RIETI Report February 2004

RIETI ANEPR Series <Event Report>

Greetings from RIETI

This month, a special season of bunraku pieces are being performed at the Tokyo National Theatre in commemoration of UNESCO recognizing Japan's ningyo joruri ("puppet theatre") as a World Intangible Cultural Heritage in November of last year. In bunraku, each puppet is manipulated by three puppeteers, with a tayu providing the puppet's voices and narration, and a shamisen player expressing further feeling and atmosphere, and thus requires a minimum of five people to perform a play. When watching bunraku, one is enchanted by the absolute human verisimilitude with which the puppets behave, and also awestruck by the unfathomable level of coordination and technical accomplishment of those responsible for controlling them. They say it takes seven years to learn how to operate the legs, another seven to learn how to operate the left hand, and a lifetime to achieve perfection of the role of omozukai, who controls the puppet's head and right hand. Even the very greatest narrators and shamisen players - like Living National Treasure Tsurusawa Tomoji - have devoted their entire lives to their art. All this training and effort to bring just one puppet to life, but the result is a beauty and a truth of emotion that can be more powerful than performances by many live actors. Out of the supposed chaos of the bunraku stage, which requires so many participants, it is fitting that such a perfect order should manifest itself.

This month, RIETI Report presents a summary of the events of last month's Asian Network of Economic Policy Research (ANEPR) Symposium at which a distinguished panel of experts engaged in lively debate on how the countries of Asia can work together in creating better regional order. (DC)

Event Report

RIETI ANEPR Series

The symposium "Asian Network of Economic Policy Research (ANEPR) 2003-2004: Asia in Search of New Order" held on Jan. 16 and 17, brought together scholars and specialists from Japan, China, the United States and other economies in the Asia-Pacific region to discuss economic, security and cultural phenomena. The event, the second in the series hosted by the Research Institute of Economy, Trade and Industry (RIETI), was divided into four sessions with the first three sessions respectively focusing on economic integration, information and culture, and security issues, while the fourth session was designated for free discussion.

*Trade, multilateralism and regional integration*

In the first half of Session 1, Lawrence Lau, professor at Stanford University, spoke on economic integration in East Asia and its prospects, while Ahn Duk-geun of the KDI School of Public Policy and Management and Chia Siow Yue of the Singapore Institute of International Affairs made presentations respectively entitled "Modality of Korea-Japan FTA: From the Perspective of Korea" and "ASEAN and East Asian Economic Integration." They were followed by Kazuhito Yamashita of RIETI, who pointed to the difficulty of and problems surrounding agricultural negotiations.

During the subsequent discussion, the fundamental question was raised as to whether it is rational for a government to pursue FTAs and/or regional economic integration. Some participants called for prudence, saying that FTAs and regional integration - though good for competitive global players - may be detrimental to inefficient domestic companies that provide jobs and pay taxes. In opposition to this view, others claimed that the function of FTAs is not to drive competitive companies out of a country, but to get them stay and bring jobs back to the country by creating more favorable business conditions. With regard to Japan's pursuit of FTAs, it was pointed out that Japan is promoting FTAs as one of various tools to push forward domestic reform. Meanwhile, another participant pointed to the need to pay more attention to the widening gap between winners and losers - although it is happening with or without FTAs - so as to prevent the spread of negative sentiment toward FTAs.

*Financial aspects*

The second half of Session 1 was devoted to the financial aspects of regional integration with the first three speakers - Wang Yun-jong from the Korea Institute for International Economic Policy, Takatoshi Ito from the University of Tokyo, and Ronald I. McKinnon from Stanford University - presenting their individual views regarding ways to achieve exchange rate stability in Asia, while Li Jiange of the Development Research Center of the State Council of China spoke on the macroeconomic situation and financial reform of China.

