feel confident and comfortable enough to have a free trade arrangement with China, then we can have an East Asia Free Trade Area which, of course, will then allow us to move toward an East Asian Economic Community (Nihon Keizai Shimbun, 3 December 2003). This paper aims to show that there are signs of improvement in Sino Japanese relations. This may provide a foundation for their possible shared directional leadership in the development of ASEAN+3, with a positive effect on its institutionalization. The paper then focuses on the areas in which member countries have different views about and approaches to the institutionalization of the ASEAN+3 meetings, including: 1) an East Asian free trade area (FTA); 2) the establishment of an ASEAN+3 secretariat and the development of the ASEAN+3 leaders meeting into an East Asian summit; and 3) membership in an East Asian community. 1) A significant question here is whether Japan and China share an interest in those issues and, if not, what sorts of implications their distinctive views have for the development of ASEAN+3. This paper concludes that, while Japan and China have shown their interests in promoting East Asian regionalism, they remain reluctant or even unable to take positive action or shared leadership in the institutionalization of ASEAN+3. It is safe to assert that both nations decision to take a leadership role in institutionalizing ASEAN+3 depends on their careful calculations about ASEAN s interests and their efforts to adjust their own with ASEAN s, an important characteristic of directional leadership. The institutionalization of ASEAN+3 is therefore not necessarily dependent on leaders willingness, but ASEAN s intention greatly influences it as an independent variable. In other words, it is likely that ASEAN s decision to transform ASEAN+3 from its own organization into an East Asian one, through changing the mindset, will be a necessary condition for China and Japan to develop their interest in taking a leading role in the institutionalization of ASEAN+3 generally. This paper thus argues that the so-called ASEAN divide issue, which causes the more diversified interests and approaches in the institutionalization of ASEAN+3, is the major factor affecting Japanese and Chinese leadership interest in the further institutionalization of ASEAN+3. 1 The 2002 ASEAN+3 summit in Brunei agreed to institutionalize ASEAN+3 by endorsing recommendations launched by the East Asia Study Group (EASG), established in March 2001 and comprising government officials from member countries. These included, as a long-term goal, the establishment of an East Asia Free Trade Area (EAFTA) and the promotion of the framework into an East Asian Summit.

2 Improving Sino Japanese relations, a prerequisite for joint directional leadership The idea of an integrated East Asia, joining Northeast Asia and Southeast Asia in regional unity, was firmly enough established to gain the consensus necessary to form a regional institution based on the larger framework (Terada 2003). This argument followed the constructivist approach, which emphasizes analyzing how regional togetherness can be strengthened and how this influences the formation of a regional institution. I contended then that the strengthened bonds between the countries of the region and the gradual acceptance of the East Asian concept could be attributed partly to the successful establishment of the ASEAN+3 meetings in 1997 in Kuala Lumpur and that Japan s push for the promotion of ASEAN+3 could be seen as a major factor behind the development of this regionalism. The constructivist approach, which stresses the significance of the processes of how actors interpret the world and how their understandings of where they belong are formed (Hurrell 1995: 65), seemed to be appropriate when arguing that the creation of a regional concept is a prerequisite for the formation of any regionalism, specifically the establishment of the ASEAN+3 meetings based on the creation of a newly emerging East Asian concept. When it comes to a more rule-governed form of regional cooperation, however, strong leadership and clear awareness of potential interests among regional countries, as emphasized by realists and neo-liberals respectively, are more significant. Combining realist and neo-liberal approaches to regime formation, I have elaborated on the features of directional leadership which are important to leaders efforts to adjust the different interests of potential participants, persuading them to join new regional institutions by setting up common goals. These goals can be legitimated by followers who perceive the benefits of complying with them, and I examined the appropriateness of these features of directional leadership in the case of Japan s leadership in the formation of the Pacific Economic Cooperation Council (PECC) and APEC (Terada 2001). This precedent suggests that it is important who exercises what sort of leadership for what kind of shared interests in the case of further institutionalization of the ASEAN+3 meetings. The Korea Herald (10 October 2002) asks which country is capable of taking the lead? It boils down to either China or Japan. Japan and China are often depicted as rivals and their antagonistic relations, mainly caused by the legacy of history, may hamper the development of the ASEAN+3 meetings. Comparing the pivotal roles played by France and Germany in European integration and regional institution-building, Webber (2001: 363) argues that Sino Japanese relations have not been transformed in the way that Franco German relations were transformed

