Waseda University Global COE Program:
Global Institute for Asian Regional Integration (GIARI)

August 2 (Monday) – August 6 (Friday)
The Waseda University Global COE
Program, the Global Institute for
Asian Regional Integration (GIARI),is accepting applications from
PhD students to attend theSummer Institute on AsianRegional Integration. The Institutewill provide students theopportunity to deepen theirknowledge about regional
integration in Asia and expand
their research networks.

Le ctu rers:

Peter Drysdale (Australian National University)
Dennis McNamara (Georgetown University)
Giovanni Capannelli (Asian Development Bank)
Christopher Hughes (The University of Warwick)
Jun‑Hyeok Kwak (Korea University)
Tsuneo Akaha (Monterey Institute of International
Studies; GIARI, Waseda University)
Takashi Terada (GIARI, Waseda University)
Shujiro Urata (GIARI, Waseda University)

Was ed a Un i vers i ty Gl ob al CO E Prog r am

Global Institute for Asian Regional Integration (GIARI)

Summer Institute on Regional Integration at Waseda, 2010
Program

All lectures and presentations will be held in Room 710, seventh floor, Bldg. 19.

August 2 (Monday)
MC: Kazuo Kuroda (Professor, Waseda University)
Miki Honda (Assistant Professor, GIARI, Waseda University)
9:15-9:30

Opening Remarks
Satoshi Amako (GIARI Project Leader; Professor, Waseda University)

9:30-10:45

Lecture 1:
Regional Integration: Theoretical and Normative Implications for East Asia
Tsuneo Akaha (Monterey Institute of International Studies)

10:45-12:00

Lecture 2:
Patterning Asian Regional Architecture: Power, Interest and Institution-Building
Takashi Terada (Professor, Waseda University)

12:00-13:00

Lunch

13:00-13:40

Presentation 1:
Regional Environmental Cooperation in East Asia
Takeshi Odaira (GIARI, Waseda University)

13:40-14:20

Presentation 2
Ocean Governance, Maritime Security, and the Consequences for Regional
Cooperation in Northeast Asia
Christian Wirth (GIARI, Waseda University)

14:20-14:35

Break

14:35-15:15

Presentation 3
Human Rights Exchanges in Asia: Discourses and Legal Practice
Elisa Nesossi (University of London)

15:15-15:55

Presentation 4South Korea’s internationalization of higher education in the context of regional
integration
Yeeyoung Hong (GIARI, Waseda University)

16:00-16:40

Orientation for students
MC: Kazuo Kuroda (Professor, Waseda University)

17:00-19:00

Welcome Party (Seihoku no Kaze (西北の風))
MC: Jemma Kim (Assistant Professor, GIARI, Waseda University)

August 3 (Tuesday)
MC: Kazuhiko Yokota (Professor, Waseda University)
Jemma Kim (Assistant Professor, GIARI, Waseda University)
9:30-10:45

Lecture 1
Asia’s Economic Integration: Trends and Prospects for Cooperation
Giovanni Capannelli (Asian Development Bank)

10:45-12:00

Lecture 2
Regional Economic Integration in East Asia and Japan’s FTA Policy
Shujiro Urata (Professor, Waseda University)

12:00-13:00

Lunch

13:00-13:40

Presentation 1
The Integration in East Asian Economies: Towards Specialization or
Diversification?
Ferdous Farazi Binti (GIARI, Waseda University)

13:40-14:20

Presentation 2
The Role of Global Companies in Asian Regional Cooperation through CSR and its
ProspectInsun Kim (GIARI, Waseda University)

14:20-14:35

Break14:35-15:15

Presentation 3
AFTA,BFTA & ITRO Effect on Trade & Investment Relations: Southeast Asia
Kiki Verico (Waseda University)

15:15-15:55

Presentation 4
Spaghetti effects in Asia – A QCA analysis of Free Trade Agreements
Po-Kuan Wu (European University Institute)

15:55-16:10

Break

16:10-16:50

Presentation 5
Japan's FTAs as Tools for Achieving a Firm's Commercial Interests: Do JapaneseCorporations Need a Region-Wide Trade Liberalization Treaty?
Anna Jerzewska (University of Leeds)

August 4 (Wednesday)
Field Trip

August 5 (Thursday)
MC: Naoyuki Umemori (Professor, Waseda University)
Sachiko Hirakawa (Assistant Professor, GIARI, Waseda University)
9:30-10:45

Lecture 1:
Inherited Responsibility and Reciprocal Non-domination: Making Citizens
Responsible for Historical Injustices
Jun-Hyeok Kwak (Associate Professor, Korea University)

10:45-12:00

Lecture 2:
East Asia – The Knowledge Region
Dennis McNamara (Park Professor, Georgetown University)

12:00-13:00

Lunch

13:00-13:40

Presentation 1:
Linguistic Imperialism in Higher Education in East Asia: Imprication for
Collaborative Framework of Languages
Sae Shimauchi (GIARI, Waseda University)

13:40-14:20

Presentation 2
The Present Conditions and Problems on Historical Recognitions between Japanand Asian Neighboring Countries
Kinuyo Kawaji (GIARI, Waseda University)

14:20-14:35

Break

14:35-15:15

Presentation 3
The historical legacy of Pan-Asianism and its impact on Asian regional integration
Yuan Cai (University of Adelaide/ ANU)

15:15-15:55

Presentation 4'History politics', Asian identity, and visions of an East Asian Community
Torsten Weber (Jacobs University Bremen)

August 6 (Friday)
MC: Chikako (Kawakatsu) Ueki (Professor, Waseda University)
Hiro Katsumata (Assistant Professor, GIARI, Waseda University)
9:30-10:45

Lecture 1
The DPJ's new (but failing), foreign policy grand strategy : implications for the
US-Japan alliance, Sino-Japanese ties, and East Asian regionalism
Christopher Hughes (Professor, The University of Warwick)

10:45-12:00

Lecture 2
Building an East Asian or Asia Pacific Community
Peter Drysdale (Emeritus Professor, The Australian National University)

12:00-13:00

Lunch

13:00-13:40

Presentation 1:
Regional integration in East Asia/ Southeast Asia and Central Asia: politics andpolicies compared
Chinara Esengul (Kyrgyz National University)

13:40-14:20

Presentation 2
The Rise of China and the East Asian Regionalism in Post-Cold War East Asia
Zornitza Grekova (Sofia Unviversity)

14:20-14:35

Break

14:35-15:15

Presentation 3
China’s Changing Perception of U.S.-Japan Military AllianceZhihai Xie (Peking University)

15:15-15:25

Closing Remarks
Shujiro Urata (Professor, Waseda University)

17:30-19:30

Farewell Party (Garden terrace @ RIHGA Royal Hotel)
MC: RALecturers

August 2 (Mon)
Lecuture 1
Prof. Tsuneo Akaha

Dr. Tsuneo Akaha is Professor of International Policy Studies and Director of the Center for East
Asian Studies at Monterey Institute of International Studies, where he teaches courses on Japan,
Northeast Asia, and international migration. From 2008 to 2009 he was a Visiting Professor in Waseda
University’s Graduate School of Asia-Pacific Studies and since 2009 has been a Senior Fellow at
Waseda University’s Global Institute for Asian Regional Integration. He was Managing Editor of
Asian Regional Integration Review (Waseda University Global Institute for Asian Regional
Integration), Vol. 1 (2009) and Vol. 2 (2010). Dr. Akaha received his Ph.D. in International Relations
from the University of Southern California. He has authored/edited twelve books, over 70 journal
articles and book chapters on topics ranging from nontraditional security in Northeast Asia to Japanese
security policy.
His most recent publications include: The Evolving US-Japan Alliance in East Asia: Balancing Softand Hard Power, London: Routledge, 2010 (co-edited with David Arase); “’China’ in theContemporary Nationalists’ Reconstruction of ‘Japan’,” in Victor Teo and Gerrit Gon, eds.,
Reconceptualizing the Divide: Identity, Memory, and Nationalism in Sino-Japanese Relations,
Newcastle upon Tyne: Cambridge Scholarship Publishing, 2010, pp. 72-94; “Japan’s Soft Power-Hard
Power Balancing Act,” in Vladimir Mazyrin and Oksana Novakova, eds., The Asia Pacific Outlook:
2008-2009, Moscow: Moscow State Lomonossov University Institute of Asian and African Studies,
Center for Modern Southeast Asia and Pacific Studies, 2010, pp. 41-58 (in Russian); “Sofutopawa
kara Hadopawa e: Tenkansuru Nihon no Anzenhosho Seisaku” (A shift from soft power to hard powerin Japan’s security policy), in Hara Kimie, ed., ‘Zaigai’ Nihonjin Kenkyusha ga Mita Nihon Gaiko(Japanese foreign policy as seen by Japanese researchers resident abroad), Tokyo: Fujiwara Shoten,
2009, pp. 15-45, 303-308 (in Japanese); “Human Security in East Asia: Embracing Global Norms
through Regional Cooperation in Human Trafficking, Labor Migration, and HIV/AIDS,” Journal of
Human Security, Vol. 5, No. 2 (2009), pp. 11-34; "The Nationalist Discourse in Contemporary Japan:
The Role of China and Korea in the Last Decade," Pacific Focus, Vol. 33, No. 2 (August 2008), pp.
156-188; “International Migration and Human Rights: A Case for Regional Approach in Northeast
Asia,” in Martina Timmermann and Jitsuo Tsuchiyama, eds., Institutionalizing Northeast Asia:
Making the Impossible Possible, Tokyo: United Nations University Press, 2008, pp. 336-358(co-authored with Brian Ettkin); and“Images in Tinted Mirrors: Japanese-Russian Mutual Perceptionsin Provincial Japan,” in Yulia Mikhailova and M. William Steele, eds., Japan and Russia: Three
Centuries of Mutual Images, Honolulu: University of Hawaii Press, 2008, pp. 153-174 (co-authoredwith Anna Vassilieva). His forthcoming works include "Japanese Migration Policy,” in International
Migration of Population: Russia and Contemporary World, Moscow: Moscow State University's
Department of Population (co-authored with Linsey Bosnich). Dr. Akaha has served as President of
Asian Studies on the Pacific Coast (ASPAC), President of the Comparative Interdisciplinary Studies
Section of the International Studies Association (U.S.A.). He currently serves on the Board of ASPAC
and on the Editorial Board of International Relations of the Asia Pacific.

Regional Integration: Theoretical and Normative Implications for East Asia
Tsuneo Akaha

Monterey Institute of International Studies
Regional Integration
Units (individuals, groups, communities, economies, societies, etc.) are said to be integrated
when their material and ideational functioning depends on each other. Fully functioning
units require political, economic, security, and social-cultural resources and produces

political, economic, security and social-cultural effects. Measures of “integration” among

the units, therefore, indicate the depth and scope of the linked functioning among themalong all these dimensions; hence, the notion of political integration, economic integration,
security integration, and social-cultural integration.

“Political integration” has to do with the constitution and sharing of power (authority toallocate values) among the constitutive units; “economic integration” relates to thegeneration and sharing of capital, goods, services, technology, labor, and other material

assets among the units; “security integration” is defined as the generation and sharing of

the ability to sustain the constitutive units in a stable and predictable manner over time;and “social-cultural integration” has to do with the generation and sharing of ideas, ideals,

and values among the units.

To the extent that the normal functioning of states, economies, and societies within aregion (geographically or otherwise defined) significantly depends on each other, thoseunits are said to be integrated.

When the region is deeply integrated with a shared identity and a sense of common destiny,
the region is said to constitute a “community”. When the region is deeply integrated in thesame sense but only in economic terms, the region is said to constitute an “economic

community.” Similarly, the region may be “ a political community,” “a security community,”

or “a social-cultural community.” A fully and comprehensive integration region thenbecomes a genuine “regional community.”In this paper, “East Asia” is defined geographically to include the countries/areas ofNortheast Asia and Southeast Asia. “Northeast Asia” includes Eastern Siberia and theRussian Far East, North and South Korea, Mongolia, China, Taiwan, and Japan, with theUnited States considered a part of the region when it comes to political, security, andeconomic functioning of the region as a whole. Southeast Asia includes all of the ASEAN
member states.

Currently, Southeast Asia and Northeast Asia constitute two separate and rather distinct
regions, or subregions, due to geographical, historical, and social-cultural reasons.

Southeast Asia is much more deeply integrated than Northeast Asia, particularly along

political, security, and social-cultural dimensions. For political and increasingly economic
reasons, however, the two subregions are developing their ties and have a potential but
uncertain ability to become an integrated region. Economic (trade, investment, andfinancial) ties are the most dynamic and expansive forces of integration between Northeast
and Southeast Asia, although political and security relations are also gradually growing, as
are social-cultural ties through the burgeoning transborder immigration networks ofindividuals with familial, social, and ethnic ties.

Theoretical Perspectives on Regional Integration
Realism assumes the constitutive units of regional integration to be sovereign states
representing their subjects. To the extent that those units share common political,

economic, and security interests, they are likely to seek functional cooperation, and thecooperation may lead to integration. According to realists, the states pursue national

interests and goals through such cooperation and/or integration, with integration only ameans to an end. Therefore, if states view cooperation or integration as eroding or

weakening their self-interests, they will defect from cooperation and obstruct integrative
forces, with political considerations dominating economic interests. Generally, realists

also assume that each state is ultimately responsible for its own security in the world ofanarchy and, therefore, the state’s top priority is the maintenance of national security, withother interests of secondary importance. Realists tend to overestimate the importance ofstate-define national security interests, with a primary focus on traditional (military)
security threats and response to them. In their analysis, consequently, they focus on“national power” and the means to expand and yield it in international affairs.

Structural realism emphasizes the distribution of power among the constitutive units of aregion, power relations among them defining their interests vis-à-vis each other. The

states will attempt to either deepen or limit their cooperation depending on their self-

centered assessment of cooperation’s effects on their national interests. When the balanceof power changes as a result of relative growth of some states and decline of others,

integration will grow if the rising states view integration as promoting their strength. The
reverse will be the case if the rising states see integration as diminishing their power.
Hegemonic stability theory would suggest that regional integration would require ahegemonic state willing to share its surplus of power in protection, production, andconsumption with other powers in the region and that once regional integration takes

place, the hegemonic state may reduce its burden for sustaining the peace and stability of
the region and other regional powers will contribute to the maintenance of the regional
order thus created because the regional integration also serves their interests.

Neorealism recognizes the increasing role of institutions and organizations, both internaland external to the sovereign state, in the formulation of its foreign and security policies.
Neorealists recognize the impact of “low politics,” that is politics over economic,

environmental, and other non-security issues, on national interests. Internal organizations
give rise to the notion of “winning coalition,” a set of domestic political forces sharing acommon policy agenda against rival forces. A winning coalition may collectively promote
or limit regional integration depending on how it assesses the cumulative effects ofintegration. The emergence of a domestic winning coalition favoring regional integration
will likely support and be supported by international institutions, that is norms, rules,

principles, and standards. The role of such institutions is best captured by institutionalism.
Liberals emphasize the sources of commonality-seeking behavior of the constitutive unitsof regional integration, including both states and non-state actors. Such actors prefer aworld of shared interests and cooperation to a world of conflicting national interests andstruggle among self-interested powers. The sources of commonality-seeking behavior may
be found in the historical experience, cultural ties, or future visions among the hegemonic
elites of the regional countries.

Neoliberals recognize the role of structural constraints that constrain common aspirations
among regional powers but still prefer cooperation and integration to conflict and rivalry
between them. They also believe international institutions are valuable to the promotionof cooperation for the building of a liberal regional and world order. Liberals andneoliberals reject the “high politics” vs. “low politics” dichotomy of the realists. Instead,they accept the mutual influences between political-security and non-political factors andissues. Moreover, unlike the realists, they appreciate the importance of non-traditional
security concerns, such as environmental security and human security.

