Session 1
Asian Regional Economy in a Multilateral Setting
"Asia is one," Okakura Kakuzo proclaimed in his 1903 book, Ideals of the East . We seldom hear this expression today, largely because the phrase was too often exploited by the Japanese militarists of the 1930s to justify their ill-conceived idea of the Greater East Asia Co-prosperity Sphere. Also, in reality it would seem that today's Asia remains as diverse as it was a century ago in economic, political, and cultural terms. Still, there is a clearly visible tendency toward Asian integration.
While global or broad-based multilateral trade liberalization - such as initiatives under the World Trade Organization and the Asia-Pacific Economic Cooperation forum - stagnates, East Asian countries are inching toward free trade agreements (FTAs). There seems to be a tacit understanding of first proceeding with small-scale and feasible FTAs (e.g. those between Japan and Singapore, between Korea and Chile, and between China and ASEAN) and then converging them into a region-wide ASEAN with three (Japan, China and South Korea) FTAs. When it comes to finding the specific combination of member countries and how best to arrange the steps to achieving that goal, however, the region must still rely on trial and error since no convincing theory exists that can serve as a guide. Related issues that will be examined include:
- What are the driving forces behind the institutionalization of regional integration among economies? Are the benefits compelling enough to enable East Asian governments to overcome domestic political resistance?
- Can the current building-block approach which has no clear commitment to the endgame still help realize the eventual East Asian FTA, or is it doomed to spin a complicated web of ad hoc FTAs?
- Can East Asia provide a unique model of institutionalized economic integration?
- Can geopolitical mistrust, including that between Japan and China, and between East Asia and the United States be resolved?
In addition to FTAs, there has been growing recognition of the need to promote monetary cooperation among Asian countries. "Competitive devaluation" among Asian countries might have deepened the magnitude of the Asian currency crisis. Now, there are voices among developed countries that the current exchange rate of the Chinese yuan and its U.S. dollar-pegged regime many not be beneficial for China and other countries. It would be interesting to study the pros and cons of exchange rate coordination policies among Asian countries. Some related topics for discussion could include:
- Is the rise of China a major factor contributing to global deflation (deflation in Japan in particular), and would a revaluation of the Chinese yuan help solve this problem?
- Should monetary integration be pursued as a goal, and if so, how far (e.g. including, ultimately, the introduction of a common currency) and how fast (including the sequencing problem) should we proceed? Is there a need to keep on relying on the U.S. dollar as the key currency?
- What are the implications for the pattern of macroeconomic interdependence (for example, synchronization of business cycles) among Asian countries?