in Western Europe after the Second World War, resulting in the formation of a probably uniquely intense bilateral intergovernmental relationship. It was no simple matter for countries which began from a position of mutual distrust to forge a diplomatic partnership as a springboard for international initiatives. Sino Japanese postwar relations had just such an unpropitious start. A prerequisite for the joint initiatives involved in the institutionalization of ASEAN+3 is the consolidation of mutual trust and a shoring up of the whole bilateral relationship. China s hostility towards Japan has been a major obstacle to the development of postwar relations, although more people in both nations have recently started trying to forge friendly bilateral relations 2). For example, as a move symbolizing China s new emphasis on better relations with Japan, China voluntarily abandoned visa requirements for Japanese citizens making short-term visits from 1 September 2003. However, this does not mean that China and Japan have resolved all bilateral issues, as seen in Japanese Prime Minister Koizumi s continuing failure to visit Beijing because of his annual visit to the Yasukuni Shrine. Japan has faced strong opposition from China and Korea whenever its Prime Minister pays a visit to the Shrine and the issue continues to cast a shadow over Japan s relationships with these two ASEAN+3 partners, as seen when Koizumi visited the Shrine on 1 January 2004. Eliminating such bilateral problems or substantially reducing the tensions arising from them is of primary significance. Australian Japanese joint leadership in building economic institutions in Asia and the Pacific, such as PECC and APEC, was made possible after the resolution of bilateral problems such as those connected with Japan s beef and sugar imports from Australia in the 1970s. Since then, prime ministerial meetings between the two countries have seldom concerned themselves with bilateral disputes, enabling both leaders to focus more on regional matters including regionalism, an interest which both countries shared (Terada 2000). The recent development of Sino Japanese relations, showing their intentions to solve or shelve critical bilateral problems, seems to indicate a possibility of exercising a shared directional leadership. Despite leaving an unpleasant and antagonistic impression by his persistent calling for Japan s correct perception of history in November 1998, on the first official trip to Japan by a Chinese head of state, President Jiang Zemin marked a new age for Sino-Japanese relations. The China Japan joint declaration, which represents the fundamental direction of the bilateral relationship in the 21st century, emphasizes 2 For instance, Wu Bangguo, chairman of the Standing Committee of China s National People s Congress, stated during his visit to Japan: We d like to stabilize our relations with neighbouring countries from a broader, strategic perspective (Nihon Keizai Shimbun, 11 September 2003).

both nations shared interest in contributing to prosperity and stability in East Asia, rather than the bilateral issues on which previous Sino-Japanese declarations tended to focus. In this context, China found it necessary to recognize the value of partnership with Japan. Chinese Premier Zhu Rongji stated during his visit to Japan in 2002 that China would attach importance to the influence and role of Japan as a regional state, while expressing his interest in collaborating with Japan within the framework of cooperation in East Asia. Kojima (2003: 9) regards this statement as shared recognition of the necessity of cooperation between Japan and China. This development has been carefully fostered by both leaders. The first summit meeting between Chinese President Hu Jintao and Koizumi in May 2003 dealt with issues including bilateral cooperation in East Asia, while emphasizing the significance of the comprehensive development of bilateral relations. Hu certainly touched on the Yasukuni Shrine, but he only mentioned the historical issue by saying using history as a mirror, and looking to the future (cited in Kojima 2003). The meeting in October 2003 saw no mention of the Shrine by Chinese Premier Wen Jiabao. He asked his Japanese counterpart, Koizumi, to visit China at an appropriate time, on the condition that the two nations forge a good atmosphere first (Nihon Keizai Shimbun, 8 October 2003). In addition, China has avoided overtly criticising Japan for sending its Self Defence Forces to Iraq. The mood between the two leaders has been gradually improving. China s more friendly approach to Japan, especially after Hu Jintao came to power in March 2003, stems mainly from its growing acknowledgement of the need for regional economic cooperation in East Asia, especially because China s exports have been growing since entry to the WTO and it has absorbed more foreign investments. Stability and prosperity in East Asia is regarded as fundamental to China s economic activities and an essential shared interest of regional countries. This was already evident in China s swift response to Koizumi s Singapore speech advocating the creation of an East Asian community. Chinese Foreign Ministry spokesman, Sun Yuxi, said: China is willing to see Japan and various countries in Southeast Asia maintain good cooperative relations and hopes Japan, being the only developed country in Asia, will play a constructive role in maintaining economic stability and promoting the healthy development of cooperation in the region. (Zhongguo Xinwen She news agency, 15 January 2002) China s recent active diplomacy with ASEAN has also provided evidence to support this view, as seen in China s interest in proposing an FTA to ASEAN in 2000 and its agreement