Constructivists identify the sources and consequences of ideational foundations and their

manifestations within the region. They are interested in how people create and sustain an“imagined national community,” of which they are members. By logical extension,

constructivism can be applied to the formation of a collective regional identity. If regional
community building requires the weakening of national identity, then, according to thelogic of constructivism, regional elites will likely oppose such integration because it willpose a serious threat to their long-established sense of national community. On the other
hand, elites who are driven by a cosmopolitan (globalization) ideology or seeking thebenefits of regional integration will likely favor such integration. Constructivism raises

questions such as: How do regional elites generate and sustain a common transnational
identity? Is there a threshold beyond which regional identity takes precedence overnational identity among the regional elites? What ideational arguments will they use topromote regional integration and persuade members of the general public of the wisdomand benefits of such integration?

Normative/Policy Implications

Regional integration produces winners and losers. The values which will be “won” or “lost”
include political autonomy, economic wealth, sense of security, communal identities, social
affinities, and cultural values.

From the realist/neo-realist perspective, the important normative questions regarding
regional integration are: Does regional integration enhance the security of the major

powers in the region? Does it add to or subtract from the political autonomy and economic
status of the states within the region? Is it possible for regional integration to expand thepolitical authority and economic wealth of the rising powers without threatening thepolitical autonomy of other powers in the region?

Liberals and neo-liberals would be concerned mostly about the cumulative impact ofregional integration upon the character of the states and inter-state relations, as well theindividual citizens and communities within the region. They would ask: Is regional

integration bringing about the desired liberalizing effects on the political life, economic

pursuits, and social-cultural experience of the people in the region? Is it enhancing humansecurity, such as freedom from want and freedom of fear? Is it facilitating the growth ofcivil society? Is it making the state more open, more accountable, and more transparent?
In other words, is regional integration promoting democracy and good governance?

Constructivism is neutral on the question of national vs. regional identity. There may beliberal constructivists who desire the deepening of regional integration, but such wishes
rest with their liberal ideology, not constructivist perspective. On the other hand, there

may be realist constructivists who favor the maintenance of national identity over regional
identity.

Regional Integration in East Asia: Competing Interpretations
Realists, liberals, and constructivists have different sets of expectations andunderstandings with respect to regional integration in East Asia.

From the realist perspective, regional integration in East Asia is very difficult and naturally
so. Realists are preoccupied with what the nations in the region are doing to secure theirpolitical independence, territorial integrity, and national sovereignty. Unless their own

country is the dominant power leading the regional integration process, realists would
oppose deep integration because it would entail diminution of political autonomy andnational security options for their state. While their state may benefit from globalizationand deepening international economic ties, realists are concerned that their neighbors may
gain more. Realists look at the relative power status of the nations in the region and theirrelative gains or losses vis-à-vis each other. Their primary interest in regional integration

is in terms of how the process of integration may affect the nation-states’ power and how itwill in turn enhance or limit the scope of their policy alternatives. In the realist conceptionof the region, there are clear winners and clear losers.

Consequently, realists pay particularly close attention to such aggregate data as GDP,

population size, and defense spending, and changes in such indicators of national power, as

well as how the rising and declining states assess the changing balance of power and how
they act on their evaluation. This information helps the realists analyze and forecast thelikely future behavior of states toward each other.

Table 1. GDP, Population, and Military Expenditure in Selective East Asian Countries

Country

GDP (in current million

Population (in thousands)

Military Expenditure (in

2000

2000

2000

US$)

2009

China

1,198,480

4,327,000

South

533,384

929,121

Japan

Korea

RussiaUnitedStates

4,667,448

259,708

9,764,800

4,910,840

1,679,480

14,093,300

estimate

1,266,954
126,706

46,429146,670
287,8422010

estimate

constant million US$)2009

1,354,146[31,200][98,800]

48,501[18,306]

27,130126,995

140,367
317,641[47,496][29,700]
377,228

46,859[61,000]
663,255

Indonesia

165,021510,730

205,280

232,517

2,970[4,908]Singapore

92,717

181,948

4,018

4,837

5,997

7,966

Malaysia

Thailand

93,790122,725

221,773
272,429

23,27462,347

27,914
68,139

2,122
2,702

4,078

[4,908]Sources: GDP data are from the World Bank, http://data.worldbank.org/; population data are fromthe UN Statistics Division, http://data.un.org; military expenditure figures are from SIPRI,

http://milexdata.sipri.org (all accessed July 23, 2010); [ ] = SIPRI estimates.

From Table 1 realists will realize that China’s economy, population, and military spending

are all growing at remarkable rates, while Japan is stagnant in all dimensions and Russia is
experiencing a decline in economy and population but a rebound militarily. They will also
see that the United States, South Korea, and Southeast Asian continues are growing, but atmuch slower rates than China. In qualitative terms, China’s economy and military aremodernizing fast as well. Accordingly, realists will conclude that the balance of power inthe region is changing in China’s favor. They will also attach great importance to possible
realignment of alliances in the region, expecting either that some countries will“bandwagon” and move closer to the rising China while other countries will move closer tothe United States to counter the growing Chinese power.

Realists expect regional integration to be limited, as they emphasize historical animosityand contemporary rivalry among the regional powers, particularly between China on one
side and the United States and Japan on the other side. They tend to see the growing

economic ties between China and Japan and the continued security alliance between the

United States and Japan as creating a serious incongruence that cannot be long sustained.
To the extent that they give greater weight to national security considerations thaneconomic interests, they will emphasize the importance of the U.S.-Japan security allianceand underplay the role of Sino-Japanese economic relations. As far as regional integrationis concerned, realists tend to see high politics unfolding in the ongoing debate on various

alternative arrangements: ASEAN Plus Three (preferred by China); East Asian Community(advocated by Japan); ASEAN Plus Three/Six (promoted by ASEAN); Asia-PacificCommunity (proposed by Australia and supported by the United States). Behind these
proposals realists see the major powers’ calculations of the alternative arrangements’
impact on their respective power positions.

From the liberal perspective, regional integration has been slow and difficult in East Asia forthe many reasons to which the realists point, but they see hopeful signs of diminishingobstacles to and improving prospects of integration. Liberals pay particular attention to

the growing economic interdependence among East Asian countries. For example, as Table
2 shows, the Northeast Asian economies are now quite dependent on trade relations with
their immediate neighbors, while for the United States and Russia intra-regional tradeaccounts for much less of their global trade.

Table 2. Northeast Asian Countries’ Intra-regional Trade as % of Their
Global Trade, 2005 (%)
China

57.52

Japan

61.98

TaiwanSouth Korea

North Korea
Mongolia
Russia
USA

60.50
55.47
70.80
44.16
11.96
18.44

Source: Calculated from data in International Monetary Fund, Direction of Trade Statistics Yearbook,

2006.

Liberals see an East Asia community emerging, driven mostly by market forces and aided –not led – by political considerations to further deepen the already visible economic

interdependence in the region. They welcome the integrative dynamic of trade and othereconomic factors. Whether through bilateral FTAs/EPAs or through multilateral tradeliberalization schemes, liberals look favorably upon them and explore the most effective

and the most efficient market-opening measures. Liberals also are increasingly attentive tothe transnational social-cultural forces in the region. They are increasingly interested in
the integrative impact of labor migration, educational and cultural exchanges, scientificcooperation, and myriad other social transactions that take place across national borders.

However, they would be concerned if the United States’ relative weight in the region should
continue to diminish as it might foreshadow the weakening of U.S.-led democracy

promotion in East Asia. They would be particularly troubled by a rollback on human rights
promotion in the region if China’s economic growth expanded its political influence.

From the constructivist perspective, there are many reasons why East Asian power elites
have not developed a transnational identity or regional institutions to promote such

identity. History and culture are fundamental to the identity formation among the elites ofEast Asian countries and both the historical background and the cultural values of thepeoples in the region tend to accentuate political divisions and cultural separatenessbetween them. Political, social, and educational elites cling to the memory of theimperialism, colonialism, war, and conflict that characterized their experience in the 19th

century through the middle of the 20th century. Diminution of nationalism based on

selective memory that is often antagonistic or exclusivist toward others in the region

would need to give way to transnational identity formation and development of a regional

community. ASEAN leaders have proclaimed their commitment to the development of sucha community. By contrast, there is little prospect of such commitment emerging among thepolitical elites of the Northeast Asian countries. Hence, the Southeast Asia-led pattern ofregional integration is likely to continue into the foreseeable future, limiting the prospectsof broader regional integration embracing both Northeast and Southeast Asia or an AsiaPacific Community.
Conclusions

Realists offer a rather pessimistic prognosis of an East Asian community emerging in theforeseeable future. Liberals observe that market forces are deepening economic

interdependence among the regional countries and hope that, assisted with associatedtransnational social ties, such forces will bring about an integrated region. Constructivists
do not yet see the formation of common regional identity among the elites of East Asian

countries; instead, they hear in the region the echoes of national narratives that emphasize
the uniqueness and distinctiveness of their “imagined nations.”

If East Asian countries are to be integrated into a regional community along political,

economic, security, and social-cultural dimensions, then the theories we have reviewed

should provide an integrated answer to the question: Is regional integration in East Asia
both desirable and possible?

So far, no theoretical tradition has offered a solution to the need to bring coherence to thedisparate discussions of integration on the political, economic, security, and social-culturaldimensions of international relations in East Asia. Nor has any of the theoreticalperspectives shown how each aspect of regional integration can facilitate the integration inother respects. Of particular importance is how the deepening integration between the
East Asian markets can help remove the walls of nationally constituted communities,

nationally constructed identities, and nationally framed consciousness of the peoples East
Asia.

There are several “models” for moving forward the integration project in East Asia that are
based on the experience in other parts of the world although we should immediately

remind ourselves of the difficulty of transferring the historical experience of other regionsof the world to the contemporary East Asian region.

One model of regional integration is offered by NAFTA, the institutional mechanism forregional integration in North America. The hegemonic leadership and willingness of thepolitical elite in the United States to share their surplus of production, consumption(market), and protection (security) with Canada and Mexico defined the core premise ofregional integration in North America. However, NAFTA is designed to integrate the threemarkets through free trade, no more and no less. It is not aimed at bringing about socialcultural integration, much less development of a political or security community.

Another model of regional integration is the EU. After centuries of wars and broken peace
treaties, the European countries that have joined the EU have developed a security

community, in which there is no longer an expectation of war or preparation for war
among them. The devastating end of the Second World War firmly established theimperatives of regional security through economic integration leading to political

integration. Although the intellectual foresight of individual European leaders played acrucial role in translating theoretical understandings of regional integration into policy, we
should also recognize the importance of the fact that the European peoples have longshared a common civilizational space, with their leaders speaking a common language forinternational discourse. Nor should we ignore the critical role that the common security

interests between the European leaders and the U.S. leadership in the face of the Cold War

confrontation with the socialist world. European integration was in the strategic interest of
the global superpower United States, which assisted in the reconstruction of devastated
Europe and the building of regional institutions for European integration.

In postwar East Asia, we saw neither a security imperative for regional integration nor anhegemonic power willing and able to share its economic surplus with other regionalcountries. Quite the contrary was the case. In the immediate postwar period, the region

was divided between the U.S.-led capitalist camp and the Soviet-Chinese led socialist camp;

it was in the strategic interest of the United States to keep Japan (and South Korea) in its
ideological orbit and, to this end, Washington offered its surplus of power in protection,
production, and consumption with its allies, assisting in the reconstruction anddevelopment of their national economies. As a result, the political rapprochement between
Japan and both China and the Soviet Union was postponed until the 1950s and the 70s,

with full reconciliation over historical and territorial conflicts yet to take place to this day.
Today, the historical animosities have been further exacerbated by the competitive urges
and mutual suspicion that characterize their relations over the future regional security
architecture, leadership in regional community building, and political and security
relations with the United States.

ASEAN offers yet another model for regional integration. Through informal, incremental,
and consensus-based “ASEAN way,” the members of the regional grouping are about toestablish a free-trade area, committed further to building a regional community alongsocial, political, and security dimensions. However, all Southeast Asian countries are

jealously protective of their sovereignty and their weak political leaderships remain wearyof both internal ethnic and regional animosities and big-power rivalry for regional

influence between China, Japan, and the United States, with India an additional factor of

growing importance in the region. Moreover, the regional economies have been beset bydeeply disturbing consequences of regional and global financial/economic crises.

Table 3 summarizes the models briefly described above, indicating the presence or absenceof the key integrative rationale and conditions.
Table 3. Regional Integration Models

Hegemonic Security
powerimperative

CommonEurope(+)++

Southeast Asia

-

+

+

RegionIntegrative rationale and conditions

North America
Northeast Asia+-

Notes: + = present; - = absent; (+) present in the background+-civilization+-

Northeast Asia lacks the integrative rationale and forces that have facilitated theintegration processes in Europe, North America, and Southeast Asia. If Northeast Asia is tointegrate itself as a genuine region, either it will need a hegemonic power, a security

imperative, and/or a common civilization, or it must develop an integration process that isquite different from the models offered by other regions of the world.

With China, Japan, and the United States vying for regional influence, none of thesecountries is likely to assume a hegemonic position in the foreseeable future, absent one or

the other of two undesirable scenarios, a devastating domestic turmoil in China threatening
the central control of the nation and a major conflagration between China and the UnitedStates over Taiwan, the Korean peninsula, and/or Southeast Asian sealanes.

A security imperative that would compel China, Japan, and Korea to form an integrated

regional community is unthinkable. All three possible Sino-U.S. conflict scenarios would
further consolidate the U.S.-Japan alliance, pitting them against China.

A common civilization space in Northeast Asia is a long-past historical reality. With Japanembedded in the Western civilization with Asian cultural elements and Russia evolving as aunique Eurasian-orthodox civilization, Northeast Asia is unlikely to be home to one
common civilization.

In conclusion, Northeast Asian regional integration would require an unprecedented

rationale and a very unique combination of conditions. It would have to be a creative,
aggressive, and collective project of unforeseen character.

Contents• Regional Integration

Regional Integration: Theoreticaland Normative Implications for East
Asia
Tsuneo Akaha
Monterey Institute of International
Studies

Integration• “Integration” defined• Constituent units• Political integration and political community• Economic integration and economic
community• Security integration and security community• Social-cultural integration and social-culturalcommunity– Integration– Regional Integration• Theoretical Perspectives on Regional Integration– Realism and Its Variants– Liberalism and Its Variants– Constructivism• Normative/Policy Implications– Realism and Its Variants– Liberalism and Its Variants– Constructivism• Regional Integration in East Asia: Competing Interpretations• Conclusions

Theoretical Perspectives on Regional
Integration:
Realism and Its Variants• Classic realism: sovereign nations, power, national interests,
rivalry, balance of power; national interests dictate scopeand depth of regional integration• Structural realism: structural constraints on the interestsand behaviors of sovereign nations; national interests
within structural constraints dictate scope and depth ofregional integration• Neorealism: domestic forces may form “winning coalition”
for or against regional integration; international forces may
facilitate or frustrate domestic winning coalition’s
promotion or opposition to regional integration

Theoretical Perspectives on Regional
Integration:
Liberalism and Its Variants• Classic Liberalism: favors cooperation andregional integration• Neoliberalism: favors cooperation and regional
integration but recognizes structural constraints• Institutionalism: emphasizes the utility ofinternational institutions for facilitating regional
integration

Theoretical Perspectives on Regional
Integration: Constructivism• Sources and consequences of ideationalfoundations and manifestations of theconstitutive units of regional integration.

Conclusion• Your assumptions need critical scrutiny, or
they will lead you astray. Each theoreticalexplanation makes sense within its
framework; but if humanity is to be united as
a community, then the theories should
provide an integrated answer to the question:
Is regional integration in East Asia bothdesirable and possible?
• What is your answer?