While supporting the idea of "Asia Bond" that was proposed by Ito, one participant questioned how the scheme could be made to work, referring to the need to first promote the development of a viable local bond market before inviting foreign investors. It was also suggested that promoting the development of an equity market might be more important because a problem common among many East Asian companies is over-borrowing. Meanwhile, as to the idea of pegging currencies to the U.S. dollar, proposed by McKinnon, one participant voiced concern over the loss of independence in monetary policy, protesting that Japan cannot afford to lose independence especially under the current economic conditions. In response to these concerns, however, it was argued that Japan would be better off if pegged to the dollar because it would diminish deflationary expectation in the future. At the same time, it was noted that Asian countries, should their currencies be pegged to the U.S. dollar, need to have fail-safe provisions for collective appreciation vis-a-vis the U.S. dollar so as to retain stability.

*Transborder risk management and information flow*

The first half of Session 2 focused on the challenges accompanied by the emergence of the new information society or new digital phenomena being observed today. Xiao Meng of the CITIC Publishing House in China and Ang Peng Hwa of the Nanyang Technological University in Singapore spoke about the lessons learned from their respective countries' experience of SARS (severe acute respiratory syndrome); specifically, how globalization and information technology contained SARS in China, while the control of information prevented the spread of the epidemic in Singapore. Meanwhile, Izumi Aizu from Asia Network Research presented his observations of the World Summit of Information Society held in Geneva in December 2003, sharing his view of the challenges he found in the ongoing multilateral and multi-stakeholder efforts toward setting global rules for governing the Internet.

On the issue of free communication versus control for the sake of security interests, participants acknowledged that each country is now facing a dilemma. At the same time, however, some participants pointed to the need for a government to ensure the free flow of information even at a time of crisis, while there were concerns voiced over the recent tendency of the general public to voluntarily give up their privacy in favor of security. As for problems surrounding the Internet, some participants called for a mechanism to deal with the spread of inaccurate information. One participant suggested, however, that de facto damage limitation may already be in place because the very nature of the Internet's anonymity creates a tendency for people to distrust information obtained via it.

*Digital industry and transnational market*

In the second half of Session 2, Nobuo Ikeda of RIETI gave a presentation on Japan's digital industry, Yoshinori Yokoyama, also of RIETI, gave perspectives on the movement of information, culture and people, and Masayoshi Sakai of the Ministry of Trade, Economy and Industry spoke of the possibility of pop culture as a driving force for regional integration.

During the subsequent discussion, questions were raised as to the role of governments in promoting pop culture. With regard to the Japanese government, quite a few participants commented that the government should play a minimum role, if any, or continue its current policy of "benign negligence." Meanwhile, on the transnational spread of pop culture and content, one participant expressed the anxiety that pop culture could be used as a tool to pursue foreign policy objectives if a government intended to do so. In reply to this, another answered that cultural content - whether movies or TV dramas - originating from one country would not spread that far abroad if they were too nationalistic, and therefore any impact would be slight.

*Regional security and crisis management in Asia*

In Session 3, active debates took place centering on three major issues concerning regional security in Asia, namely, U.S. unilateralism and security policy, the rise of China and its changing diplomatic policy, and the North Korean problem.

Stephen Krasner of Stanford University spoke on U.S. unilateralism, which he described as reflecting the national interests and military capability of the country, not the peculiarities of the administration of President George Bush. Meanwhile, Gerald Curtis of RIETI, in his presentation later in the session on the U.S. security policy toward East Asia, pointed to the need for the U.S. to change its spoke-and-hub approach in line with the changing reality of the region. On the topic of U.S. unilateralism, questions were raised as to the viability and sustainability of the policy. One participant asked why only the U.S. - among the many nations pursuing market-oriented liberalization - has been singled out as a target of terrorism, while others asked just how long the U.S. would be able to sustain its warfare and whether the U.S. government had considered the long-term costs of its unilateralism. It was also suggested that the particular style of the current administration under President George Bush which takes a polarized stance on policies may be a factor behind the unilateralism, even though it does reflect the structural needs of the country.

On the rise of China, Shi Yihong from the Renmin University of China and Akio Takahara from Rikkyo University, presented their views on China's changing security policy, which has begun to pursue more conciliatory approaches toward its neighbors, as well as on the implications of such a policy shift. One participant doubted the prospect of China being accepted as a "normal state" while remaining the largest Communist regime, while another noted that China continues to poise a military threat to Taiwan. On the subject of the China-Taiwan issue, many participants suggested that the question of sovereignty be shelved for the time being with both sides concentrating first on deepening economic relations in order to build mutual trust and increase stakes in each other; all of which would eventually facilitate some sort of settlement on the issue.