with ASEAN, in the 2002 ASEAN+1 meeting, to avoid the use of force to settle any dispute in the South China Sea. The signing of the Treaty of Amity and Co-operation (TAC) with ASEAN at the 2003 summit in Bali is also indicative of China s desire to coexist in East Asia as a responsible state. The treaty establishes a code for relations between member countries, including respect for each others sovereignty and territorial integrity, non-intervention in each others domestic affairs, and renunciation of the use of force or threat against each other. As the first country to sign the treaty, China shows its need for close ties with its Southeast Asian neighbours 3). A major event which caused China to consider good relations in the neighbourhood as strategically significant was a containment policy which the Bush Administration intended to promote against China. China is also said to consider ASEAN to be backing China when US pressure over the revaluation of the yuan has become intense (Straits Times 10 October 2003). China seems to consider the non-interference principle would be an advantage in dealing with the Taiwan issue, which China has claimed as its own internal problem. China has attempted to reassure its East Asian neighbours of its commitment to stability and prosperity by taking active approaches to signal to East Asia its friendly stance. This sort of Chinese engagement with ASEAN, however, reflects the leadership struggle between Japan and China in Southeast Asia. China s move to forge an FTA with ASEAN has been regarded as a means of developing an economic alliance and paving the way to its leadership in the region, one in which Japan has developed extensive economic relations with ASEAN countries in investment, aid, trade, human resource development and technology transfer over 30 years. Japanese leaders have been increasingly worried about a situation where China s economic rise and more active diplomacy in Southeast Asia may help it snatch the leading position Japan has so far held in the region (Terada 2003). In response, Japan has hoped to strengthen its ties with ASEAN through an ASEAN Japan FTA, as a guideline for Japan s FTA strategy published by its Ministry of Foreign Affairs (MOFA 2002) stresses. The Ministry of Economy, Trade and Industry (METI) tends to feel uneasy about the possibility that a preferential agreement between China and ASEAN will make Japan s business and production networks in Southeast Asia, well developed over decades, lose much of their advantage and benefit. The development of a China ASEAN FTA has been a chief motive behind and pressure for Japan s keener interest in furthering relations with ASEAN. 3 Straits Times, 27 September 2003. Ms Fu Ying, director-general of the Chinese Foreign Ministry s Asian Affairs Department, explains the reason for China s signing the treaty: The purpose for China is to further promote political understanding and to signal, to ASEAN countries and to the world, China s willingness to integrate with the countries around China not only economically but also politically.

Japan once hesitated to sign TAC which included non-interference principle since its diplomatic scope would be restricted in terms of promoting human rights and democracy in the region, as Prime Minister Koizumi states in the 2003 ASEAN+3 meeting in Bali: I believe it is possible for Japan to strengthen its ties with ASEAN in the future without Japan signing the treaty. I think we have the understanding of ASEAN members on this point (Asahi Shimbun, 16 December 2003). Yet, the Jakarta Post (30 December 2003) regarded the reluctance to do so as Japan s insincerity toward its neighbours. Again, China s announcement that it had signed influenced Japan s subsequent decision to do so, creating an impression that Japan s ASEAN diplomacy has lagged behind that of China, whose official relations with ASEAN only started in the mid-1990s; China s acquisition of a full Dialogue Partner status of ASEAN was made in 1996, while Japan was granted the same status in 1977. Japan s efforts to organize the Japan ASEAN Commemorative Summit in Tokyo, December 2003, were thus partly intended to signal the special nature of the Japan ASEAN relationship to China (personal interview with a METI senior official, 24 December 2003, Tokyo). The growing leadership competition between Japan and China may arise from mutually unfriendly sentiments, but signs of improved bilateral relations between Japan and China are an important indication of both nations recognition of the need for East Asian regional cooperation. This helps at least to sustain, if not to increase, mutual interest in improving bilateral relations. Both nations have established more bilateral policy channels between the relevant ministries such as Finance or Telecommunications (Nihon Keizai Shimbun 7 may 2004) and the frequency of policy elites exchanges between the both countries is useful in solving the bilateral issues or promoting joint policy initiatives. If the trend to improvement can be maintained, more time and energy could be spent on regional issues, rather then bilateral ones, at any policy level meeting between both nations, an important prerequisite for shared leadership in community-building in East Asia in the future. 3 East Asian FTA In trade policy, Japan and China have both been committed to FTAs, and the establishment of an East Asian FTA has been considered as the means for transforming ASEAN+3 into an East Asian regionalism and a common regional interest shared by Japan and China, as discussed below. The ASEAN+3 leaders meeting, in Singapore in November 2000, agreed to examine the feasibility of establishing an East Asian FTA, although the