August 2 (Mon)
Lecuture 2
Prof. Takashi Terada

Takashi Terada is Professor of International Relations at Organization for Asian Studies, Waseda
University. He received his Ph.D from Australian National University in 1999. Before taking up thecurrent position in April 2008, he was an assistant and associate professor at National University ofSingapore (1999-2006) and associate professor at Waseda University (2006-2008). His researchinterests include international relations in Asia-Pacific, empirical and theoretical studies onregionalism and regional integration, and Japanese politics and foreign policy.
His most recent works (written in English) include ‘The Origins of ASEAN+6 and Japan’s
Initiatives: China’s Rise and the Agent-Structure Analysis," The Pacific Review, 23(1) 2010;"Competitive Regionalism in Southeast Asia and Beyond: Role of Singapore and ASEAN's," Mireya
Solis, Barbara Stallings, and Saori N. Katada (eds.), Competitive Regionalism: FTA Diffusion in the
Pacific Rim, (Palgrave Macmillan, 2009); "Japan and Evolution of Asian Regionalism: Responsible
for Three Normative Transformations," in Dieter, Heribert (ed.) The Evolution of Asian Regionalism:
Economic and Security Issues (Routledge 2008), and Asia-pacific Economic Co-operation: Critical
Perspectives on the World Economy, 5 Volumes, (Routledge 2007), co-edited with Peter Drysdale.
His books written in Japanese include East Asian Regionalism (Tokyo University Press, 2010) andHow to Analyze Asina Political Economy (editor, Kobundo, 2010). He is the recipient of the 2005
J.G. Crawford Award.

Talking Points

Patterning Asian Regional Architecture: Power, Interest and Institution-Building
Takashi Terada (Waseda University)
With the inauguration of the East Asian Summit (EAS) in 2005, a tangle of regional
institutions competes for attention and resources, and as long as the 16-nation
ASEAN+6 framework continues to coexist with the 13-nation ASEAN+3 (APT) and the
21-member Asia Pacific Economic Cooperation (APEC) frameworks, the argument as towhy the various regional institutions have emerged and co-existed in Asia. This lecture
analyses the phonological order of the regional-institution building as a key clue to thispuzzle. Three institutions were actually formed in the following order: an old APEC
based on open regionalism in 1989, ASEAN+3 in 1997, ASEAN+6 in 2005 and a new
APEC which aims to promote closed integration in 2006. The order of institutionbuilding is important from the perspectives of power and interest, which helps identify
an intrinsic pattern surrounding regional institution-building in Asia. Influential major
powers tend to judge that the functions and norms of an existing regional institution do
not accord with their own interests, and work to build an institution based on a new
regional concept and purpose which they hope to promote. This lecture demonstrates
this pattern by demonstrating the actions and interests of major powers such as theUnited States, China and Japan, conducive to the establishment of three institutions withthe distinctive regional concepts, Asia-Pacific, East Asia and expanded East Asia.
Finally, the trilateral cooperation in Northeast Asia, developed by China, Japan and
Korea, will be illustrated as an anomaly of this pattern.

Patterning Asian Regional Architecture:
Power, Interest and Institution-Building
Takashi Terada
Organization for Asian Studies
Waseda University
GIARI Summer Institute2 August 2010

APEC (21)India

EAS (16)Australia
New Zealand
ASEAN+3 (13)
Japan
China
Korea

Cambodia
Laos
Myanmar

ASEAN (10)Indonesia, Malaysia
Singapore, Brunei
Philippines, Thailand
VietnamUS
CanadaMexicoPeru
ChileHong Kong
TaiwanPNG
RussiaMultilayered Regional Architecture in Asia

Question
Why have several regional institutions come toemerge and co-existed in Asia?
ApproachExamining factors behind the order of theestablishments:
old APEC (1989) → ASEAN+3 (1997) →ASEAN+6 (2005) → new APEC (2006)
Basic hypothesis (modified analytical eclecticism)
A powerful state judges that the functions or
norms of an existing regional institution do
not accord with its own interests, and thencommit itself to another institution which
would serve its own interests better.

1) Old APEC to ASEAN+3 (powerful states:
Japan and China)*APEC: failing to promote trade/investment
liberalisation and cope with Asian financial
crisis, as well as more engaged in security
agendas such as counter terrorism (Japan and
China’s commitment to helping ASEAN towhich US paid little attention in financial crisis).
*ASEAN+3: CMI and region-wide integration as
major areas of functional cooperation in which
APEC was not seen as serving to perform
effectively
The US: benign neglect2) ASEAN+3 to EAS (Japan and the US)*ASEAN+3: Anxiety about China’s growing
power that might dominate the decisionmaking process (most of the members weredeveloping countries and thus tended tosupport China’s viewpoints and agendas).

3) ASEAN+3 and +6 to new APEC (the US)
1) Japan, as its key ally, proposed the ASEAN+6
integration (CEPEA) that excludes the US.
2) China enjoyed the credit through its effort topromote “low quality” FTAs in Southeast Asia.
→ putting US businesses, which would not benefit
from the abolition of tariffs, at a disadvantage in
relation to East Asian businesses in market
competition.

*EAS: stressing the importance of ‘common
values’ shared with the US and Japan, such as
democracy or human rights, and Australia, NZ
and India as those ‘East Asian’ states wereadded to “+3”.

The US has tried to utilize FTAAP to take asymbolic action to change the discourse, orchange the expectation of where the regional
trade politics would be headed in the future.

• The US and TPP
Given +3 and +6 FTAs are yet to commence, theAmerican interest in FTAAP through TPP as adirect way of the challenge to East Asian
integration may make it difficult for Japan tovigorously promote ASEAN+6 FTA, to a lesser
extent for China’s ASEAN+3 FTA as well, sincesome key APEC members have developed aninterest in FTAAP through their initial
participation in TPP.
Japan’s New Growth Strategy (endorsed by the
Cabinet on 18 June 2010): the promotion of
FTAAP, but no mention about TPP.

5) Further development of ASEAN+6 (the US)
US engagement in East Asian regionalism→ sustaining ‘ASEAN Centrality’ claim.
a) Singing of ASEAN’s TAC (July.09): meeting
three conditions for the EAS participation.
b) Obama’s Tokyo (Nov.09) and Clinton’s
Honolulu (Jan.10) speeches: declaring its interest
in officially engaging (not joining) in EAS+2c) US-ASEAN Summit (Nov.09): first kind of
meeting the US President joined, including thefirst encounter with a Myanmar leader by a US
President in four decades (the attitude became
harsher recently due to the links with N. Korea).

7) How can the NEA regionalism be fit into theanalytical framework?
Three nations have been frustrated with the norms
or functional interests within +3 and +6
frameworks or not; perhaps not. Yet,1) the political instability in Southeast Asia, which
has delayed the development of East Asian
cooperation, is their common concern.
2) Japan and Korea have a shared interest in amore efficient trade/investment mechanism topressure China to deal with ‘the behind theborder’ issues due to the growing
independence: the ASEAN way functions little.
3) The smallest number: theoretically easiest toagree.

4) Further Development of ASEAN+3 (China andJapan)
May 2009, ASEAN+3 Finance Ministers’ meeting
saw the agreement :a) to expand the fund of the Chiang Mai
Initiative (CMI) to US$120 billion (China,
Japan and Korea: 80% contribution)b) to establish financial surveillance, andmonitoring systems (AMRO in S’pore),
independent from IMF and ASEAN.
c) to multilateralise bilateral swap
arrangements (CMIM: one time decision
with more substantial funds available).

6) Trilateral Cooperation in Northeast Asia
The relations among Japan, China and Korea havebeen improving, conducive to the establishmentof Trilateral Summit, possibly leading to morefunctional cooperation including investment
treaty or FTA in Northeast Asia with the 2011
establishment of the Secretariat in S. Korea.
Development of trans-governmental and intra
governmental networks: more ministerial andsenior officials’ meetings in finance, foreign
affairs, economy and trade, environment, healthor culture in Northeast Asia.

References

Takashi Terada, "Directional leadership in institutionbuilding: Japan’s approaches to ASEAN in theestablishment of PECC and APEC," The Pacic Review, Vol. 14, No. 2, 2001, pp.195–220.

Takashi Terada, "Constructing an ‘East Asian’ concept and growing regional identity: from EAEC
to ASEAN+3," The Pacific Review, Vol. 16, No. 2, 2003, p.251–277.

Takashi Terada, "The origins of ASEAN+6 and Japan's initiatives: China's rise and theagentstructure analysis," The Pacific Review, Vol. 23, No. 1, 2010, pp.71 – 92.

August 3 (Tue)
Lecuture 1
Dr. Giovanni Capannelli

Giovanni Capannelli graduated in international economics from Bocconi University, Milan, andobtained his Master and Doctorate degrees from Hitotsubashi University, Tokyo, specializing in
Asian economic development and regional integration.
He lived in Japan for nine years, lecturing in local universities and working at the Tokyo Delegationof the Bank of Italy. He later served at the Asia-Europe Institute of the University of Malaya, Kuala
Lumpur, as professor of economics and regional integration. Dr. Capannelli currently works in the
Office of Regional Economic Integration of the Asian Development Bank, Manila, Philippines
where he is serving as task manager of a study on 'Institutions for Regionalism'. He is also a lecturer
at the Ateneo de Manila University on the political economy of Asia-Europe relations.

Talking Points (Capannelli)Asia’s Economic Integration: Trends and Prospects for Cooperation
1. Trend of Asia’s economic integration
a. Characteristics of Asian economic regionalism
b. Pillars of economic integration and cooperation in Asiac. Growing trade integrationd. Final demand of Asian exports: still dependent from the world
e. Financial integration: low but increasingf. Deepening macroeconomic interdependence
g. Managing foreign reserves: new challenges ahead
h. Benefits of integration outweigh its costs
2. Institutions for Integration: Toward an Asian Economic Communitya. Growing Asia’s free trade areas
b. Developments in regional financial integrationc. Asia’s institutional landscaped. Stocktaking of existing institutions for integratione. Asian economic community: a long-term goal
f. Need to consolidate existing institutions
g. Needed reforms in ASEAN and SAARC
h. Creating an ASEAN Economic Community
i. The Multilateralizaion of the Chiang Mai Initiative
j. Rationale for creating new regional institutions

Bibliographic References

Asian Development Bank. 2008. Emerging Asian Regionalism. A Partnership for Shared
Prosperity. Manila.
Asian Development Bank. (Forthcoming). Institutions for Integration. Toward and Asian
Economic Community. Manila.

Table 1. Basic Economic Indicators by Regions and Subregion
Population
2008 (million)

Gross domestic product (GDP)
Average$ billion (2008)
growth rate(1980–2008)

Per capita GDP
Average$ (2008)
growth rate
(1981–2008)

Asia and the Pacific

3,790.8

14,089.8

4.5

3,716.9

2.4

East Asia
Northeast Asia
Southeast Asia
Central Asia
South Asia
The Pacific
Oceania
European Union
North AmericaWorld2,119.3
1,536.6
582.7
76.1
1,585.9
9.5
25.9
496.2
444.0
6,660.2

12,282.0
10,779.2
1,502.7
271.1
1,521.7
15.1
1,141.9
18,387.8
17,029.1
60,917.5

4.4
4.3
5.5
4.5
5.8
3.0
3.2
2.2
2.9
3.4

5,795.3
7,015.0
2,579.0
3,562.6
959.5
1,589.6
44,053.6
37,059.8
38,322.9
9,146.4

2.7
2.8
3.5
3.6
3.7
0.1
1.8
1.8
1.7
1.2

Notes: The list of countries in each subregion is shown in Figure 2.1. The European Union refers to the aggregate of the 27 EU member countries. North America
includes Canada, Mexico, and the United States. Regional GDP growth rates are derived using gross national income values weighted using the Atlas Method. Per
capita GDP growth rates are computed using GDP in 2000 $ prices
Source: Key Indicators 2009, Asian Development Bank; World Economic Outlook Database (October 2009), International Monetary Fund and World Development
Indicators (WDI) Database, World Bank. Available at http://www.adb.org/Documents/Books/Key_Indicators/2009/default.asp; http://www.imf.org andhttp://www.worldbank.org, respectively. (Accessed on February 2010).

Table A2.1. Asia and Pacific: Basic Economic Indicators 2008
Population(million)

Gross domestic product (GDP)GDP per capita

Average
growth rate(1980–2008)

Average
growth rate
(1981–
2008)$ billion

at PPP($ billion)$

at PPP ($)

Asia and the Pacific

3,790.8

14,089.8

4.5

21,965.3

3,716.9

2.6

5,794.6

East Asia

2,119.3

12,282.0

4.2

17,424.7

5,795.3

2.7

8,221.9

Northeast Asia

1,536.6

10,779.2

4.3

14,656.2

7,015.0

2.8

9,538.1

China, People's Rep. of

1,327.7

4,327.4

9.9

7,926.5

3,259.5

8.8

5,970.3

7.0

215.4

5.3

307.3

30,725.4

3.9

43,846.2

Japan

127.7

4,910.7

2.5

4,356.3

38,457.3

1.9

34,115.8

Korea, Republic of

48.6

929.1

6.3

1,344.5

19,136.3

5.7

27,692.1

Mongolia

2.7

5.2

4.2

9.4

1,975.5

2.0

3,547.1

Taipei,China

23.0

391.4

6.2

712.1

16,987.9

5.2

30,911.9

Southeast Asia

582.7

1,502.7

5.5

2,768.5

2,579.0

3.5

4,751.2

Brunei Darussalam

0.4

14.6

0.2

19.7

37,030.5-1.8

50,167.9

Cambodia

13.7

11.3

8.2

28.5

823.1

4.7

2,082.3

Indonesia

228.6

511.8

5.1

909.7

2,238.9

3.7

3,980.0

Lao PDR

6.3

5.4

6.4

13.3

858.9

3.7

2,127.2

Malaysia

27.3

221.6

6.2

384.4

8,118.3

3.6

14,081.7

Myanmar

58.8

26.2

6.5

68.0

445.7

4.3

1,155.9

Philippines

90.5

166.9

3.2

318.0

1,845.2

0.8

3,515.1

Singapore

4.7

181.9

6.9

239.1

38,975.8

4.3

51,230.9

Thailand

66.4

273.3

5.8

547.1

4,116.3

4.5

8,239.1

Viet Nam

86.2

89.8

6.6

240.8

1,042.4

5.2

2,793.8

Hong Kong, China

Population(million)

Gross domestic product (GDP)GDP per capita

Average
growth rate(1980–2008)

Average
growth rate
(1981–
2008)$ billion

at PPP($ billion)$

at PPP ($)

Central Asia

76.1

271.1

4.5

419.5

3,562.6

3.2

5,513.1

Armenia

3.2

11.9

7.4

18.7

3,684.9

8.3

5,792.5

Azerbaijan

8.7

46.4

6.5

74.9

5,349.3

6.4

8,633.9

Georgia

4.4

12.9

6.6

21.4

2,923.6

7.7

4,869.1

Kazakhstan

15.6

135.6

3.6

177.8

8,718.6

4.1

11,434.1

Kyrgyz Republic

5.3

5.1

1.7

11.6

950.9

0.5

2,184.9

Tajikistan

6.5

5.1

2.4

13.1

795.1

0.4

2,022.6

Turkmenistan

5.3

26.2

6.5

30.3

4,972.7

4.7

5,756.7

Uzbekistan

27.2

27.9

3.8

71.6

1,026.8

2.4

2,633.98

South Asia

1,585.9

1,521.7

5.8

4,096.8

959.5

3.7

2,583.3

Afghanistan

28.1

11.7

10.6

21.4

416.1

5.3

760.1

Bangladesh

161.7

84.2

4.6

226.2

520.5

2.5

1,398.5

Bhutan

0.7

1.4

7.9

3.5

2,114.2

6.8

5,312.0India

1,186.3

1,206.7

6.0

3,297.8

1,017.2

4.1

2,779.9

Maldives

0.3

1.3

7.9

1.7

3,655.1

4.8

4,965.2

Nepal

27.6

12.3

3.9

31.6

444.3

2.3

1,144.4

Pakistan

161.0

164.6

5.1

422.4

1,022.3

2.7

2,624.0

Sri Lanka

20.1

39.6

4.9

92.2

1,971.8

3.6

4,588.9

Population(million)

