I. Introduction
In the modern history, the development of global political pattern is led by the western world, especially by the United States. The omnipresence of the US, to a large extent, has shaped the contemporary power distribution in Asia ever since the Second World War. The penetration of the US influence was first achieved by the bilateral relationships between the US and its Asian partners. In the late 1980s and 1990s, the US became more active in Asia through the promotion of the multilateral relationships of some institutions under the name of Asia-Pacific region which is designed to lead Asian countries to the way of globalization. However, with the recent rise of nationalism, the failure of the international help for the Asian Financial Crisis (AFC) and some other factors, more and more Asian countries are trying to find the other way to supplement the deficiency of global solution. That way is Asians-only economic regionalism, i.e. to exclude the United States as a member of the institution. The most well-known institution established to achieve that goal is ASEAN Plus Three (APT) which includes most countries in East Asia.
Is Asians-only economic regionalism a feasible and desirable way for the future of Asia? Are the United States and those international institutions losing their influence in Asia? The article first examines Asia’s economic development before the 1997 Asian Financial Crisis. It then describes the economic regionalism after the AFC. The article concludes with a possible prospect of the future economic development of East Asia.
II. Asia’s economic development before the Asian Financial Crisis
Before the 1997 Asian Financial Crisis, Asia’s economic development always seeks help from the western world. There are many reasons for this kind of dependence on the US and US-supported international institutions.
For the region itself, East Asian nations are not under something which is obviously quite common, making it difficult to promote regionalization. In terms of geography, the size of territory and the reserve of natural resources are of great variety. The various degree and institutional form of democracy and non-democracy in the region makes interactions between countries more difficult than those with similar political structure. Sharp contrast can also be found in economic development level. This region includes the world’s second strongest economy, Japan, one of the world’s most vigorous economy, China, and the world’s poorest countries as Myanmar as well. This kind of diversity in nature gives rise to the disparity and unbalance of power in the region and makes relative power gains matter a lot. This may cause perennial struggle for power and plenty and make it difficult to form sincere cooperation among East Asian nations.[1] As a result, the Asians-only economic regionalism lacks common grounds and seems not quite favorable to many East Asian politicians.
Asians-only economic regionalism has also been hindered by strong nationalism among regional members. After the Second World War, Japan develops under a burden of history. Perception that Japan is by nature a militaristic and aggressive society is widely spread among victim countries in East Asia. Any behaviors or signs towards establishing stronger military forces, denial of history or visiting the Yasukuni Shrine may trigger waves of condemnation and protests.[2] The strongest reaction towards Japan’s potential provocation in the region comes from China and South Korea. Both countries have important roles in East Asia, and China’s influence in the region is sufficient to call for a different approach when Japan proposes an unfavorable suggestion for future regionalization.
In the past years, Sino-Japan relations always face conflicts and frictions. Territory dispute on the Diaoyu Islands/the Senkaku persists while recent disputes on the border line between the two countries in East China Sea due to its abundant natural resources add to rising tensions. Japan’s support to jointly research on and develop the regional TMD system despite strenuous Chinese objections also worsens the bilateral relations. Although the fastening of mutual trade partnerships have counterweighed some negative factors in the Sino-Japan relations, 50 percent of Chinese respondents in a 2002 poll indicating that they disliked Japan while pressure on the Japanese government from the grass roots to reduce the amount of foreign aid to China increased.[3]
The sophisticated economic diversity and political rivalry make it difficult for attempts to cooperate without outside forces. To fuel economic development, East Asian countries have gradually learned to seek for global solution with years of help from the US and the US-supported international institutions.
Ever since the end of the Second World War, the US has established strong bilateral relationships with almost all the important players located in the East Asia. Under the strong support of its political, economic and military power, the US becomes a very important factor which not only influences the political development in these countries, but also fuels and stabilizes the economic development in the region.
The US established partnership with Japan under the San Francisco Peace Treaty in September 1951, which enshrined America’s efforts to integrate Japan into a network of US Pacific alliances through a non-vindictive peace. Under this system, Japan and the US become “bilateral, highly asymmetric US security alliances”; Japan also gets huge economic benefits from the US under the “asymmetrical economic arrangements” through which Japan gets an open American market while it can protect its national industries by putting restrictions on foreign firms.[4] It was these favourable terms that created the miracle of the economic giant, especially in the 1980s.