leaders are yet to endorse this ambitious goal. Given the region s total of 1.9 billion people and its gross domestic product of US$2 trillion, an East Asian FTA is expected by some observers to form the basis for the emergence of a huge single market, possibly having a major impact on the creation of a tripartite world economic system with the European Union (EU) and the North American Free Trade Area (NAFTA) (Bergsten 2000). A fundamental but significant question is how an East Asian FTA can be created under the current circumstances, where there have been negotiations for a number of bilateral and regional FTAs in East Asia. A report published by the ASEAN Japan Research Institute Meeting (2003) advocated that a Japan ASEAN FTA be used as a building block for creating a broader East Asian FTA. Since it appears difficult for all 13 member countries to discuss an East Asian FTA at one time, partly because their priorities for FTAs are too diverse as a result of their different industrial structures, it may be more feasible for ASEAN to establish FTAs with its three Northeast Asian partners while waiting for China, Japan and South Korea to establish a triangle of bilateral FTAs. Long Yongtu, former Chinese vice minister of foreign trade and economic cooperation and the top negotiator on its entry into WTO, also represents a similar view by stating that China hopes the China-ASEAN and Japan-ASEAN FTAs may become very useful stepping stones to an eventual East Asian economic integration (Jiji Press, 18 March 2004). If the Northeast Asian FTA were to be established, as China initially proposed in the 2002 ASEAN+3 meetings in Cambodia, it could be a better FTA partner for ASEAN and the FTA negotiations would probably be less complicated and less time-consuming. However, as South Korea has just started showing its interest in forging an FTA with ASEAN, as seen at the 2003 ASEAN+3 meeting in Bali, the former option would be more likely, despite a suggestion that the Japan Korea FTA should logically be extended to include China as well, because it otherwise would create serious political tensions The inclusion of China would effectively rule out the need to create two other bilateral FTAs, China Japan and China Korea (New Straits Times, 30 November 2002). However, as touched on earlier, China s active approach to initiating an FTA with ASEAN and signing early-harvest deals with individual ASEAN members (except the Philippines) as part of its bid for economic advancement has been seen as a challenge to Japan s presence in Southeast Asia, which may hamper China Japan shared leadership in an East Asian FTA. Japan began to promote an FTA with ASEAN in January 2002, but this is seen as an attempt to emulate China rather than a sign of real interest in free trade and promoting regional integration, particularly as it came after China first proposed an FTA with ASEAN during the ASEAN+3 Brunei summit in November 2001. A Vietnamese official

commented that Japan s FTA proposal seemed to be a hastily-put-together affair that was all show and little substance and that its main purpose, not stated, was to counter the FTA proposal floated by China to ASEAN (Business World, 27 February 2002). Japan remains tied down by its agricultural dilemma, which caused it to appear indecisive and unable to make a full commitment to trading relations with ASEAN. Such a contrast reflects adversely on Japan s leadership and signifies the waning influence of Japan in East Asia. Japan is currently undertaking a two track approach to achieving FTA with ASEAN; bilateral FTAs with the developed ASEAN members such as Singapore, Malaysia, Thailand and the Philippines, and a wider FTA with ASEAN as a unit. However, with ASEAN leaders determined to stay economically united, they have expressed suspicions over Japan s intention, with some claiming Japan s bilateral policy approaches could cause economic disintegration within ASEAN. Even during the process of drawing up the Joint Declaration in Phnom Penh in 2002, to be signed by Koizumi and ASEAN leaders, the ASEAN side became reluctant to accept the initial Japanese draft that stressed bilateral ties 4). Since ASEASN Free Trade Area (AFTA) is not a customs union in which individual members pursue their own independent trade policy towards non-members, it does not employ a common external tariff policy. It is thus probable that a Japan-ASEAN FTA may be eventually established through the consolidation of the existing bilateral FTAs between Japan and ASEAN 5). Yet, the development of bilateral FTAs between Japan and ASEAN members make rules of origin requirements more complicated, given the fact that many Japanese firms such as Matsushita and Fujitsu are employing the ASEAN-wide operation system by setting up their productions bases in two or more ASEAN countries. With this business trend in Southeast Asia, a FTA between Japan and an integrated ASEAN would be more preferable to Japanese and ASEAN companies and this scenario would require better infrastructures in ASEAN such as a more liberalized distribution and transportation system and deregulated custom procedures. This process should involve Japan s commitment towards assisting the ASEAN integration with a focus on the development cooperation on behalf of the less developed members. In the end, it seems essential for Japan to provide overall policy strategy of its FTA policy with a view to coordinating bilateral and regional FTA. One of Japan s advantages is that a Japanese FTA with ASEAN is perceived to be potentially more beneficial than a China ASEAN FTA. Singapore s Trade and Industry 4 The declaration that was eventually approved by the leaders was rephrased to call for the promotion of FTAs between Japan and ASEAN. Yomiuri Shimbun, 6 November, 2002. 5 Terada, Takashi (2003) Keizai Kyoshitsu: FTA Senryaku-to Nihon, Higashi Ajia wakugumi-wo suishin [FTA Strategy and Japan, Part III: Promoting East Asian Framework Nihon Keizai Shimbun 25 July.