Gross domestic product (GDP)GDP per capita

Average
growth rate(1980–2008)

Average
growth rate
(1981–
2008)$ billion

at PPP($ billion)$

at PPP ($)

The Pacific

9.5

15.1

3.1

24.4

1,589.6

0.0

2,596.3

Cook Islands

0.0

0.2

3.5

…

9,776.3

3.0…

Fed. States of Micronesia

0.1

0.2

0.8

0.3

2,221.8-0.3

4,385.2

Fiji Islands

0.9

3.6

3.2

3.7

4,092.4

0.6

6,090.0

Kiribati

0.1

0.1

0.8

0.6

1,370.0

1.0…

Marshall Islands

0.1

0.2

3.1

…

2,654.7

0.7

2,830.3

Nauru

0.0

0.0

-8.6

…

2,563.6

-5.0

…

Palau

0.0

0.2

1.2

…

8,952.2-0.4…

Papua New Guinea

6.2

8.1

2.9

13.1

1,306.0

0.1

2,108.5

Samoa

0.2

0.5

2.4

1.1

2,604.2

1.2

5,666.7

Solomon Islands

0.5

0.6

2.4

1.5

1,227.5

1.5

2,915.9

Timor-Leste

1.1

0.5

4.4

2.5

468.5

-0.1

2,333.0

Tonga

0.1

0.3

4.9

0.6

2,504.9

1.6

5,378.6

Tuvalu

0.0

0.0

2.1

…

2,920.9

1.6…

Vanuatu

0.2

0.6

3.2

1.0

2,438.3

1.0

4,246.8

Oceania25.9

1,141.9

3.2

914.9

44,053.6

1.8

35,295.6

Australia

21.6

1,013.5

3.3

799.1

46,824.1

1.9

36,918.0

New Zealand

4.3

128.4

2.5

115.8

European Union
North America

496.2
444.0

18,387.8
17,029.1

2.2
2.9

15,262.8
17,292.4

30,030.2
37,059.8
38,322.9

1.3
1.8
1.7

27,083.5
30,761.6
38,915.4

World6,660.2

60,917.5

3.4

69,489.9

9,146.4

1.2

10,433.5

Notes: Regional growth rates are derived using GNI Atlas Method as weights. PPP is purchasing power parity.
Average per capita growth rate are in constant 2000 $ prices.
Regional average GDP growth rate and per capita GDP growth does not include Cook Islands; Marshall Islands; Fed. States of Micronesia; Nauru; Palau; Papua New Guinea; andTuvalu for the Pacific region.
Asia and the Pacific includes East Asia, Central Asia, South Asia, and the Pacific.
East Asia includes Northeast Asia and Southeast Asia.
ASEAN = Association of Southeast Asian Nations, includes the ten Southeast Asia economies.
European Union refers to the 27 member countries of the European Union.
North America includes Canada, Mexico and United States of America.
Source: Key Indicators 2009, Asian Development Bank; World Economic Outlook Database (October 2009), International Monetary Fund and World Development Indicators(WDI) Database, World Bank.

Table 3. Multilateralization of the Chiang Mai Initiative
Financial
Contributions

Borrowingarrangements

Members

China
PRC
Hong Kong, China
Japan
Republic of Korea
Plus-three Countries
Brunei Darussalam
Cambodia
Indonesia
Lao PDR
Malaysia
MyanmarPhilippines
Singapore
Thailand
Viet NamASEAN
ASEAN+3$ billion% share multiplier

38.40
34.20
4.20
38.40
19.20
96.00

32.00
28.50
3.50
32.00
16.00
80.00

0.03
0.03
0.12
0.10
4.55
3.79
0.03
0.03
4.55
3.79
0.06
0.05
4.55
3.79
4.55
3.79
4.55
3.79
1.00
0.83
24.00 20.00
120.00 100.00

quota($ billion)

Voting Power
No. of No. of votes
basic
based onvotes contributions

Total
no.
votes

% share

28.41
25.43
2.98
28.41
14.77
71.59
1.16
1.22
4.37
1.16
4.37
1.18
4.37
4.37
4.37
1.85
28.41
100.00

0.50
2.50
0.50
1.00

17.10
10.50
19.20
19.20

1.60
0.00
1.60
1.60
4.80

34.20
4.20
38.40
19.20
96.00

40.00
35.80
4.20
40.00
20.80
100.80

5.00
5.00
2.50
5.00
2.50
5.00
2.50
2.50
2.50
5.00

0.20
0.60
11.36
0.20
11.36
0.30
11.36
11.36
11.36
5.00

1.60
1.60
1.60
1.60
1.60
1.60
1.60
1.60
1.60
1.60
16.00
20.80

0.03
0.12
4.55
0.03
4.55
0.06
4.55
4.55
4.55
1.00
24.00
120.00

1.63
1.72
6.15
1.63
6.15
1.66
6.15
6.15
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140.80Asia’s Economic Integration:
Trends and Prospects for Cooperation1
Giovanni Capannelli

1. Introduction
The center of gravity of the global economy is shifting to Asia. Asia’s gross domestic
product (GDP) is already similar in size to those of Europe and North America, and its
influence on the world continues to increase. In many Asian economies, the cycle ofpoverty has been broken; in others, this historic aim is within sight. Asia’s extraordinary
success has brought new challenges: while rapid economic growth remains a priority,
citizens demand that it also be sustainable and more inclusive. And Asia is now soimportant to the world economy that it must also play a larger role in global economic
leadership. Regional economic cooperation, a relatively new dimension of Asiandevelopment, will be essential for addressing all of these challenges.
East Asian economies are principally connected through markets—through trade,financial flows, direct investment, and other forms of economic and social exchange. But
where markets lead, governments are following. Asian leaders have committed to work
together more closely and have already taken concrete steps in some areas. The 1997/98
financial crisis, 2 in particular, was an important catalyst for this emerging regionalism
and gave rise to a range of new initiatives and institutions. Asian regionalism has notsought to replicate the European Union (EU), but has rather focused on finding new andflexible forms of cooperation that reflect the region’s diversity and pragmatism. It aims tobuild on the region’s remarkable achievements to address the daunting challenges it still
faces.
The stakes could not be higher. A dynamic and outward-looking Asian regionalism
could bring huge benefits to Asia and to the world. Whereas a volatile and fractious
Asian economy could play a corrosive role both regionally and globally, a vibrant andintegrated one could boost productivity and competitiveness, raising living standards in
Asia and around the world. A cohesive and productive Asia would help to stabilize andpower the world economy, and is thus in everyone’s interest. In short, emerging Asian
regionalism could develop into a partnership that advances regional and global prosperity.

2. Asian Regionalism: Context and Scope
Until recently, Asia’s development path involved sequential—and sometimes
competing—ties to markets outside the region, and did not yield strong economic links
1

The following text draws from the Highlights of the ADB study on “Emerging Asian Regionalism: A partnership for
Shared Prosperity”. ADB, 2008. Manila.
2
The crisis started on 2 July 1997. Its duration varied between places, but was generally 1–2 years.

within Asia itself. This has changed—while the region’s economic policies remain
predominantly nondiscriminatory and outward-oriented, Asia’s economies have grownlarge and prosperous enough to have become very important to each other. Their tradeand financial transactions are deeper, their macroeconomic links are stronger, theirpeople have more contact with each other, and their governments are experimenting withnew forms of cooperation.
The step from interdependence to regionalism—from market-led to policy-led
integration—is neither automatic nor self-evident. With reasonable access to global
markets, Asian economies have made exceptional progress individually. They have also
developed strong regional ties with relatively few formal agreements. But just as regional
integration generates new commercial opportunities, it also creates new demands forintergovernmental cooperation and institutional development.

a. The logic of regional collective action
The economics of regionalism has a complex and troubled history. In the 1930s,
shrinking international trade led to the emergence of preferential trading blocs, whichfurther damaged the global trading system and accelerated the downward spiral of
economic activity. This experience was foremost in the mind of the architects of the
postwar global economic system as they adopted the principle of nondiscrimination as acentral pillar of the General Agreement on Tariffs and Trade (GATT), the forerunner ofthe World Trade Organization (WTO). The case for Asian regionalism must be consistent
with WTO principles: a “fortress Asia” is no more desirable than a fortress Europe or afortress North America would be. But the open, outward-oriented regionalism that is
emerging in Asia today need not pose such a threat. Much of the evidence assembled inthis report suggests that Asia has—and will continue to have—a fundamental stake inboth regional and global integration.
The case for collective action arises from market failures that would reduce economic
welfare in the absence of official measures. The case for regional collective action is still
more specific: it addresses the problems that are inherently regional or that, for otherreasons, cannot be solved at the global or national level. Economic theory argues for suchaction in the presence of regional cross-border externalities and spillovers, and whenpolicies need to be coordinated to deliver joint public goods. In line with theserequirements, Asia’s regional initiatives should focus on the following importantpriorities:•

providing new regional public goods, such as mechanisms to head off epidemics;
resources to address financial crises; and rules to enable countries to integrate
financial, goods, and services markets;•managing spillovers among economies resulting from closer macroeconomic
relations, greater capital and labor flows, and environmental degradation;

•

exercising Asia’s influence in global economic forums to help sustain open andcompetitive global markets;•

liberalizing trade and investment beyond levels achievable through global
negotiations; and•adding value to national policy making, notably by sharing “best practices” andhighlighting priorities that may be opposed by domestic special interests—such asmeasures to enhance competition and regulatory oversight, reduce poverty andinequality, and control environmental externalities.

Regionalism can be a powerful tool for coping with the consequences ofinterdependence in trade and investment, finance, macroeconomic links, and social andenvironmental issues. Asia’s links are deepening in each of these areas, and new
institutions are emerging or will be needed to manage its cooperative efforts.

b. Watershed: the financial crisis of 1997/98
Asian economic cooperation has been discussed for some time—for example, in 1990,
Malaysian Prime Minister Mahathir Mohammed proposed the establishment of the “EastAsian Economic Group,” which did not gain traction until the financial crisis of 1997/98(for brevity, referred to subsequently as the “crisis”). The crisis was a watershed: it
sharply focused the region’s attention on its interdependence and shared interests. It also
exposed weaknesses in the global financial architecture and led to new regional initiatives.
The crisis began on 2 July 1997, when Thailand abandoned a short but costly defenseof the baht against speculative attack. The attacks quickly spread to Indonesia, Malaysia,
and the Philippines. Later they spread to Hong Kong, China; the Republic of Korea; andTaipei,China. Although the People’s Republic of China (PRC) and Hong Kong, China
also came under pressure, they did not allow their currencies to float or devalue. The
crisis was short: most currencies had bottomed out by January 1998, and nearly all East
Asian economies were expanding again by 1999. But it was also severe: in many
countries it also involved a serious banking crisis, the collapse of credit markets, anddeep recession. Scars remain: poverty rates rose sharply in affected countries and, in most,investment and growth have yet to regain precrisis levels.
A decade later, debate continues on whether the crisis was triggered by macro- or
micro-economic fundamentals, or simply too many investors “rushing for the exit”(Radelet et al. 1998). Its suddenness, rapid geographic spread, and brevity suggest that
financial panic was an important—perhaps a dominant—cause. But as with mostcomplex economic phenomena, the crisis probably had multiple causes (World Bank
1998). Stronger macroeconomic policies and financial systems in the affected economies
might have prevented it; more decisive and appropriate action by the international
financial community could have limited its damage (Ito 2007); and, had an Asianregional financing facility existed, it might have provided more timely and better-tailoredsupport.
Yet the crisis did have a silver lining: most Asian economies—including those notdirectly affected—used it as an opportunity to undertake systemic reform. Domestically,
they restructured and strengthened their financial systems; regionally, they establishedmechanisms for cooperation and emergency financing. The lessons of the crisis are
examined in the main study; two conclusions stand out. First, rapid development creates
structural tensions, such as the lagging development of Asia’s financial sector, that aremasked by strong growth. Economic development requires the parallel development ofsound institutions and good governance, but this does not happen automatically. Second,
Asian economies have deeper connections, more significant spillovers, and (hence) alarger stake in each other’s stability than previously understood. Asia requires
cooperative mechanisms to minimize the risks of crises and to contain and manage thosethat arise. Both conclusions argue for enhanced regional cooperation.

c. Deepening economic interdependence
The crisis highlighted financial links, but regional interdependence is best understoodas a complex, multidimensional process that encompasses several spheres of economic
activity, social contacts, and strands of official collaboration. The most common measureof regional integration—the share of a region’s total trade conducted within it—has risen
in Asia from about a fifth in the aftermath of World War II to a third or so in the 1980s,
and to over half in recent years. Asia is now broadly as interdependent in trade as the EU
and North America are. Indeed, Asia now trades more with itself than either the EU or
North America did at the outset of their integration efforts.
A broader measure should incorporate other channels of integration, such as direct
investment, financial and macroeconomic links, and personal contacts. To this end, dataon six indicators of Asian economic integration were collected for integrating Asian
economies before and after the 1997/98 crisis. These need to be interpreted cautiously—some indicators are only proxies of economic links, and several indicators measure trends
and correlations, which do not necessarily reflect causation—but it is striking that all six
indicators have increased in recent years.
Regional integration is not an inevitable outcome of economic development. Most
rapidly developing economies—especially large or highly specialized ones—require, andusually develop, strong global connections. Yet the network-based production systems
that have emerged in recent years, as well as the investment and labor flows associatedwith them have increased the relative importance of regional relationships in Asia andelsewhere. Thus, while the large economies of the PRC, Japan, and the Republic of Korea
remain strongly connected to the global economy, their regional links have also
intensified. To some extent, these and other advanced economies act as the region’s
conduits to global markets. India is at an earlier stage of integration, but its regional
connections are also growing very rapidly.

d. Asia in 2020
Prediction is always hazardous, but there is good reason to expect Asia to have abright economic future. 3
Even if growth in the PRC and India slows somewhat, Asia’s share of world output islikely to expand from 28% in 2005 to 35% in 2020 in purchasing power parity (PPP)
terms. By then, Asia’s GDP is set to be more than 50% larger than the EU’s or North
America’s. The PRC would account for much of this gain: its share of world output is
expected to rise from 10% to 15%. Asia’s average per capita income would rise fromabout $3,000 in 2005 to about $5,000 (in 2005 dollars) in 2020, a level roughly
equivalent to Malaysia’s today. Per capita incomes would more than double in somecountries, including the PRC. At market prices, these increases are less dramatic but still
very substantial. Most importantly, the projections suggest that Asia’s regional links arelikely to intensify further: on the demand side, the region’s spending power is set tooutstrip growth in the rest of the world; on the supply side, its production capabilities arelikely to continue to expand and diversify.
At the heart of these projections is the continued dynamism of the PRC and India,
which together account for two fifths of the world’s population. The PRC’s economic
growth has averaged nearly 10% a year during the past 20 years; India’s has reached 6%,
and has exceeded 8% in the past few years. These two giants have huge markets; lowcost, relatively well-educated labor forces; and are committed to market-based
development. They are large enough to enter a wide range of industries and build manysophisticated production clusters and networks simultaneously. As a result, they are
powerful magnets for investment and effective locomotives for other, linked economies.
The rise of the PRC and India is reshaping the economies of the region and the world.
They are formidable competitors in their areas of comparative advantage, and they offer
vast markets and highly attractive investment opportunities. Other Asian economies havelargely benefited from the rise of the PRC and India—although competition in certain
products and industries has taken its toll. The world has benefited too, but tensions haveemerged in the markets for Chinese and Indian exports. The two economies’ continued
growth will help drive productivity increases as well as world economic growth, but it
will require large adjustments—and is thus likely to generate continuing tensions as well
as opportunities. Managing these strains within Asia and globally is a central challenge of
Asian regional cooperation.

