Engaging East Asian Integration: States, Markets and the Movement of People

1. Introduction

 1 Introduction Takashi Shiraishi Jiro Okamoto The Institute of Developing Economies-Japan External Trade Organization (IDE-JETRO) organized a symposium in December 2008 on the theme, “Engaging East Asian Integration: States, Markets and the Movement of People”. It was held in the wake of the Lehman Brothers collapse and in the midst of the deepening global financial crisis that originated in the United States. The crisis reminded us of other historic events that marked turning points in the history of East Asian region making. One was the Plaza Accord in 1985 which marked the beginning of the region’s economic development and regionalization. The yen appreciated enormously in the wake of the Plaza Accord, forcing Japanese firms — above all, electronics, machinery, and automotive firms — to move abroad and deploy their production facilities regionally to remain competitive in the world market. South Korean, Taiwanese, and Hong Kong as well as Southeast Asian ethnic Chinese business also went transnational and became regionalized. This expansion and deepening of business networks and production chains led to de facto economic integration.  Takashi Shiraishi and Jiro Okamoto It was against this background of regionalization that people such as Mahathir Mohamad, then prime minister of Malaysia, and Takeshita Noboru, prime minister of Japan, started to talk about East Asia as we do now when referring to the region extending from Japan and South Korea through China, Taiwan, and Hong Kong to Southeast Asia. It was also in those years that China transformed itself from socialism to a socialist market economy while being integrated into the regional and global economy. A crisis that marked another turning point in the history of East Asia was the Asian economic crisis in 1997–98. In the midst of this crisis, the first ASEAN plus 3 (Japan, China and South Korea) summit meeting was held in 1997. The summit meeting was institutionalized in 1998, which also saw the establishment of an East Asia Vision Group to map out the future of the region. A year later, in 1999, the Chiang Mai Initiative laid the foundation for currency cooperation at the bilateral level among states in the ASEAN plus 3. Through these steps, there emerged a regional political project of building an East Asia community in the wake of the 1997–98 Asian economic crisis, in part to create a mechanism for regional cooperation, especially in currency, as a hedge against the kind of U.S. intervention that Indonesia, Malaysia, South Korea, and Thailand had experienced, and, in part, to promote trade and investment in the region in view of stalling WTO negotiations and the transformation of regional triangular trade. China’s emergence as an economic powerhouse was also crucial in changing the pattern of triangular trade that had hitherto anchored the regional system. In the wake of the Asian economic crisis, Japanese, South Korean, Taiwanese, and other firms reorganized their production systems. Producing capital and intermediate goods in their home countries and their production bases in Southeast Asia, they assembled final products in China for export to the United States and other markets. As a result the triangular trade system, which had consisted of Japan, Asia (minus Japan), and the United States, came to be reorganized with China, Asia (minus China) and the United States as its three mainstays. This change led to the expansion of Chinese exports to the United States and the European Union, while the intraregional trade in capital and intermediate goods expanded between China and the rest of Asia. Following the 1997–98 crisis, East Asia also saw the flourishing of regional institutions. ASEAN Introduction  has been at the centre of this development, providing venues for ASEAN plus 3 and the East Asia Summit (ASEAN plus 6) processes. ASEAN members ratified the ASEAN Charter in 2008. The IDE-JETRO has also played its part by contributing to the establishment of the Economic Research Institute for ASEAN and East Asia (ERIA). The current global financial crisis will no doubt mark yet another turning point in the making of East Asia. And this is the reason the symposium was organized with Professor Peter J. Katzenstein — the leading scholar of regionalism — as the keynote speaker. Let us look at some long-term forecasts about the region in order to gauge the scale of changes in store. According to the long-term economic outlook released by the Japan Center for Economic Research in 2007, the size of the Chinese economy...