Minister George Yeo says: Japan is ASEAN s largest source of imports and our second largest export market. Japan is one of ASEAN s largest sources of FDI. Southeast Asia can be Japan s alternative manufacturing base to China. We have energy and other resources, which Japan needs. The benefits of an FTA between Japan and ASEAN would be of even greater benefit to South East Asia than an ASEAN China FTA in the short and medium term. (Straits Times, 1 February 2002) Another advantage is that benefits from a Japan ASEAN FTA could extend beyond trade and investment. The Japan ASEAN Comprehensive Economic Partnership Agreement would also include science and technology, human resource development, tourism and so on. Such a comprehensive economic cooperation and partnership could be more attractive to a majority of ASEAN members, which tend to see technology transfer and human resource management as particularly helpful in enhancing economic development and integration. The 2003 ASEAN+3 meeting in Bali witnessed a number of statements and speeches which stressed the desirability of East Asian cooperation including an FTA, seemingly significant progress in the institutionalization of ASEAN+3. Chinese Premier Wen Jiabao proposed that research be undertaken for the establishment of a free trade area in East Asia, signifying China s interest in promoting the integration of the 13 East Asian economies. South Korean President Roh Moo-hyun underscored the desirability of further promotion of exchanges of people and information in East Asia to promote more integration. Singapore Prime Minister Goh Chok Tong asked Japan and China to make an effort to forge a bilateral FTA with a view to the creation of an East Asian FTA, indicating a general view in the region that a movement towards an FTA between these two nations was missing in the recent proliferation of FTAs in East Asia (Nihon Keizai Shimbun, 8 October 2003). Despite these voices favouring the East Asian FTA, not all ASEAN members regard this grand vision as useful, partly because the three Northeast Asian economies account for nearly 90 per cent of the total East Asian economy and ASEAN would be marginalized within the FTA, a point raised by Singapore Trade Minister George Yeo (Business Times, 15 September 2002). ASEAN tends to worry that it would lose the advantage its members used to enjoy in terms of skilled labour as a result of the rise of China, which has increased competition for their products such as textiles and electrical appliances. Despite its integration efforts through the AFTA scheme, ASEAN is still a group of fragmented,

relatively small economies unable to enjoy benefits from economies of scale in production, as discussed later. For the purpose of playing a central role in the creation of an East Asian community, ASEAN needs to work harder to become a unified actor and to achieve further integration of the ASEAN economic community, a prerequisite for its commitment to the negotiations with the three large Northeast Asian partners for an East Asian FTA. In other words, Japan s and China s interest in creating a region-wide FTA in East Asia would face a serious hurdle unless ASEAN were integrated as a confident equal partner. 4 Organizational structure (1): East Asian summit The name ASEAN+3 originated ASEAN s practice of inviting three countries, Northeast Asia, China, Japan and South Korea, to participate in their meetings, beginning with the December 1997 leaders meeting in Kuala Lumpur. This practice has been organized as a part of the annual ASEAN summit. In November 2000, the leaders meeting, which was held in Singapore, formally decided to study the feasibility of establishing an East Asian summit, and the 2003 Bali meeting also saw a proposal for the eventual transformation of the ASEAN+3 summit into an East Asian summit. However, formal establishment of the East Asian summit is still considered to be a long-term objective, even though the only major unfulfilled precondition is ASEAN s agreement to extend the right to host the 13-member summit to the three Northeast Asian countries. Japan s hosting of the commemorative summit with 10 ASEAN leaders in December 2003 can be regarded as a step towards the formal realization of the East Asian summit, although some ASEAN countries like Thailand cast doubt on the necessity and validity of the commemorative summit partly because the same members had already gathered in Bali a few month before and there seemed no immediate reason for 10 heads of government to go all the way to Tokyo. This commemorative summit was symbolically significant because ASEAN leaders had never previously gathered outside the Southeast Asian region and it may provide a precedent for China and South Korea to organize similar special summits with ASEAN. This habit of the organization could lead to the creation of an East Asian summit, if either China or South Korea should be interested in inviting the other two Northeast Asian countries to its own summit. In fact, South Korean President Roh Moo-hyun suggested in this regard: The ASEAN Plus Three group would gradually develop into an East Asian summit, eventually leading to the formation of the East Asian Community, and that the