3

The long-term projections were prepared by Asian Development Bank staff in 2006 as background for strategic
analysis. They have been adjusted to take into account new purchasing power parity estimates (ADB 2007b). The
underlying growth rates lie within a fairly broad range of estimates recently published by private and public researchorganizations.

3. Integrating Production
Outward orientation, trade liberalization, and related reforms—in Asia and globally—
have helped to drive Asia’s remarkable economic rise. These forces have led to the rapid
expansion of intraregional trade; broadly, Asia trades as much with itself as Europe andNorth America do with themselves. And trade has not shifted from non-Asian to Asianpartners—rather, the growth and specialization patterns of Asian trade have resulted in
especially rapid growth in intraregional trade. And because Asia’s global connections
remain vital, the region needs to pursue global agreements as well as deeper regional
relationships.
Regional integration is now central to Asia’s comparative advantage in world trade.
By promoting further integration, innovation, and competition, the region can continue toconsolidate its leadership in global manufacturing. But to realize the full value of thisadvantage, Asia needs to maintain good access to global markets. To achieve the dual
objectives—regional integration and global access—Asia must play a key role in global
policy making, in particular, as an advocate of open global markets.
a. Expanding regional and global links
Nearly all Asian economies have internationalized—some dramatically so. Viet
Nam’s total exports and imports have soared from 24% of GDP in 1985 to 142% in 2006;
GDPs of the PRC and India each tripled over a similar period, as increased openness of
trade is associated with growth. Recent increases have particularly favored intraregional
trade. But trade has not been diverted from the rest of the world: on the contrary, tradewith each of Asia’s four main partner groups (the region itself, the EU, the US, and therest of the world) has increased in the last two decades—not just absolutely, but also
relative to Asia’s GDP. For example, Asia’s trade with the EU has more than doubled asa share of GDP, from 2.6% in 1986 to 6.0% in 2006. The increase is even larger as ashare of the EU’s GDP.
While intraregional trade is intensifying, external trade remains vital for Asian
economies. Indeed, the increase in the share of Asia’s exports destined for global markets
understates their importance. The complex structure of modern production networks blurs
the destination of exports: parts and components exported within Asia are often
incorporated into final goods shipped to North America and Europe. A detailed analysis
of Asia’s trade dependency reveals that the share of Asia’s total exports to Europe andNorth America increases substantially when parts and components incorporated into final
goods exports to those markets are also taken into account.

b. Production networks and Asian trade
Asia’s rapidly growing trade reflects the region’s dominant position in global
manufacturing, which is the result of a combination of low wages, increasingly educatedlabor forces, sophisticated technologies, high productivity growth, large markets, and(above all) the ability to bundle together diverse production advantages. Manufacturing—
especially in industries such as automobiles and electronics—is now often based on
breaking production chains into small steps, and producing each step in the most costefficient location. Firms may set up their own production facilities in various countries orthey may depend on transactions with other firms abroad. These transactions may also
include the outsourcing of business processes. The rise of such production networks—
often called “production fragmentation”—is a relatively recent trend, driven by new
information and communications technologies. 4 Such networks have been particularly
successful in Asia because of the region’s wide range of development levels, strong
intraregional links, and capacity for organizational and technological change.
The PRC is increasingly at the hub of such production networks, but all economies
participate. The manufacture of disk drives in Thailand offers a striking example: it spansnine Asian economies (with many parts coming from each), as well as suppliers from
Mexico and the US (Figure 4). Production networks have played a central role in themassive expansion of Asia’s intra-industry trade, especially in machinery parts andcomponents. While the share of parts and components in world manufactures trade grewby 3 percentage points between 1992 and 2003 (from 18% to 21%), it grew by 8
percentage points in Asia (from 19% to 27%). The PRC is the region’s largest trader ofparts and components, yet over three quarters of the trade involves other Asian
economies—including Malaysia; the Philippines; Singapore; and Taipei,China—four
economies where trade in parts and components is among the highest in the world as ashare of GDP.
The growth of production networks increases the urgency of the need for measures tofacilitate regional integration. Such networks require an attractive, predictable businessclimate as well as world-class transport and communications infrastructure. Most Asian
economies are fairly advanced in providing a climate conducive to doing business. For
example, most Asian economies have slashed tariff and other import barriers, both
unilaterally and through global agreements. Two economies—Hong Kong, China andSingapore—are essentially free traders; three—Japan, the Republic of Korea, andTaipei,China—are quite open except in agriculture. The PRC cut tariffs from 16% in
2001, prior to joining the WTO, to less than 10% in 2005. Tariffs in the Association ofSoutheast Asian Nations (ASEAN) have also fallen, and now average below 10% in all
sectors. Comprehensive measures of trade restrictiveness (Feridhanusetyawan 2005) offer
more guarded results, but confirm an overall liberal trend.
Yet there is also room for improvement in many countries. Trade is still often
impeded by border measures and incompatible domestic standards and regulations.
Further liberalization is vital, especially in agriculture. Liberalization could substantiallyexpand the ranks of people benefiting from regional trade, helping to reduce poverty as
well as income gaps, both within countries and among them. And spreading Asia’s own
best practices for conducting business could help make the region’s overall business
4

The theoretical and empirical literature on trade due to “fragmented production” is growing rapidly (see the main
study and Ando and Kimura [2005] and Athurkorala and Yamashita [2005]).

environment among the most competitive in the world. While many policies need to be
adopted nationally, due to Asia’s rapid integration, the region as a whole is now astakeholder in the policy environments of its individual economies.

c. Trade policy in a fractious global environment
Most Asian economies appear ready to undertake additional reforms and tradeliberalization—with willing partners. As of early 2008, the WTO’s Doha Development
Agenda negotiations remain deadlocked, and new or deeper regional and bilateralarrangements are emerging across the world. Until the ASEAN Free Trade Area (AFTA)
was established in 1992, Asia had not participated in any regional trade agreements, but
subregional and bilateral trade agreements have now taken hold in Asia as well. This
challenges the region’s traditional approach to trade policy based on unilateral and global
liberalization.
The number of Asian free trade agreements (FTAs) has expanded rapidly in recent
years, and nearly twice as many have been proposed or are being negotiated as have beenconcluded. The region’s FTAs are an eclectic mix—a large majority are with partners
outside the region. Accords involving developed countries such as Japan and the US
often have deep and formal structures, and many go well beyond the WTO’s sector
coverage. The Singapore-US FTA, for example, addresses issues ranging from
intellectual property rights and foreign investment to government procurement, ecommerce, technical barriers to trade, environment, labor, and several service sectors(Naya and Plummer 2005). In short, Asia’s inventory of trade agreements is extensive,varied, and growing.

d. Complementary regional and global strategies
Despite the proliferation of FTAs, Asia’s trade policies remain consistent with theregion’s global, outward-oriented strategy. Asia’s emerging regionalism is in large part
defensive—or “market restoring” (Menon 2007)—and responds to new or deeper
regional agreements in Europe, North America, and other important markets. Agreements
among Asian economies often include provisions beyond trade, such as the national
treatment of investment. Such agreements aim to remove domestic impediments totransactions and to create large markets and production platforms with economies ofscale to match those of the PRC and India. Such agreements are likely to increase market
efficiency and investment productivity.
But even though the region’s agreements generally respect their international context,
it would be far better to stitch together the tangled web of bilateral and subregional FTAs
into a broad, comprehensive, framework consistent with the WTO. Consolidation has
been discussed by ASEAN+3 and at the East Asian Summit (EAS, often also described
as ASEAN+6). An even broader “Free Trade Area of the Asia-Pacific” has been also
proposed in Asia-Pacific Economic Cooperation (APEC). Modeling results suggest thatwider arrangements bring larger gains and help to mitigate the problems associated with
the inconsistency of bilateral agreements. Asia would gain most from global free trade,roughly half as much from an ASEAN+3 or EAS arrangement, and much less from
uncoordinated bilateral agreements. Given the difficulty of achieving global free trade, aconsolidated FTA would yield substantial benefits and could also advance global
integration (Kawai and Wignaraja 2008).
The full integration of the region’s goods and services markets is thus a central
objective for Asian economic cooperation. It can be achieved with policies that do thefollowing:•

Support the open global trading system. Asia’s continued success depends onaccess to global markets, and an open, rules-based global system of trade andinvestment remains a high regional priority. By acting together, Asia could help
lead the world to a successful conclusion of the Doha round and strengthen the
WTO framework.

•

Pursue regional cooperation as widely and deeply as possible. Because global
negotiations are progressing slowly and opportunities for smaller groups toconclude deeper agreements exist, pursuing broad regional agreements is also in
Asia’s interest. The benefits of consolidating the region’s bilateral andsubregional FTAs into a single, region-wide arrangement would be substantial.

•

Develop guidelines for best practices in subregional trade agreements.
Independently negotiated trade agreements often involve incompatible rules oforigin and other inconsistent provisions. Narrow, partial agreements are also more
likely to harm excluded regional and global partners. To ensure that subregional
trade agreements recognize regional interests and are more easily consolidated,
they should be guided by regionally accepted best-practice principles. Suchagreements should also prioritize sectors, such as agriculture, that have beneficial
distributional effects.

•

Enhance regional connectivity. Building a regional economy requires world-classinfrastructure—transport, communications, and energy systems—to connect theregion’s economies, and in particular to connect the poorer economies andsubregions to the region’s economic centers.

4. Integrating Financial Markets
Decades of bank-dominated and highly regulated financial systems have left Asianfinancial markets relatively underdeveloped. The crisis also made the region wary of
opening capital markets. But while Asia is now making progress in strengthening andintegrating its financial markets, the region’s financial links are weaker than its trade ties.
And financial links within the region are weaker than those with global capital markets.
The challenge is to accelerate an important virtuous cycle—to attract more of Asia’ssubstantial savings to regional markets so that these, in turn, stimulate the development ofa state-of-the-art legal, regulatory, technical, and informational infrastructure for thefinancial system.
Asia is home to world-class financial centers. Two—Hong Kong, China andSingapore—are ranked among the top five in the world (City of London Corporation
2007). Yet many Asian economies remain hobbled by the legacy of financial repression.
Overcoming this is a regional, as well as a national, priority. If Asia can invest more of its
vast savings within the region, major benefits will follow. For example, investing Asiansavings would (1) bolster the development of sophisticated investment vehicles that
expand regional financing options—for small companies as well as complex
infrastructure projects; (2) foster innovative financial intermediation that can identify andcreate “bankable” investment projects; and (3) help generate financial products thatenable consumers and investors to use their incomes and assets more productively.

a. Achievements since the crisis
Asian financial markets have become stronger and safer since the crisis: greater
competition has been introduced; private sector ownership and foreign entry have beenencouraged; and governance, disclosure, and prudential regulation have been tightened.
Financial institutions’ capacity to assess and manage risks has improved. Financial
deepening has been occurring faster than in the EU or US—albeit from a lower base—and as a percent of GDP Asia now has larger capital markets than the EU has. Capital
markets, in particular, have grown very rapidly in absolute terms, as a share of total
financial assets, and relative to GDP.
Other data also suggest improvement in Asian financial systems reforms and market
efficiency. In banking, nonperforming loans have sharply declined, and capital adequacy
ratios now exceed Basel I levels in most of the region. But in many markets, state-ownedbanks remain dominant, and require overhauling and privatization. Regulatory processes
have been strengthened, but they too need more work, especially in preparation for the
adoption of Basel II standards. Efficient systems to manage securities trading, payments,and settlement have become more important; they need to be expanded and connectedacross markets. Effective securities regulation, in turn, can help make markets safer,
deeper, and more innovative; local-currency bond markets—both primary andsecondary—are an especially important priority. To support these developments, efforts
to improve corporate governance also need to continue, in part to make better information
available for the private monitoring of markets, including by international rating agencies.

b. Regional financial integration
Financial interdependence has been rising, both within the region and with the rest of
the world. Evidence comes partly from price movements: interest rates in Asia haveincreasingly converged during the last decade. Although the integration of markets is far

from complete, the standard deviation of cross-border bond yields has fallen sharply
since the crisis. Correlations of equity-price indexes across regional markets have also
risen, and are now higher than with US and other global equity markets. (This has not yet
happened in the case of bond returns.)
Evidence on portfolio asset holdings also suggests rising interdependence. NonJapanese Asians invested 28% of their portfolios within Asia in 2006, up from 21% in
2001, while their holdings of US assets declined from 20% of the total to 15% during thesame period. With Japan included, however, the picture changes: because Japaneseholdings consist disproportionately of non-Asian securities, the share of Asian assets held
regionally in 2006 is a mere 10%. Overall, non-Asian assets account for adisproportionate share of the region’s total portfolio investment, although this share is
declining slowly.
Thus, the region’s financial markets are deeper and more sophisticated than they werea decade ago. But while legal and regulatory frameworks have improved, many countries
still lag behind the best global practices (Lee 2008). In some countries, the gaps areexacerbated by restrictions on capital account transactions and on the entry of foreignbanks and other financial firms (Chinn and Ito 2007). All these issues will need to beaddressed nationally and regionally if more of Asia’s vast savings are to be attracted into
the region’s own investment opportunities.

c. Toward efficient, integrated financial markets
Asian financial cooperation has increased markedly since the crisis and variedintergovernmental forums now support cooperation among finance ministers, central
bank governors, and capital market regulators. This framework is discussed in moredetail below, but some of its prominent results have included the Asian Bond Markets
Initiative (ABMI, launched in 2004), which has helped strengthen the market
infrastructure for local-currency bond development, and the Asian Bond Funds (ABF)
initiative, which has supported the development of regional bond funds. ASEAN’s
subregional efforts provide a model for still deeper cooperation: in addition to conducting
regular surveillance, ASEAN has drafted a long-term roadmap for developing capital
markets and liberalizing capital accounts and financial services. Its work on capital
market development, for example, covers information sharing, harmonization, trading,clearing and settlement, and even the launch of an exchange-traded fund.
In theory, connections with global markets could provide all of the benefits offinancial integration, with ample opportunities for raising capital, wide choices forinvesting it, and good options for diversifying risks. But regional financial integration canplay an additional, important role. Common time zones and geographic proximity
facilitate information flows and personal contacts and can help to reduce information
asymmetries. Larger markets, in turn, can lead to more efficient and competitive financial
services. In most major regions, these factors lead to a significant “home-regioninvestment bias”—the tendency of a region’s financial transactions to be conducted
disproportionately with regional counterparties. 5
However, in Asia the bias appears to be reversed—financial transactions seem tofavor counterparties outside the region. These patterns likely reflect continuing
impediments to cross-border financial transactions and suggest potentially significant
gains from harmonizing rules, regulations, standards, and market practices, and fromliberalizing capital account transactions. An integrated regional market could help todiscover deeper and more timely information on Asian investment opportunities, andmight be especially effective, for example, in adapting financial products and services tothe needs of small and medium-sized enterprises and regional consumers and investors.
An integrated financial market could also help to develop new approaches to funding theregion’s massive infrastructure investment requirements.
Further progress on regional financial integration will need to address fundamental
causes—weaknesses in national financial systems, differences in national financial
regulations, and the unevenness of market opening and capital market liberalization.
There is growing consensus that much can and should be done about these issues on aregional level, both to improve the efficiency of markets and to forestall financial shocks.
These goals can be achieved with policies that do the following:

5•

Improve the surveillance of financial markets. Institutions that conduct
meaningful surveillance and address common regulatory issues are the sine qua
non of regional cooperation. This objective would be best served by establishing a
new, high-level “Asian Financial Stability Dialogue” on financial sector issues, tooperate in parallel with the Economic Review and Policy Dialogue (ERPD),
which addresses macroeconomic cooperation. The “Asian Financial Stability
Dialogue” would bring together all responsible authorities—including financeministries, central bank authorities, and other financial supervisors andregulators—to address financial market vulnerabilities, regulations, and efforts at
integration, as well as to engage in dialogue with the private sector.

