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79. Regionalism and Economic Integration in East Asia
- ISEAS–Yusof Ishak Institute
- Chapter
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390 Sung-Hoon Park By: ROS Size: 7.5" x 10.25" J/No: 03-14474 Fonts: New Baskerville 79. REGIONALISM AND ECONOMIC INTEGRATION IN EAST ASIA SUNG-HOON PARK Reprinted in abridged form from Sung-Hoon Park, “Regionalism and Economic Integration in the East Asia: Current Status and Future Policy Options”, in Asia-Europe on the Eve of the 21st Century, edited by Suthipand Chirathivat, Franz Knipping, Poul Henrik Lassen, and Chia Siow Yue (Bangkok: Centre for European Studies; and Singapore: Institute of Southeast Asian Studies, 2001), pp. 133–48, by permission of the author and the publishers. Over the last fifteen years or so regionalism has become increasingly prevailing in the world economy. After the first wave of regionalist tendency during the 1960s, the number of regional integration agreements (RIAs) has again surged especially since the mid-1980s. The WTO recently reported that of totally 184 RIAs notified to the GATT/WTO so far, 109 agreements are still in force.1 There are only few member countries of the WTO that are currently not participating in any kind of regional integration agreements. However, the East Asia region has so far been relatively immune from this increasing worldwide tendency towards regionalism. The ASEAN Free Trade Area (AFTA) comprising 9 (10 including Cambodia) countries in Southeast Asia and the South Asian Association for Regional Cooperation (SAARC) comprising 7 countries in South Asia are the only formal RIAs operating exclusively in the Asian region. In addition, many Asian countries are members of a quasi-RIA called Asia Pacific Economic Cooperation (APEC), which also contains non-Asian, Pacific-basin countries. Compared to the long history, the diversity and the complexity of regional integration agreements in Europe and North and Latin America, economic integration in Asia is rather a new phenomenon.2 In contrast to the relatively belated consciousness on regional integration in Asia, a recent surge in Asian countries’ interest in the formation of regional economic grouping is remarkable. Korea started negotiations on free trade area (FTA) agreement with Chile in 1999, which was officially endorsed through the bilateral Summit meeting on the occasion of the 1998 APEC Summit in Kuala Lumpur. Japan also does consider an FTA agreement with East Asian trading partners as a policy option for the 21st century. A tripartite FTA agreement among Korea, Japan and China has also been 079 AR Ch 79 22/9/03, 12:57 PM 390 Regionalism and Economic Integration in East Asia 391 By: ROS Size: 7.5" x 10.25" J/No: 03-14474 Fonts: New Baskerville discussed within academic and political circles recently. In short, after a long period of abstinence Asia has now become more interested in its own regionalism. THE CO-EXISTENCE OF MULTILATERALISM AND REGIONALISM: BACKGROUND AND RELATIONSHIP Especially since the mid-1980s the increasing tendency towards regionalism coincided with the strengthening of the multilateral trading system which reached its triumphal moment in 1995, when the WTO was launched as a result of successfully completed negotiations. This seemingly contradictory development implies that countries were, on the one hand, making efforts to strengthen multilateralism under the auspices of GATT. On the other hand, they were at the same time resorting increasingly to regional economic integration .3 As a consequence, the co-existence of multilateralism and regionalism has become one of the main characteristics of the recent world economy. Even though such situation is expected to sustain for a while, a fundamental question arises as to whether or not regionalism has been and will be detrimental to the multilateral integration process of world economy. Two conflicting views exist for the relationship between regionalism and multilateralism . One is the view that regionalism has been (and will continue to be) a stumbling block to multilateralism. The other contends that regionalism has been (and will continue to be) a building block to multilateralism. The first view is well summarized by, ‘inter alia’, Bhagwati (1996) and Bhagwati and Panagariya (1996). They argue that regionalism is detrimental to the multilateral world trading order, and is thus an obstacle to the integration of the world economy, mainly for the following reasons. First, regionalism by itself implies preferential trading arrangements that basically discriminate between members and nonmembers , not only in enforcing tariff barriers but also by erecting non-tariff barriers like rules of origin, regional content requirements, etc. As such, regionalism therefore results in trade diversion. Even though they also expect some trade creation effects as well, they argue that the trade diversion effect exceeds the...