Northeast Asia nations should alternately host the ASEAN Plus Three summit once every three or four years as an interim step towards the East Asian summit. (The Nation, 21 October 2003) According to Wendt (1994: 391), summitry is important in transforming ideas about identity and collective action, and the establishment of an East Asian summit could be the catalyst for consolidating a newly emerging East Asian regional cooperation. In its early days, APEC was not perceived as a major political event, but its status was substantially upgraded after the leaders meeting was institutionalized by the 1993 Seattle meeting. Australian Prime Minister Paul Keating played a pivotal leadership role in this case, by proposing and disseminating the idea of an APEC leaders meeting through his enthusiastic diplomatic efforts 6). The sort of political leadership shown by Keating in the case of APEC is currently scarce in East Asia, mainly because the ASEAN countries are yet to find the merit in breaking their long-term mindset about the existing ASEAN regional framework. This is a major impediment to the creation of an East Asian summit, as it was in the case of an East Asian FTA. As Drysdale (2003: 12) comments, ASEAN+3 is not a regional trading arrangement but rather seeks to provide a framework for demonstrating East Asian influence and leadership on regional and international affairs. It is thus necessary that ASEAN promote political awareness, which underscores the importance of working together with Northeast Asia. At the same time, ASEAN by itself must find it difficult to respond to the possible development of economic regionalism on a larger scale in Europe and the Americas. Development of regional links with the three Northeast Asian countries, especially China, could help draw international attention to Southeast Asia as an attractive investment destination. In this sense, the creation of an East Asian Summit may be a positive movement, possibly suggesting a more ambitious political connection of ASEAN and Northeast Asia, enabling East Asian leaders to identify common positions more easily and to articulate them more effectively in multilateral fora such as the World Trade Organization and the United Nations. Importantly, this view has been gradually acknowledged by leaders and senior officials in the region, as an East Asian Summit became an issue discussed in the Japan-ASEAN Forum in April 2004 and Malaysian Prime Minister Abdullah advocated it in 6 In 1993, Keating was heavily engaged in summit diplomacy to garner support for the idea of an APEC heads of government meeting from other APEC leaders: he met Japanese Prime Minister Miyazawa in April, New Zealand Prime Minister Bolger in May, and Chinese Premier Li and South Korean President Kim in June. Keating finally visited the United States, the APEC host nation in that year, to discuss the idea with President Clinton directly in July. The first APEC leaders meeting took place in Seattle in November.

his visit to China and Japan in May 2004. As the East Asian Study Group (EASG 2002: 4) maintains, however, the transition from ASEAN+3 should not be too fast and the process should aim to nurture a great sense of ownership among all members in striving towards greater East Asian cooperation. A possible approach is to gradually expand the array of meetings, working groups and cooperative linkages at various levels, producing circles of officials in charge of ASEAN+3 in relevant ministries such as trade, transportation or finance and associating them with their counterparts in other member states. These intra- and inter-governmental interactions and networks of government agencies are likely to become entrenched, and have already been instrumental in nurturing an East Asian commonness among those officials, especially in ASEAN members. 5 Organizational structure (2): ASEAN+3 secretariat If the summit is to be realized, a secretariat in charge of coordinating tasks has been considered necessary by some nations, like Malaysia. However, the establishment of an ASEAN+3 secretariat is one of the most controversial issues in East Asian regionalism, as it has divided ASEAN members, making Japan and China unenthusiastic about promoting a separate secretariat from the existing ASEAN secretariat located in Jakarta. The idea of an ASEAN+3 secretariat was discussed at the 2001 ASEAN+3 leaders meeting in Brunei with support from Malaysia and South Korea. It was Malaysia which then officially proposed the establishment of an ASEAN+3 secretariat, as a separate entity from the ASEAN secretariat in Jakarta, at an ASEAN Ministerial Meeting (AMM) in Brunei in July 2002. The responses were mixed. While Thailand hoped the ASEAN secretariat in Jakarta could be further strengthened, former Philippines Foreign Secretary Domingo Siazon, as his country s special envoy to the AMM, said an ASEAN+3 secretariat would be necessary when the China ASEAN FTA was sealed, despite his addition that it s too early right now to have one, you have to look at the structure, the costing maybe three or five years down the road 7). According to the proposal, the secretariat was supposed to deal only with trade and political ties with three Northeast Asian countries, leaving unchanged the functions of the existing ASEAN headquarters in Jakarta (Straits Times, 28 July 2002). Nonetheless, the Malaysian proposal failed to remove a lingering suspicion among members that it would duplicate roles of other regional institutions and reduce the significance of the 7 New Straits Times, 29 July 2002. Malaysia announced its readiness to offer US$10 million for the first five years of the secretariat s operations.