•

Promote consistent standards and mutual recognition. Most Asian economies stillneed to improve prudential norms, regulation and supervision, and standards forgovernance and transparency. Harmonized standards would facilitate theregulation of financial activities across jurisdictions and would lower informationand transactions costs for investors. Given that harmonization poses greatchallenges for Asia’s diverse economies, the region’s policy makers may take a
two-pronged approach: develop guidelines for best practices (an ultimate basis forharmonization); and set minimum standards that can be recognized, initially atleast among subsets of economies.

Home bias is often judged to be excessive relative to theoretical expectations in many countries, and in such cases isusually attributed to regulations that restrict cross-border transactions or to inadequate access to information about
global investment opportunities.

•Strengthen financial markets and their infrastructure. Deeper and more innovative
financial markets can be promoted by expanding catalytic official initiatives suchas the ABMI and ABF. These have increased the standards expected fordisclosure and documentation and attracted new international issuers andinvestors to regional markets. The ABMI’s working groups are considering broad
improvements, including the development of securitized debt instruments,
regional credit guarantees, settlement and clearance systems, and rating agencies.
Because many Asian financial markets individually lack the resources to build
adequate transactions infrastructure—for credit enhancements, payments andsettlements, and information exchange—coordination among them is essential toachieve critical economies of scale.

•

Liberalize capital accounts and cross-border financial services flows prudently.
Efficient financial systems require competition and economies of scale—which
ultimately entail exposing national financial markets and firms to international
competition. In some Asian economies, efficient financial systems have alreadybeen built; in others, the benefits of integration still have to be balanced against
the risks of liberalization. For the latter economies, progress needs to be measured
and prudent; steady liberalization is essential, but it needs to be accompanied by
the development of institutions that can ensure markets’ continued stability.

Asian economies face the daunting, but essential, task of building world-classfinancial systems. The agenda is largely national, but the region as a whole is a key
stakeholder. Regional financial cooperation can provide a forum for dialogue andinformation sharing, a framework for drafting mutually acceptable standards, and peerpressure to accelerate the adoption of difficult policies. It can foster the development ofbroader and deeper regional markets—and thus ultimately enhance the productivity of theregion’s massive savings.

5. Managing Macroeconomic Interdependence
Asia’s growing trade and financial ties are rapidly translating into macroeconomic
interdependence. One implication is that national authorities increasingly need to basetheir policies on what they expect their neighbors to do. Another is that the benefits frommanaging policies collaboratively—to maximize joint performance—are becoming larger.
As a result, Asian policy makers are actively exploring ways to manage the propagationof global and regional shocks, and to reduce financial volatility and exchange rate
misalignments. In the longer run, improved macroeconomic cooperation will also help
strengthen the region’s structural ties.
While most Asian economies have performed well in recent years, their stability has
been achieved against the backdrop of a benign global environment—which seems tohave already ended with the financial turmoil that began in the US in the summer of 2007.
Looking ahead, the global context is likely to require larger adjustments. For example, inthe event of a US recession or global slowdown, Asia will need to refocus its growthaway from slow-growing or contracting markets to faster-growing ones, including fromexports to outside Asia to demand within it. Even if these adjustments are not forced byshort-term macroeconomic developments, they will be necessary in the longer run toresolve persistent global payments imbalances.

a. Growing interdependence
Of the several reasons to expect that greater interdependence may cause Asian
macroeconomic variables to move together more closely, three are most important. First,
because Asia’s trade includes a large share of parts and components, industry-specificshocks are likely to propagate rapidly across the region. Second, because Europe and the
US remain major export markets for Asia’s final goods, external demand shocks to Asian
economies tend to be similar. Third, Asian markets themselves are becoming increasingly
important drivers of regional economic activity.
Output correlations, the most frequently used indicator of interdependence, have
sharply increased among integrating Asian economies (ADB 2007b, Kawai andMotonishi 2005, Kim and Lee 2008, McKinnon and Schnabl 2002). An analysis includedin the main study shows that quarterly GDP co-movements rose dramatically after the
Asian crisis and have remained high since—the average coefficient for pair-wisecorrelations in integrating Asia has risen from 0.07 before the crisis to 0.54 after it. But,
as several other studies show, Asian economies remain closely connected with the rest of
the world—in fact, the correlation of integrating Asia with the EU and US increased from
0.16 before the crisis to 0.51 since
Price links also appear stronger than before the crisis. The average correlation ofquarterly consumer prices (detrended and adjusted for nominal exchange rate changes)
across pairs of Asian economies increased from 0.10 before the crisis to 0.39 since. Thissuggests that either Asian economies face more similar price shocks from the rest of theworld than before, or price shocks in one part of the region are transmitted to others withgreater force, or Asian prices are more sensitive to external shocks. Correlations cannot
distinguish among these alternatives, but all three are likely to be at work.
Thus, regional macroeconomic interdependence has increased: a more integrated Asia
has become more sensitive to Asian shocks. At the same time, the region’s sensitivity to
global shocks remains significant, although it appears to be diminishing. These results
offer an interesting perspective on the debate over whether Asia is ”decoupling” from theglobal business cycle. One side sees the current drivers of Asian economic activity as
mainly regional, the other as mainly global. The study findings suggest a more subtle anddynamic perspective. Regional demand is indeed more important for Asia’s economic
growth than it used to be. Yet, as a result of globalization, economic activity in the EU
and US remains important: these markets are still key destinations for Asia’s exports. If
decoupling is under way, it is taking hold only gradually as the relative importance of thedrivers of Asian demand changes. In the meantime, purely national factors—the thirddriver of Asian activity—have clearly diminished in importance relative to regional andglobal forces, given the context of the region’s increasingly open economies.

b. Lack of policy convergence?
Despite the convergence in regional macroeconomic outcomes, there is little evidence
so far that macroeconomic policies have converged. Monetary policies have followed
similar broad trends, but have diverged in detail. After converging until 2004, theregion’s policies since (through early 2008) have varied—from steady tightening in the
PRC and Taipei,China, to sharper tightening followed by easing in Indonesia andMalaysia, and to later and more gradual tightening in Thailand and the Republic of Korea.
Announced strategies also differ: Indonesia, the Republic of Korea, Thailand, and thePhilippines have a formal inflation-targeting framework, while others follow more
eclectic policies and in some cases specifically target exchange rate stability. In part due
to these policy differences, inflation and interest rates have varied considerably in theregion.
Fiscal policies have also diverged, though less so than monetary policies. Public debt
levels in most Asian countries have fallen since 2000, but fiscal consolidation has beenless successful in India and especially Japan, where public debt has reached criticallyhigh levels. In 2008, fiscal positions still range from deficits of about 6% of GDP for
India and Japan to a surplus of 10% in Singapore. To some extent, these differences also
reflect variations in the region’s development levels and national policy objectives.
Exchange rate systems vary too. Before the crisis, most economies claimed to havemanaged floats, but in practice their currencies closely followed and were sometimes
pegged to the US dollar. After the crisis caused these systems to collapse, affectedeconomies temporarily adopted more flexible regimes, with the notable exception of
Malaysia. But as calm returned, countries again began to manage their floats to reduce
currency volatility. More recently, some managed floaters, notably the PRC, are showing
greater flexibility.
Although the medium-term trend of Asian currencies still follows the US dollar
closely, their co-movements with the euro and yen have increased in recent years. Thishas produced exceptionally stable real effective exchange rates: within-region variations
were lower in 2004–2006 than in any other comparable period during the past 17 years.
But this stability does not appear to be the product of deliberate policy decisions, and noformal regime exists to ensure that stability will continue. Indeed, it appears to havealready ended, starting with the more tumultuous market conditions that set in as the US
dollar began to depreciate in early 2006 and the yen began to strengthen in mid-2007.

c. Mechanisms for macroeconomic cooperation
Regional mechanisms are clearly needed to address Asia’s macroeconomic
interdependence, but policy cooperation in this area is still in its infancy. A basic
structure is taking shape, consisting of the Chiang Mai Initiative (CMI)—the region’s
emerging financing facility—and several regional forums for macroeconomic dialogue.
Subregional institutions are most developed; ASEAN’s surveillance process, for example,
consists of confidential reports, discussions, and peer review sessions. 6 The ASEAN+3
Economic Review and Policy Dialogue (ERPD) is less formal and more interactive, but
has a broader membership—its Finance Ministers Meeting has proven quite effective.
The Executive Meeting of East Asia-Pacific Central Banks (EMEAP) serves a similarfunction for central banks. 7
The CMI, launched in 2000, enables countries to borrow international liquidity
collateralized by domestic currencies. But CMI bilateral swaps are still limited, andmainly restricted to complementing the financial support that members receive from theInternational Monetary Fund (IMF). The CMI has been expanded and strengthened since
its inception—for example, the total amount of swap arrangements has been gradually
increased to $85 billion at the end of 2007 and the ceiling for activating swaps without an
IMF program was raised from 10% to 20% in 2005. ASEAN+3 officials are now at anadvanced stage in multilateralizing the CMI and promoting its closer integration with the
ERPD. The CMI’s continued development will encourage countries to economize on
their foreign exchange reserves. Sovereign wealth funds could then provide a vehicle fordiversifying reserves into higher return, albeit riskier, assets. If managed on an
independent, transparent, and commercial basis, sovereign wealth funds could make adeep, steady pool of savings available for investments in the region and worldwide andcould help stimulate the development of regional capital markets.
To meet the potential challenges ahead, the region’s mechanisms of macroeconomic
cooperation need greater focus, less overlap, and deeper institutional structure. These
goals can be achieved in the following ways:•

6

Making macroeconomic consultation and surveillance more effective. To
minimize duplication and, in particular, coordinate monetary and financial issues,
an “Asian Secretariat for Economic Cooperation” should be established, withqualified, permanent staff. The Secretariat would most logically operate under theoversight of ASEAN+3 and in coordination with the region’s central banks,
although the functions it administers could have varying memberships, including
economies outside ASEAN+3. The Secretariat could strengthen the principal
surveillance functions of ASEAN+3 by facilitating explicit agreements on thetools, indicators, and standards used to monitor economic activity. For example, it

The Asian Development Bank supports this process with the ASEAN Economic Outlook, special studies, andtechnical assistance.
7
Other, subregional central bank forums include Southeast Asia, New Zealand, Australia (SEANZA), Southeast AsianCentral Banks (SEACEN), and the Association of Southeast Asian Nations (ASEAN) Central Bank Forum.

could introduce a regional early warning system to help prevent financial crises orcreate a synthetic currency basket, such as an “Asian currency unit,” to monitor
individual currency movements against a regional benchmark.
•Strengthening Asia’s short-term financing facility. Pooling the region’s massive
foreign exchange reserves and improving the rules under which they are used areessential tools for effective crisis management. Multilateralizing the CMI andagreeing on rules for its rapid activation would be a critical step. The Secretariat
would oversee the region’s pooled resources and, in a crisis, negotiate economic
policies with governments seeking support. It would thus complement the IMF’s
surveillance and crisis management efforts in Asia and, in time, the link between
CMI activation and IMF programs could be phased out.

•

Cooperating in exchange rate and macroeconomic policy management. As Asia’s
structural links deepen, exchange rate and macroeconomic policy cooperation are
becoming increasingly important. Cooperation can begin with understandings on
the conduct of policy, and with ad hoc coordinated actions. For example,
countries could coordinate a particular wave of exchange rate adjustments against
third currencies in order to hold their relative competitive positions stable. Suchcooperation might emerge initially in ASEAN or other groups with closely
synchronized business cycles. However, because growth in the region varies
widely, any form of currency cooperation would have to be flexible enough toallow real exchange rates to adjust over time.

The recent era of relative macroeconomic stability may already be over; in any case,it will not last forever. With divergent prospects, conflicting demands on policy, andlarge realignments on the horizon, Asian policy cooperation will be essential. Asia needs
to develop the institutions to make this possible and, because many years of cooperation
are required to make such processes effective, the time to begin building such institutions
has arrived.

6. Making Growth Inclusive and Sustainable
The goal of economic development is to improve social well-being in the broadest
sense: to enable people to enjoy prosperous and fulfilling lives. Economic growth that
benefits a broad cross-section of the population is essential. If the benefits of regional
integration are to be shared by everyone—including the poor and sociallydisadvantaged—a wide range of social issues needs to be addressed. Public policies need
to focus on ”inclusive growth” to create opportunities for everyone, to improve people’s
access to such opportunities, to provide a safety net for those who fall on hard times, andto achieve other social and environmental objectives.
Asia’s integration bolsters economic growth, and typically the poorest countries havethe most to gain from it. But economic integration can be associated with negative side
effects, such as greater dislocation of exposed sectors and negative impacts on the poor.

A rapidly modernizing economy needs effective social policies to make growth broadly
acceptable and to complement traditional mechanisms (based on extended families andsmall communities) for caring for those left behind. Such an economy also needs toaddress other issues, including threats to health, safety, and the environment.

a. Who is left behind?
Given the complexity of Asia’s social problems, efforts to tackle poverty andinclusion need to rest on systematic information on which groups are left behind and why.
Much progress has been made in recent years—especially in the context of theMillennium Development Goals (MDGs)—with understanding the scope and causes ofpoverty, in both its income and non-income dimensions. This work needs to continue,
especially in pinpointing the factors that lead to exclusion—such as geography, skills, age,gender, and race—and the policies that can offset them.
Asia has made remarkable progress in reducing poverty, but major challenges remain.
The good news is that Asia appears set to meet the MDG of halving extreme poverty by
2015. 8 Half of Viet Nam’s population lived on less than $1 a day in 1990; only 1 in 10
did in 2004. In the PRC, the proportion has fallen from a third to less than a seventh. In
Indonesia, a country badly hit by the crisis, extreme poverty has fallen by two thirds. Yet
progress has been much slower in some countries, especially on non-income measures.
Nearly 2 billion people in the region are without basic sanitation, over 650 million arewithout clean water, 100 million under 5 years are underweight, and nearly 30 million
children of primary-school age do not attend classes (ADB-ESCAP-UNDP 2007).
Income disparities within countries are also rising. Measured by the Gini coefficient,inequality has fallen in Thailand and Viet Nam, but has risen considerably in the PRC
and India. Fortunately, this does not involve “the poor getting poorer and the rich getting
richer, but the rich getting richer faster than the poor” (ADB 2007b, 79). The region’s
overall development model is working, but the gains need to be shared more equally.
The causes of growing inequality vary, but, generally, the rich are better equipped to
exploit the opportunities offered by economic change. 9 People in urban areas are on the
average better off than those in rural ones, but within urban areas inequality has also
widened. Some groups are systematically excluded from economic opportunities—
especially women, the lower socioeconomic strata, minorities, and indigenous people.
Tackling discrimination is critical: in the case of gender, for example, successful regional

89

ADB (2005b) estimates that the number of extremely poor people (with incomes of less than $1 a day) fell from 921
million in 1990 to 621 million in 2003, largely as a result of rapid economic growth. Further progress is expected tooccur, but by 2015, the number of extreme poor could still be as high as 347 million, with South Asia accounting forthe greatest number (274 million), mainly in India.
Higher income groups benefit from various factors that directly affect their productivity, such as better healthconditions, educational achievement, infant and child mortality, and immunization against diseases.