With a quite similar background as Japan-US relationships, South Korea depends on the US a lot on its national security and economic development as well. The presence of the US military forces in South Korea balances the military threat from the North Korea, and the strong economic tie between South Korea and the US is a strong support for ROK’s economy. In 2005, the United States was Korea’s third-largest trading partner, second-largest export market, third-largest source of imports, and its largest supplier of foreign direct investment.[5] The most important achievement in the economic field between the two countries is the reach of the world’s largest bilateral free trade agreement on April 2nd, 2007.[6]
As the largest country in the region, China also has its important place in the US diplomatic strategic plan. Generally speaking, Sino-American relations have largely relied on burgeoning economic ties against tensions on political and security issues. China is especially dependent on the US as an exporter market. Trade with the US represented 23.7 percent of total trade for China in 2002. The US ranks as China’s top trading partner. The US is also China’s leading partner as a source of foreign direct investment (FDI). It contributes to 9.5 percent of China’s inward FDI grew in 2001.[7]
Under the influence of the US promotion of free trade and globalization, especially after 1980s, East Asian countries began to understand more about globalization. The 1980s and 1990s witness their entries into international institutions and cooperation with global players.
In 1989, APEC was established in response to the growing interdependence among Asia-Pacific economies and to the need to advance Asia-Pacific economic dynamism and sense of community. Many East Asian countries become the founding members of the APEC forum, such as Japan, the Republic of Korea, Thailand, Indonesia, and so on.[8]
Even China gradually opens its door and finds its place in the international institutions after years of close. Chinese politicians have formed some kind of belief in globalization that it will benefit China a lot through participation in the international institutions. This participation will help China share the achievement of the world economic development and raise the recognition of China from other countries and international institutions. The entry of APEC in 1991, WTO in 2001 all shows China’s willingness to obey the international rules and behave as a responsible member of the international community.
To give an overall view, before the Asian Financial Crisis in 1997, East Asia seeks global solutions to fuel its economic growth. The US and US-supported international institutions play very important role in this course.
III. The Development of Economic Regionalism
However, the AFC serves as a turning point of the approach for East Asia to promote and stabilize its economic development. Politicians in East Asian countries find that the globalization brings not only economic booming in East Asia, but high risk of financial attack as well. “National economic security cannot always be achieved unilaterally or even bilaterally; in some cases, it may require de facto multilateral coordination or even formal cooperation.”[9] What’s more, the interest of East Asia in the global economy is not fairly and well represented in the existing international institutions. The feelings were proved when western countries in the International Monetary Fund (IMF) deeply intervened the economic policymaking of the region’s crisis-hit countries. As a result, AFC gives birth to ASEAN Plus Three (APT) which becomes one way out for the purpose of counterweighing the global solutions to economic development in East Asia.[10]
For East Asian countries, global solution has brought them tremendous benefit. Interdependence between east world and western world makes countries one economy. However, liberalism cannot fully illustrate the picture of the crisis. When in danger, the international institutions as representatives of the western world will provide help only on strict terms and will easily take over the control of the national economy to protect their own interest. This may even be practiced at the cost of the victim county’s whole social system to just stabilize the currency. Thus the role of APT is not an institution to make East Asia become totally independent, but as a measure to promote the regional cooperation and work as a backup and supplement for the region in case of the fail of the global solution to Asia’s economic development. As a result, the policies made by APT are characterized by its tentative and gradual integration and various latent links to the international institutions.
Two economic and financial cooperation measures can be used to illustrate these two characteristics: the Chiang Mai Initiative (CMI) and Asian Bond Fund Initiative (ABFI).
“The CMI is designed to provide liquidity support for member countries that experience short-run balance-of-payment deficits, with the purpose of preventing an extreme crisis or systemic failure in a country and subsequent regional contagion.”[11] Started from 2000, the initial amounts involved under CMI were only $36.5 billion for a total of 16 bilateral currency swap arrangements concluded among APT. This number is quite insufficient compared to the amount of assistance required by Thailand alone was $17.2 billion. This arrangement will necessarily lead to the supplement from the IMF or other international financial institutions. In the May 2006, the amount of CMI is raised to $75 billion. The gradual raise of the CMI amount is due to the increase of mutual trust between member countries and strengthen its ability to reduce the dependence on an IMF or the US-determined solution to financial crisis in the region.[12]
However, the CMI does not mean an Asians-only solution. The initial CMI required its member countries drawing more than 10 percent from the funds in the CMI to accept an IMF conditionality. Even after the review of the IMF linkage with the CMI, IMF conditionality will still need to be accepted at 20 percent level. This linkage is especially supported by China and Japan despite some member countries’ opposition.[13] Those important players in the region know well that without the support from the well-established international institutions, the CMI will become fragile whenever there are conflicts between member countries. The loss of US support on a CMI excluding the US influence may also have negative impact on the bilateral relations between these countries and the US.