secretariats of ASEAN in Jakarta and APEC in Singapore. Then, the Philippines Foreign Ministry Undersecretary Lauro Baja suggested that the ASEAN Standing Committee should consider three options: 1) establish a separate secretariat to be hosted by an ASEAN member country; 2) expand the ASEAN secretariat in Jakarta to undertake the role; and 3) establish an ASEAN+3 bureau within the ASEAN secretariat (New Straits Times, 29 July 2002). Although these three options were not eventually considered to be feasible, it was reported that Japan supported the establishment of a secretariat 8). However, it seems Japan s view has also varied. The financial bureaucrats tend to stress the significance of the ASEAN+3 secretariat as it might provide strong financial surveillance and monitoring systems, which East Asia currently lacks. A senior official in the Bank of Japan (personal interview, 10 December 2003, Singapore) acknowledged that the ASEAN secretariat was unlikely to perform this function, but he added that the Regional Economic Monitoring Unit in the Asian Development Bank (ADB) could do so, reflecting a view that Japan sees ADB as its own institution and thus does not wish to see it replaced. Haruhiko Kuroda, special adviser to Prime Minister Koizumi and former Vice-Minister of Finance, said: Japan maintains that the ASEAN+3 may need a secretariat to perform surveillance. This is a matter for future discussion (6 August 2003, New Straits Times). Senior MOFA and METI officials, on the other hand, shared a view that the decision should be left to ASEAN, and Japan should not be involved in anything that would diminish ASEAN s solidarity (personal interviews). These divergent views within the Japanese government point to Japan s limited role in this issue. It is doubtful whether the ASEAN secretariat in Jakarta, with only 45 professional staff members who carry out the whole basket of ASEAN activities (Sunday Times, 7 December 2003), can manage regional issues which include substantial political ones arising from the involvement of more powerful states such as China, Japan and South Korea. Also, the involvement of these Northeast Asian countries, especially Japan, would help expand the sources of funding. As was the case with APEC, the Senior Officials Meetings (SOM) may instead take responsibility for the management of ASEAN+3, but the limited national bureaucratic capacity among some ASEAN developing countries would make it difficult for efficient bureaucrats to be allocated to the SOM. Regional cooperation on the ASEAN+3 basis is now extending to such areas as an emergency communication network among the energy ministers, the creation of an East 8 New Straits Times, 3 August 2002. Malaysian Foreign Minister Syed Hamid Albar said: We made a radical suggestion, but I think the feeling is that we should move slower at the director-general s level. We will adopt a step-by-step approach until our view in respect of the secretariat can be fully realised.

Asian rice reserve system, a framework action plan to prevent and control SARS (severe acute respiratory syndrome) and a new oil reserve system to prepare for possible petroleum shortages arising from instability in the Middle East. These developments in East Asian cooperation may encourage more ASEAN nations, together with Northeast Asia, to urge the need to set up an ASEAN+3 secretariat to cope with expanding regional problems more effectively. 6 The membership issue At stake in terms of the actual organizational links between ASEAN+3 and an East Asian community is whether Australia and New Zealand should be included in any activity associated with ASEAN+3. Although Koizumi (2002a) in his Singapore speech said that through this cooperation, I expect that the countries of ASEAN, Japan, China Australia and New Zealand will be core members of such a community, Australia whose relations with ASEAN countries, especially Malaysia and Indonesia, have been strained has not been expected by many in the region to be a natural member of the community. In fact, Australia has not been a member of ASEAN+3, despite Koizumi s advocacy. There is a discrepancy between the actual regional institution and an imagined regional community on the point of Australia s participation. Koizumi (2002b) said, in his Sydney speech in May 2002, I do not believe it is always the best policy to set up new organizations or institutions to build a community, and he did not touch on ASEAN+3, the significance of which he stressed in his Singapore speech a few months before, representing a contradictory approach to the establishment of a community in East Asia. The Tokyo Declaration launched in December 2003 mentions creation of an East Asian Community as a significant goal, but it does not include any statement about membership. It says: to build an East Asian community which is outward looking upholding Asian traditions and values, while respecting universal rules and principles [would be important]. This may reflect a view that, although the community is outward looking which suggests that any country can join any member should possess or understand Asian traditions and values. This raises the question, is Australia such a country? Also, is Australia actually interested in participating in ASEAN+3? Australia s interest in ASEAN+3 and East Asia more broadly, seemed to be being redefined when Alexander Downer, the Australian Foreign Minister, in his address at the 2000 Asian Leaders Forum in Beijing, sought to draw a distinction between cultural regionalism and one based upon practical considerations of trade and economic