initiatives have ranged from gender-sensitive poverty reduction programs to improving
access to finance and property.
People also fall behind through bad luck—by working in a declining sector or
becoming unable to work. The recovery since the crisis masks the continuing inadequacyof Asian social protection systems (ADB 2003b). Demographic ageing will increase thestress—family and community support systems are declining rapidly and have to becomplemented by public systems. Yet the cost can be manageable: for example, theUnited Nations World Economic and Social Survey estimates that the cost of providing apension of $1 a day to everyone aged over 60 in the developing countries surveyed is lessthan 1% of their combined GDP a year (UN 2007). Innovation—such as in
microinsurance, locally based social funds (ADB 2003b), and community-based
information technology support—would also help.

b. Fighting poverty and exclusion
The battle against poverty and exclusion begins with creating high-productivity
jobs—a central goal of Asian regionalism. But whether people have access to these jobs
depends on how well labor markets function and how effectively the places where they
live are connected with dynamic regional and global markets.
Asia’s official unemployment rates are not high by global standards, but studies showthat employment growth is becoming less responsive to output growth (Felipe and Hasan
2006, Kapsos 2006). This is so partly because formal employment data capture only partof the story. In 2005, about 500 million of Asia’s 1.7 billion workers were reckoned to beeither unemployed or underemployed (Felipe and Hasan 2006). Asia’s informal labormarkets are huge—accounting for 83% of nonagricultural work in India and 71% inIndonesia. Many of these outcomes reflect barriers in labor markets, especially between
urban and rural areas. Rigid labor laws, in turn, cause entrepreneurs to opt for machinery
or illegal workers in place of regular employees. Weak property rights keep people fromfinancing businesses, because untitled assets cannot be used as collateral. To remove
regulations that make starting new businesses and hiring people costly and risky is often
politically difficult, but still essential (Freeman 2006).
A second approach is to target sectors that are potent in poverty reduction. It isespecially important to get policies right in agriculture—the mainstay of Asia’s poor.
Often, national policies are misguided: for example, subsidizing staple food crops
discourages diversification into higher value crops and the adoption of productiveplanting and marketing strategies. Focused regional policies can also make a difference.
Greater opportunities for international trade in agricultural products—both within theregion and beyond—could amplify national efforts to improve agricultural productivity.
Aid-for-trade could also make an important, direct contribution to these efforts: in the
Greater Mekong Subregion, for example, innovative programs promote cross-borderagricultural trade and investment, supported by public-private partnerships on agriculturalscience and technology (ADB 2007b).

Even with sound policies, new formal-sector jobs often favor skilled workers, due toskill-biased technical change and the quality requirements of export markets. This
benefits the economy as a whole—it boosts productivity and average incomes—but it
does not help people who do not have, and are unable to acquire, the skills required for
new jobs.
Thus, a third strategy is needed: reducing gaps in education and infrastructure thatmake it impossible for people to connect with the centers of economic growth. To do so
requires a focus on basic education and on vocational and skills training. Investing in
trainability—the capacity to learn how to use new technologies—is especially important.
Investment climate surveys show that a lack of education and training are among thefactors that prevent rural areas from developing higher productivity nonfarm enterprises(ADB 2007a). Strategic investments in infrastructure—in transport, communications, andenergy—can also connect low-income regions with Asia’s dynamic core. Growth inremote areas can save substantial social, financial, and relocation costs, and benefits
people who move and those who are unable to do so.

c. Labor migration
Making it easier for people to move to where jobs are is broadly beneficial. This istrue for migration within countries as well as among them. Of the 200 million or sointernational migrants in the world, the top three sending countries are in Asia—the PRC,
with 35 million; India, 20 million; and the Philippines, 7 million (Global Commission on
International Migration 2005). Migrants’ remittances through formal channels exceed$200 billion a year, and twice that much may be sent informally. The funds appear to be
used very productively: they boost investments in education, housing, and household
enterprises (Yang 2006). If rich countries let their labor forces swell by 3% throughgreater labor mobility, poor countries would gain an estimated $305 billion a year—more
than the combined effects of lower trade barriers, debt relief, and aid (Pritchett 2007).
Migration can also match labor market surpluses in younger, poorer countries withshortages in older, richer societies, for example, in sectors such as health care.
Yet migration needs to be managed. Cooperation to curb abuses—trafficking in
women and other illegal forced labor—is essential. So too is broader regional peerpressure to protect the welfare and dignity of migrant workers. International conventions,
including ASEAN’s declaration on the protection and promotion of the rights of migrant
workers, provide a framework, but are not well enforced. Social protection systems
interact in complex ways with migration: they need to become internationally portable,
available to the families of migrant workers, and supportive of the reintegration of
returning workers.

d. Health and safety: critical public goods
Due to high population densities and limited health services in some countries, Asia isunusually vulnerable to epidemics. Regional integration and the frequent movement ofpeople and goods increase its vulnerability. HIV/AIDS, 10 severe acute respiratory
syndrome (SARS) and avian influenza highlight how rapidly local health problems canturn into regional ones. These threats—and potential future ones—are risks to society atlarge: they have devastating economic and social consequences. The brief SARS crisis
cost Asian economies $20 billion in lost tourism and output, amply demonstrating thevalue of international monitoring and coordination in containing epidemics (Lee and
McKibbin 2003). Protecting the region from health threats is a critical “public good” andan obvious priority for regional cooperation. 11
The tsunami of 2004 was a devastating reminder of the region’s vulnerability tonatural disasters. Regional cooperation can help to make the response to disasters faster,
more effective, and less costly. Cooperation should include regional early-warning
systems where appropriate; disaster management and recovery plans; and arrangements
for information-sharing, transport, and communications. Financial innovations—such as
regional catastrophe-bond and flood-insurance markets—could further improve themanagement of such risks (Lin et al. 2007).

e. Environment
Environmental concerns are increasing, particularly because economic growth inmuch of Asia remains propelled by production that depends on carbon fuels. Many of
Asia’s major urban centers have unacceptably poor air quality. Its bodies of water—
including major water supplies—are also under stress. Rapid climate change increases therisk of natural disasters and disease outbreaks. All these problems require concerted
global and regional consultation and action to assess problems and identify solutions andto develop strategies for addressing them jointly so that no economy suffers
disproportionately from the policies adopted.
Cross-border environmental issues are of particular concern for regional cooperation.
Problems such as desertification, dust storms, forest fires, haze, and acid rain cut acrossnational borders; their solution requires regional collective efforts. Asian countries andsubregional organizations need to cooperate more closely on environmental challenges byharmonizing standards, regulations, and laws. Priorities include air pollution, landdegradation, and global climate change, which tend to affect the poor the most.
10
11

Human immunodeficiency virus/acquired immunodeficiency syndrome.
Priorities include strengthening the regional collection and dissemination of information on health threats; theestablishment of vaccine development and production capacities; support for national capacity development,
particularly in surveillance and diagnosis; and the creation of intergovernmental mechanisms to fight diseases suchas HIV/AIDS and to undertake concerted action on standards, health promotion, early-warning systems, andcommunications.

Subregional cooperation is proving effective in some areas. The BIMP-EAGA 12
initiative on environmental protection, for instance, is an important effort to preserve oneof the world’s richest repositories of land and marine biodiversity, and ultimately to
manage the long-term sustainability of the subregion’s natural resources. This and othersubregional initiatives offer focused interventions and models that are broadly applicablein Asia and around the world.

f. A social and environmental agenda
Asian regionalism cannot fulfill its immense potential unless it addresses disparities
within countries and among them. Left to market forces, Asian regional integration willbypass many people and support for it will be eroded. Governments increasingly
recognize this; their vision of shared regional prosperity requires corrective action.
Regional cooperation is useful for addressing critical social and environmental issues
directly; it can also help make a strong case for action—as the MDGs did globally—and
mobilize national, regional, and global support. Deeper networks among policy makers,
research institutions, and nongovernment organizations could improve the design andimplementation of policy. And by concerted action, the region could ensure that the
impact of social and environmental policies on the competitiveness of particularindustries and subregions is recognized and, if necessary, addressed throughcomplementary policies.
Based on the foregoing analysis, Asia’s principal objectives are as follows:

12•

Connect the poor to the thriving regional economy. Policies will vary acrosscountries, but they should aim to eliminate regulatory, social, and geographicalbarriers in labor markets; prioritize development and trade in sectors, such as
agriculture, that have a strong impact on reducing poverty; encourage theintegration of informal sectors into the formal economy; invest in education andtraining to make workers more productive; and build infrastructure to connect
disadvantaged regions with economic centers.

•

Develop cost-effective social protection systems. With family and community
mechanisms of social protection declining, low- and middle-income countries alsoneed adequate social protection systems. Recent experiments are expanding therange of cost-effective solutions, in part with innovations that exploit technology
and microfinance strategies.

•

Facilitate and manage labor migration. National and international migration can
improve the lives of migrants, their families, and the citizens of host economies.
The challenge for host countries is to maximize the benefits of employing foreign

Brunei Darussalam, Indonesia, Malaysia, Philippines East ASEAN Growth Area.

labor while minimizing its potentially negative impacts and to ensure that
immigrants have basic rights and protection and are treated with dignity.
•Protect regional health and safety. Densely populated and closely integrated Asia
needs world-class systems to monitor, prevent, and (if necessary) containepidemics. Providing the public goods of disease prevention and disastermanagement is a top regional priority.

•

Make development sustainable. The environmental costs of economic activity aremounting with Asia’s rapid development. Cooperation is required to set
environmental standards, design interventions, and monitor results. Regional
cooperation can be useful in mobilizing Asian and non-Asian resources andtechnologies, and is essential for addressing cross-border issues.

Sharing such regional goals will help to build a genuine Asian community. Throughunderstanding each others’ successes and failures, people and countries will develop
stronger foundations for cooperation. A common, inclusive vision will also help tomobilize popular support, an essential requirement for realizing the promise ofregionalism.

7. Creating an Architecture for Regional Cooperation
The case for greater regional cooperation is broad, deep, and compelling. Yet
marshaling collective efforts across this vast, diverse region is a huge challenge. The
examples of the EU and, to a lesser extent, the North American Free Trade Area
(NAFTA) highlight some of the possibilities and difficulties. But Asia does not function
exactly like Europe or North America. Asia’s economics, politics, and history are
different. Some forms of interdependence—in trade, for instance—are deeper in Asia
today than they were in Europe in the early stages of European regionalism. But others—
such as monetary policy—involve largely independent national decisions.
While Asia can draw on other regions’ experience, Asian regionalism will ultimately
follow a distinctive blueprint, building on Asian economic priorities and based on an
Asian vision for a regional community. That vision is just beginning to take shape, amid
spirited debate.

a. Regionalism with Asian characteristics
Asia’s powerful countries and centers of economic activity have many common priorities,
but also differing ones. At times, the differences are amplified by history and politics.
The price of cooperation is the loss of some national sovereignty and the narrowing ofpolicy options for pursuing purely national objectives. It is understandably difficult forlarge, successful, and independent economies to make such compromises, and ultimately
to sacrifice some authority to regional institutions. Yet understanding of the logic of

regional collective action is becoming stronger, driven by the need to manage theconsequences of rising interdependence. Cooperation is likely to evolve gradually, but it
will intensify as countries gain confidence in the benefits of concerted action and theprocesses of joint decision making. Different groups of countries will progress at various
speeds, using different frameworks to address subsets of policy interests.
Asia’s regionalism will be distinctive in other ways as well. The region’s policymaking style is pragmatic and cautious. Cooperation is aimed at making markets work
better and is usually limited to specific initiatives and objectives. Intergovernmental
dialogue at all levels has greatly increased, but formal regional institutions remain
relatively underdeveloped. Yet recognition that the requirements for institutional
capabilities are growing is widespread—for example, ASEAN has committed toincreasing the capacity of its secretariat along with implementing its new blueprint forestablishing an ASEAN Economic Community. In several areas the payoff to regional
institutional development is high; this study has identified, in particular, theestablishment of both an “Asian Financial Stability Dialogue” and an “Asian Secretariat
for Economic Cooperation” as important priorities. These and other institutions that will
emerge in the region are likely to be lean, carefully structured to achieve their purpose
and limited in authority. In other words, even as the institutional structure deepens,intergovernmental consultation and decision making are likely to remain central featuresof the Asian regional cooperation.

b. The architecture of cooperation
Asia’s regional policy agenda is too broad and complex to be handled by a single
institution, especially given Asia’s vast economies and diverse interests. A flexible,
multitrack, multispeed architecture will best respond to this challenge. It will emphasize
the gradual intensification of cooperation—engagement in limited areas first, followed by
the deepening and widening of the scope of cooperation. This will allow any group of
economies to join the integration process and share in its benefits, regardless ofdevelopment level. As partnerships strengthen, they can lead to deeper collaboration or
the enlargement of the group. Open, gradual, and flexible regionalism will ensure that
Asia’s economic integration remains market-friendly and responsive to the region’s
diverse constituents.
Importantly, a flexible framework enables newcomers to regional integration todevelop relationships in line with their capabilities. The smaller developing countries thatare not yet fully integrated into the region’s economy often have the most to gain frominternalizing the lessons of Asian dynamism. Joining regional and global production
networks could dramatically raise their productivity, employment, and output levels. This
study seeks to foster understanding of the requirements and implications of integration.
Newcomers to integration need to adopt vigorously outward-oriented policies; in turn, theregional system needs to remain accessible to integrating economies.
The principal groups of the current framework range widely in scope, fromsubregional organizations that encompass parts of a few countries to APEC and the Asia-