Regarding North Korea, Lim Won-hyuk of Korean Development Institute gave a presentation on the 1994 Geneva Agreed Framework and reasons for its failure. In the subsequent free discussion, it was pointed out that denuclearization of North Korea, unification of North and South, and departure of U.S. troops would be a solution acceptable to all parties concerned, with the possible exception of North Korea. Meanwhile, one participant noted that a package deal - rather than making denuclearization the precondition for the normalization of talks and economic aid - may be the only possible option even though there is little prospect of its success. The question, however, is how the five countries dealing with North Korea in the six-party talks can come up with a common view as to how to proceed, they added.

*Theoretical concepts and new orders*

In Session 4, which was dedicated to discussing the theoretical aspects of what was discussed in the earlier sessions and to exploring possible new orders, there was active debate on the conventional notion of state, borders and sovereignty vis-a-vis the potential for new institutional frameworks. Pointing to a series of departures from the conventional notion of a sovereign state, it was suggested that institutional innovation could be the way to solve the Taiwanese issue. However, it was also argued that any departures from conventional arrangements must be based on voluntary agreements between the relevant parties and might have to be reinforced by explicitly recognized alternative institutional arrangements. Others noted that the conventional idea of sovereignty still plays an important role in the world today.

Participants generally recognized the need to expand the roles of nongovernmental organizations (NGOs) or alternative government systems, but opinions differed on the question of to what extent. One participant called for minimizing the role of government, which they described as the most costly organization, leaving other tasks to NGOs or other cheaper alternative actors. However, there was also the view that NGOs, though increasingly important, are no substitute for the conventional government system.

There was also discussion on how Asian countries should allocate the burden of inevitable adjustments of the growing global imbalance, namely, the U.S. current account deficits in Asia. It was acknowledged that foreign exchange rate adjustments would be too costly and may not be effective in correcting the imbalance. Instead, it was suggested that Asian countries coordinate both macro- and microeconomic policies, launching a new collective exchange rate regime and removing trade barriers. One participant also proposed that two groups of Asian countries - China and ASEAN countries except for Singapore in one group, and Japan, South Korea, Taiwan, Hong Kong and Singapore in another - form a currency bloc and maintain relative parity among currencies within each bloc, that is to say, among countries and regions competing in exports, so as to facilitate exchange adjustments against the U.S. dollar.

EVENTS INFORMATION

3/11-12 RIETI Symposium
"Fiscal Reform of Japan: Redesigning the Frame of the State"
For event program and information, http://www.rieti.go.jp/en/events/04031101/info.html

For a comprehensive list of past and upcoming RIETI events, please visit the website: http://www.rieti.go.jp/en/events/index.html

Brown Bag Lunch Seminars

All BBLs run 12:15 - 13:45, unless otherwise stated.

2/23 Speaker: HOSOYA Yuichi (Full-time Lecturer, Faculty of International Studies, Keiai University)
Moderator: IRIE Kazutomo (RIETI Director of Administration)
"British Diplomacy Today"
(in Japanese only)

For a complete list of past and upcoming BBL Seminars, please visit the RIETI website: http://www.rieti.go.jp/en/events/bbl/index.html

Research Seminars

All Research Seminars run 10:00 - 12:00, unless otherwise stated.

2/26 KODAMA Toshihiro (Senior Fellow)
HIGUCHI Yoshio (Faculty Fellow)
(Thursday 10:00-11:30)

3/4 TSUGAMI Toshiya (Senior Fellow)
"A Study on China's Sub-National Fiscal Mechanism"

For a complete list of past and upcoming Research Seminars, please visit the RIETI website: http://www.rieti.go.jp/en/events/research-seminar/index.html


Fellow titles and links in the text are as of the date of publication.

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RIETI Report is published monthly.

Event Information

For a complete list of past and upcoming event information.

Symposiums

Workshops

BBL Seminars

Fellow titles and links in the text are as of the date of publication.

For questions or comments regarding RIETI Report, please contact .

RIETI Report is published monthly.