relationships (Straits Times, 29 April 2000). Appearing to be at odds with Australia s long-term regional policy, especially as it developed during the Hawke and Keating administrations, the central implications of Downer s remarks are that Australia has not seen itself belonging culturally to the East Asian regional entity and that ASEAN+3 is not attractive as a way of promoting Australia s national interest. In Japan, there have emerged groups responsible for foreign and trade policymaking who tend to see Australia s unfriendly relations with Southeast Asia as detrimental to Japan s regional policy. Japan, which has been increasingly interested in ASEAN+3 (rather than APEC) in foreign and trade policy, has been pursuing bilateral FTAs with some East Asian nations to strengthen general economic relations with them. There is no policy framework Australia can be involved within this approach, and this indicates that Australia s significance in Japan s total foreign and trade policy has been declining. This raises the important question of why Koizumi advocated the inclusion of Australia in his proposed community, despite Australia s detachment from East Asia in its foreign policy. There are other policy groups in Japan who believe in the usefulness and effectiveness of the partnership in achieving Japanese national interests. According to a senior official of MOFA (personal interview July 2003 Tokyo): 1) they tend to fear China s predominance within ASEAN+3 and East Asia as a whole; 2) security issues emerged as a more significant element in the bilateral relations with the United States, subsequently leading to the establishment of the trilateral defence talks involving Australia; and 3) it is a consideration that the United States has expressed concerns about the rise of China as detrimental to American interests in East Asia. For these reasons, Japan hoped that Australia would become more committed to maintaining good relations with Southeast Asia: Koizumi s speech was intended to send such a message to Australia. These views are not necessarily universal in Japanese policy circles. Asian specialists in MOFA were said to oppose the inclusion of Australia, and METI, whose primary interest has evolved around an FTA with ASEAN or its individual members, did not welcome Australia s involvement as a result. The idea which METI has promoted of an East Asian Free Business Zone does not include Australian membership. Given these divergent views on Australia within Japan and the region, Japan hesitated to clarify the intended membership of the proposed East Asian community, included in the Tokyo Declaration as an agenda which Japan and ASEAN should be in concert to promote. This was simply because Tokyo could predict ASEAN s opposition to Australia s inclusion and thought it inappropriate to cause problems with ASEAN in a commemorative ceremony by announcing a clear proposal to include Australia in the membership of an East Asian community (personal interview with a

senior METI official, 24 December 2003, Tokyo). As Dalrymple (2003: 150) argues, Australia s cultural differences with its neighbours would increasingly appear too manifest, and its identification with the US and Europe too close, to be reconciled with the forces driving East Asian regionalism. This stance makes it obscure to what extent the establishment of bilateral FTAs between Australia and some East Asian countries such as Singapore, Thailand and China could help Australia s entry into the movement towards the creation of an East Asian community, despite a general view that these FTAs could integrate markets, facilitate investments and promote the exchange of people between the signatories. It appears that fundamental change in Australia s foreign policy orientation is necessary, in order to change a negative view held by many East Asian countries. In addition, Japan, which is currently the only apparent supporter of Australia s inclusion in the community, has had difficulty adjusting government policy over the treatment of Australia. ASEAN s opposition to Australia s involvement in East Asian regionalism has made it difficult for Japan to make a strong push in this direction, as was the case of the East Asian Economic Caucus in the 1990s. 7 ASEAN divide and Japan China directional leadership A major obstacle to ASEAN s committing itself to an East Asian community is the variation in stages of economic development among members, the so-called ASEAN divide 9). This is a major cause of the lack of strong leadership in ASEAN+3. The ASEAN divide involves not only divergence of economic performance, but also differences in indices such as industrial structure, infrastructure, human resources, and the level of privatization. These elements are significant in terms of promoting FTAs. For instance, in ASEAN latecomers such as Cambodia, Laos, Myamer and Vietnam (CLMV), the main industry is still primary production, social infrastructure such as roads and bridges are inadequate, and most of the industry sectors are state-owned, while the private sectors are extremely immature. FTAs are regarded as beneficial for promoting structural reform and improving the competitiveness of industries, but FTAs in a premature stage of development, as in the case of these nations, may result in insufficient privatization and deficiency in the creation of an efficient private sector. For this reason, there is growing support in Japan for the view that it may be more 9 GDP per capita (1999) of the 10 member countries varies enormously: Singapore US$21,836, Brunei Darussalam US$13,585, Malaysia US$3,472, Thailand US$1,974, Philippines US$1,025, Indonesia US$675, Vietnam US$362, Laos US$273, Cambodia US$245, and Myanmar US$122 (market rate). http://www.asean.or.jp/general/statistics/base05.html#1. 5.2