Asian Bond Fund Initiative (ABFI) is another example. Up to present, the size of the initiative increases from $1 billion initially to $2 billion and the investment has shifted from a basket of dollar denominated bonds issued by Asian sovereign or quasi-sovereign issuers in EMEAP economies to local-currency bonds. For this initiative, Asian leaders have placed their emphasis on the Asian-Bond-Eurobond linkage. Senior ranking financial officers both from Asia and Europe had their meeting in Singapore to discuss the interests and consolidated relations between EMEAP and the EURO-system.[14]
IV. Possible Prospect of the Future Economic Development of East Asia
The precious discussion gives a general view on the background and present development of Asian regionalism. As East Asian countries benefit a lot through globalization in the past, it will not immediately give up the attempt to be involved to share the global achievement even after the Asian Financial Crisis. However, the AFC do ask the Asian politicians to make a second thought on how to develop a healthier and more stable financial market for the benefit of the region, and the world as well. The supplementary measure adopted is economic regionalism.
Asians-only economic regionalism may not be a good direction without globalization at the same time since Asia faces challenges of economic diversity and political rivalry. However, it is also not safe to have global solution only to the future of Asia’s economic development. As a result, the 21st century witnesses the use of both solutions to fuel the economic growth in East Asia. For liberalists, they will be happy to see that the globalization and regionalization helps to deepen the interdependence between countries. But they cannot illustrate the disparity in the international institutions. For realists, their prediction of the power acquisition will still be considered even within the regional economic institution. However, cooperation has been and will be seen between East Asian countries. Hopefully, East Asia will march towards a more open and cooperative future under the help of both global and regional solutions.
Reference
[1]Kim, S. S. (2004). Northeast Asia in the Local-Regional-Global Nexus. S. S. Kim (Ed.), The International Relations of Northeast Asia (pp.4-19). Oxford: Rowman & Littlefield Publishers, Inc.
[2]Berger, T. (2004). Japan’s International Relations: The Political and Security Dimensions. S. S. Kim (Ed.), The International Relations of Northeast Asia (pp.139). Oxford: Rowman & Littlefield Publishers, Inc.
[3]Berger, T. (2004). Japan’s International Relations: The Political and Security Dimensions. S. S. Kim (Ed.), The International Relations of Northeast Asia (pp.154-155). Oxford: Rowman & Littlefield Publishers, Inc.
[4]Calder, K. E. (2004). U.S. Foreign Policy in Northeast Asia. In S. S. Kim (Ed.), The International Relations of Northeast Asia (pp. 226-227). Oxford: Rowman & Littlefield Publishers, Inc.
[5]Manyin, M. E (2006). South Korea-U.S. Economic Relations: Cooperation, Friction, and Prospects for a
Free Trade Agreement (FTA). Congressional Research Service. Retrieved Nov. 17th, 2007, from http://keia.org/4-Current/CRSFTA.pdf?sort=01&seq=20060124142516.
[6]Choe, S. H. (April 2nd, 2007). U.S. and South Korea reach free trade agreement. International Herald Tribune. Retrieved Nov. 17th, 2007, from http://www.iht.com/articles/2007/04/02/asia/fta.php.
[7]Moore, T. G. (2004). China’s International Relations: The Economic Dimension. S. S. Kim (Ed.), The International Relations of Northeast Asia (pp.115). Oxford: Rowman & Littlefield Publishers, Inc.
[8]A Brief History of APEC. Canada. Retrieved Nov. 17th, 2007, from http://www.dfait-maeci.gc.ca/canada-apec/media/history-en.asp.
[9]Moore, T. G. (2004). China’s International Relations: The Economic Dimension. S. S. Kim (Ed.), The International Relations of Northeast Asia (pp.126). Oxford: Rowman & Littlefield Publishers, Inc.
[10]-[14]Sohn, I. (2007). East Asia’s Counterweight Strategy: Asian Financial Cooperation and Evolving International Monetary Order. Intergovernmental Group of Twenty-Four on International Monetary Affairs and Development.
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