Europe Meeting (ASEM), which span continents. This diversity is consistent with, andnecessary for, achieving the region’s multiple policy objectives. Developing
infrastructure to connect nearby communities through transport and energy links, forexample, requires limited, focused subregional cooperation. At the same time, ensuringthat markets in Asia, Europe, North America, and other parts of the world remain open toeach other requires dialogue in APEC, ASEM, and of course global institutions. The
challenge is to maintain effective and flexible groups while ensuring the coherence of
their different policy directions. Some institutional consolidation can be valuable in thisprocess—as this study recommends, for example, in the area of macroeconomic
surveillance. Yet overlap and competition among groups is not necessarily bad; it opens
multiple options for addressing a problem and stimulates forums to become more
effective.
Because the structure of regional cooperation in Asia remains very fluid, proposing
firm assignments of institutional functions is premature. Nevertheless, as the detailed
arguments of this study suggest, ASEAN+3 frequently emerges as an especially usefulcoordinating forum. It is organized around ASEAN, which has the most experience withcooperation and operates the most developed regional institutions. It also incorporates theregion’s three large economies (the PRC, Japan, and the Republic of Korea), and isgenerally closely integrated. But processes coordinated by ASEAN+3 need not be limited
to its membership. For example, functions that require wider participation—such as the
Asian Financial Stability Dialogue proposed in this study—could also build on EAS
membership.
Although the process of cooperation may begin with an ASEAN+3 structure, it
should not end there. It should involve strong complementary relationships with otherregional forums whose unique histories and memberships provide expertise foraddressing different aspects of cooperation. This argues for maintaining multiple regionalarrangements and good connections among them. For example, ASEAN will be anespecially effective proving ground for more advanced forms of regional cooperation. It
will become an increasingly effective hub as it pursues deeper integration itself,following the recently adopted ASEAN Economic Community Blueprint (Kawai 2007).
The Greater Mekong Subregion framework—a subregional group—provides an ideal
laboratory for coordinated infrastructure development as well as for targeted new
initiatives in areas such as fighting poverty. The EAS may prove to be the most effective
forum for addressing climate change and other environmental challenges from Asian
perspectives. And given its membership, APEC can be effective in trade facilitation.
APEC and ASEM could also have useful roles in policy dialogue on domestic regulatory
policies and in ensuring that the region’s expanding global role is effectively managed.
A flexible, multitrack architecture also responds to the challenges of the region’s
exceptional political, economic, and cultural diversity. Asia’s economics and politics are
not always aligned, but they are interdependent. Economic interests shape political
positions, much as political will affects economic outcomes. Closer economic
cooperation within Asia will provide a stronger framework for managing the economic
adjustments ahead, both within the region and with the world. Foremost among these isthe rise of the PRC and India, which will affect regional and global markets in farreaching ways.
As long as the economic benefits of regional integration are substantial, politicalcompromises are possible. A survey for this study confirms that the region’s opinion
leaders welcome regional engagement and are optimistic that political hurdles can beovercome (Capannelli 2008). Asia’s approach emanates from—and neatly
accommodates—its diversity. The approach allows countries to retain a great deal ofindependence and control over their internal affairs, yet fosters a sense of community—in
essence, mutual trust and confidence.
c. Leadership
Gradual, bottom-up cooperation has economic and political advantages; it also hasrisks, including possible inconsistencies among initiatives, and slower progress thanmight be possible with a top-down approach. What forces will generate momentum andpressure for deep and ambitious integration?
At the highest levels of government, the importance of regional cooperation is well
accepted—Asian leaders have repeatedly and eloquently confirmed their commitment towork together. 13 But they will need effective mechanisms to translate this intent into
pragmatic results. Asia’s regional institutions are not strong enough to take a leadershiprole yet; many operate with very limited resources and often with staff members on short,
temporary assignments. In this context, knowledge-generating institutions outside theofficial sphere play an especially important role. Ideas matter, and the region’s thinktanks and universities have the structure and time to focus on long-term issues and tooffer objective advice.
In the longer run, civil society will provide the most important source of support. The
survey for this study found that a wide range of Asian opinion leaders welcomesinternational cooperation. All nationalities and groups seem to share this perspective,
including business executives; professionals; journalists; experts in universities,
laboratories, and research institutes; and political and economic analysts. They welcome
an Asian identity, and increasingly interact with regional colleagues in professional,
educational, and official networks. Their collaboration and friendships can informregional strategies and provide foundations for future cooperation.
In short, Asian regionalism will need sophisticated official leadership as well as
individual champions. It will need the support of many visionary and determinedpeople—including political, business, and civic leaders; academic experts; andintellectuals—people from all walks of life and representing the region’s great cultural13

The reports of the East Asia Vision Group (2001) and the East Asia Study Group (2002), commissioned by theleaders, offer an excellent summary of potential regional cooperation efforts.

diversity. The challenge for governments is to embrace this broad coalition, to provide
forums where its voice can be heard, and to make sure that its impact is felt.

d. A partnership for shared prosperity
It is easier, in some ways, to envision an integrated Asia many decades hence than todescribe the detailed goals that could be achieved by 2020. In the longer run, Asia islikely to have a single market subject to common regulations, a common currency, andsubstantial freedom of movement for workers—in other words, an environment similar tothat of the EU today. An integrated Asia will reap enormous benefits from the great
diversity of its economies and peoples; its deep cultural heritage; the vast scale of its
financial, technical, and other resources; and its joint ability to manage economic, social,environmental, and other threats. It will offer unrivaled opportunities for innovation,
entrepreneurship, and commerce. And it will help subdue the political rivalries that could
otherwise threaten stability.
Such a vision can provide inspiration and offers guidance on long-term directions.
But to inform immediate policy, it must be translated into steps that can—and should—beachieved in the intermediate term. The vision that motivates these steps has to be
pragmatic. It must consist of realistic initiatives that show early, step-by-step results. By
pursuing growth-inducing policy options that foster regional integration, by 2020 Asia
could have:•an integrated market free of restrictions on regional flows of goods, services, andcapital;•deep and liquid financial markets open to cross-border financial flows andservices, with high standards of oversight and strong protection to national andforeign investors;•

effective frameworks to coordinate macroeconomic and exchange rate policies,
taking into account global challenges and differing national circumstances;•collective efforts to address vital social issues, such as poverty, exclusion, income
insecurity, migration, ageing, health, and environmental threats;•a consistent voice to project the concerns of Asian economies in global policy
forums and enhance responsible global governance; and•vital institutions, adequately and highly professionally staffed, to provide first-rate
analytical and logistical support for these efforts.

The goals are challenging but achievable. Some should receive earlier attention thanothers; cooperation to ensure financial stability and the smooth adjustment to global
imbalances are especially urgent.

Each step toward regional integration will require innovation, leadership, and support
from major economies. Asia is poised to take these steps: its economies are sound andenjoy good relations with each other and other global centers. Appropriately, Asian
regionalism is becoming more confident in its potential to contribute to both Asian andglobal welfare. All of this favors the emergence of a strong, prosperous, outward-looking
Asian economic community, regionally integrated yet connected with global markets, andwith responsibility and influence to match its economic weight. In short, emerging Asian
regionalism is a partnership that can ensure the region’s continued, peaceful progress, andhelp power globally and regionally shared prosperity.

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Asia’s Economic Integration:

Part One

Trends and Prospects
for Cooperation
Giovanni Capannelli
Office of Regional Economic Integration
Asian Development Bank

Asia’s Economic Integration:
Trends and Prospects

Lecture at GIARI Summer Institute
Waseda University, Tokyo
3 August 2010
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Benefits of Integration
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Asian Regionalism: Partnershipfor Shared Prosperity
Asian economies in the long-run are likely to have- a single market for goods and services- deep, liquid and integrated financial markets- effective macroeconomic policy coordination- workers moving much more freely than todayADB 2010
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6OLGHAugust 3 (Tue)
Lecuture 2
Prof. Shujiro Urata

Shujiro Urata is Professor, Graduate School of Asia-Pacific Studies (International Relations),
Waseda University since 2005. He is also Senior Research Advisor to the Executive Director of the
Economic Research Institute for ASEAN and East Asia (ERIA), Faculty Fellow at the Japan Center
for Economic Research (JCER), and Faculty Fellow at the Research Institute for Economy, Tradeand Industry (RIETI). He holds MA and Ph.D. in Economics from Stanford University. He
specializes in International Economics. After holding positions such as Research Associate at the
Brookings Institution, Economist of World Bank, and Professor of School of Social Sciences at
Waseda University, he took the present position from April 2005. His research interests include
international trade, foreign direct investment, corporate small and medium enterprises, as well as
regional integration and Asia-Pacific Economic Cooperation.
His major publications include Winning in Asia, Japanese Style: Market and Nonmarket Strategies
for Success (co-ed. Palgrave, 2002); Competitiveness, FDI and Technological Activity in East Asia
(co-ed. Edward Elgar, 2003); Bilateral Trade Agreements: Origins, evolution, and implications(co-ed. Routledge, 2005); The Political Economy of the Proliferation of FTAs (co-authored, Korea
Economic Research Institute, 2005); Multinationals and Economic Growth in East Asia (co-ed.
Routledge, 2006); Free Trade Agreements in the Asias-Pacific (co-ed. World Scientific, Singapore,2010). His recent articles include "Proliferation of FTAs and the WTO," (Global Institute for AsianRegional Integration Working Papers) January, 2010; "Exclusion Fears and Competitive
Regionalism in East Asia," in Mireya Solis, Barbara Stallings, and Saori N. Katada (eds.),
Competitive Regionalism: FTA Diffusion in the Pacific Rim, England: Palgrave Macmillan, pp.
27-53, 2009; "Proliferation of FTAs and the WTO," in Yonghyup Oh (ed.), The World Economy
with the G-20, Korea Institute for International Economic Policy, 2009; "The Impacts of Free Trade
Agreements on Trade Flows: An Application of the Gravity Model Approach,” in Christopher
Findlay and Shujiro Urata (eds.), Free Trade Agreements in the Asia-Pacific, Singapore: World
Scientific, pp.195-239 (Co-authored with Misa Okabe), 2010.

Contents
I. Introduction
II. Market-Driven Regional Economic
Integration
III. A Shift from Market-Driven to
Institution-Driven Regional Economic
Integration
IV. Japan’s FTA Policy
V. Concluding Remarks

Regional Economic Integration in
East Asia and Japan’s FTA Policy
August 3, 2010

Shujiro URATA
Waseda University

I. Introduction

II. Market-driven Regional Economic Integration

Background Rapid economic growth in East Asia despite
global financial/economic crisis
 Prime drivers of economic growth have been
foreign trade and foreign direct investment(FDI): Trade-FDI nexus
Purposes of the presentation
 Investigate recent developments in regional
economic integration in East Asia
 Analyze Japan’s FTA policy in East Asia

Figure 1 East Asia' Trade: Value and the Share of the World$ billion
3,000

Rapid expansion of foreign trade by East Asian
countries, especially by China (Figures 1 and 2)
 Advances in regional economic integration(Table 1) : increased dependence on China anddecreased dependence on Japan by East Asian
countries (Figures 3 and 4), decreased regional
dependence in exports and increased regional
dependence in imports by China (Figures 5 and6) Increased shares of machinery, electronic
machinery (Table 2)
 Increase in parts and components trade (Table 3)Figure 2 Country Composition of East Asian Exports

％
25

100%

20

80%

15

60%

Merchandise exports
Merchandise imports
2,500

Merchadise exports share of world
Merchandise imports share of world

2,000

ASEAN

1,500

Korea
10

40%

5

20%

0

0%

China

1,000

Japan

500

0

19

80

8
19

1

82 83 84 85 86 87 88 89 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06
19 19 19 19 19 19 19 19 19 19 19 19 19 19 19 19 19 19 20 20 20 20 20 20 20

1980 981 982 983 984 985 986 987 988 989 990 9 91 9 92 993 994 995 996 9 97 998 999 000 001 002 003 004 005 006
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
2
2
2
2
2
2
2

Figure 3 Dependence on China for East Asia's Exports

Table 1 Intra-regional Trade Ratio (%)

%
30.0

Japan
25.0

1980
35.5
61.3
33.8

East Asia
EU
NAFTA

Korea
ASEAN

2007
52.3
67.2
43.0

20.0

15.0

10.0

5.0

1995

1996

%

Figure 4 Dependence on Japan for East Asia's Exports
%

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2005

2006

2007

Figure 5 Intra-regional Dependence in East Asia's Exports

60.0

25.0

Japan
Korea
China
ASEAN
ASEAN+3

50.0

Korea

20.0

China
ASEAN

40.0

15.0
30.0

10.0
20.0

5.0

10.0

-

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

1996

1997

1998

1999

2000

70.0

60.0

50.0

40.0

30.0

Japan
Korea
China
ASEAN
ASEAN+3

20.0

10.0

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2001

2002

2003

2004

Table 2 Product Composition of
Foreign Trade in East Asia

Figure 6 Intra-regional Dependence for East Asia's Imports

%

1995

2005

2006

2007

Foods
TextilePulp, Paper and Wood
Chemicals
Oil and Coal
Stone, clay, glass and concrete products
Iron and steel , Nonferrous metals
General machinery
Electrical machinery
Household electric appliances
Transportation Equipment
Precision machinery
Toys and Miscellaneous goods
Total

1990
Exports
4.3
9.1
7.8
6.0
6.2
1.4
6.2
14.8
16.2
6.9
13.1
1.8
6.1
100.0

2005
2.4
6.9
5.5
8.0
4.8
1.4
6.5
17.8
23.3
6.2
8.0
2.7
6.5
100.0

1990
Imports
8.8
3.8
8.5
12.3
6.4
2.2
8.6
17.9
14.0
1.9
9.5
1.9
4.3
100.0

2005
4.8
2.1
5.5
14.0
5.1
1.4
8.9
18.4
24.9
2.0
6.9
4.0
2.0
100.0

Trade patterns observed above indicate: Formation of regional production network Fragmentation strategy by multinational
corporations.
 Triangular trade pattern in that China
became a factory for the world market

Table 3 Product Composition of Foreign Tradein East Asia (%)
With the rest of the world Inside East Asia
Exports Imports
Exports Imports
1990 2005 1990 2005 1990 2005 1990 2005
Total
100 100 100 100 100 100 100 100
Primary goods
5.6 3.2 11.8 7.7 12.0 5.6 13.3 5.8
Processed goods
23.4 22.3 31.4 28.5 36.7 31.9 36.9 31.3
Parts and components 18.9 25.6 18.9 31.7 19.7 31.7 18.4 32.1
Capital goods
21.4 24.2 22.1 20.9 17.0 19.1 15.4 18.6
Consumption goods 30.7 24.6 15.8 11.1 14.7 11.7 16.0 12.2

$ billion

Figure 7 FDI of East Asian Countries$ billion%

180

Foreign direct investment (FDI) Rapid expansion (Figure 7)
 China became a large recipient of FDI(Figure 8)
 Active FDI in electronics sector (Table 4)25

Figure 8 FDI Inflows to East Asia

90

FDI outflows
160

80

FDI inflows
FDI outflows share of world

140

FDI inflows share of world

China
20

70
60

120

Japan
Korea
ASEAN

15

50

100
40
80
10
60

30
20

40

5

10
0

20
0

0

80 81 82 83 84 85 86 87 88 89 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07
19 19 19 19 19 19 19 19 19 19 19 19 19 19 19 19 19 19 19 19 20 20 20 20 20 20 20 20

Table 4 Sectoral Distribution of FDI
Inflows in Malaysia and Thailand (%)
Manufacturinbg
Food
TextilesWood and wood products
ChemicalsPetro chemicals
Metal products
General machinery
Electric machineryTransport machinery
Scientific instruments
OthersMalaysia Thailand
1997-2006 1997-2006
100.0
100
3.6
5.5
1.7
2.0
6.1
12.1
10.4
12.4
2.1
9.4
10.5
2.3
41.7
24.6
4.4
31.6
2.0
4.3
13.3

-10

8 0 81 82 83 8 4 85 86 87 8 8 89 90 91 92 93 94 95 9 6 97 98 99 0 0 01 02 03 04 05 06 07
19 19 19 19 19 19 19 19 19 19 19 19 19 19 19 19 19 19 19 19 20 20 20 20 20 20 20 20-20

Factors behind Market-driven Regional
Economic Integration+ Trade liberalization
 Substantial reduction in tariffs but high tariffs
still remain (Figure 9, Table 5) Non-tariff barriers are increasing+ FDI Liberalization
 Freer FDI environment, but still FDI barriers
remain. (Table 6) Need for further FDI liberalization andfacilitation

Table 5 Trade Liberalization:
Reduction in Tariff Rates

Figure 9 Tariff Rates
%
60.0

China
Indonesia
Malaysia
Philippines
Thailand

50.0

Total

China

1992
2006
Indonesia 1989
2006
Japan
1988
2006
Korea
1988
2006
Malaysia 1988
2006
Phillipines 1988
2006
Singapore 1989
2006
Thailand 1989
2006

40.0

30.0

20.0

10.0

0.0
1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007

Table 6 Impediments to FDI: Survey Results of Japanese Firms: 2008
Number ofincidents

Share byincidents

category

FDI liberalization

66

21%

Restrictions on foreign entry

35

11%

Performance requirements

93%

Restrictions on overseas remittances and controls on foreign currency transactions

13

4%

Restrictions on the movement of people and employment requirements

93%

FDI facilitation

250

79%

Lack of transparency in policies and regulations concerning investment(institutional problems)

64

20%

Complicated and/or delayed procedures with respect to investment-related
regulations (implementation problems)

88

28%

Insufficient protection of intellectual property rights

11

3%

Labor regulations and related practices excessively favorable to workers

27

9%Underdeveloped infrastructure, shortages of human resources, and insufficientinvestment incentives

53

17%

Restricted competition and price controls

7

2%

316

100%

Figure 10 Rapidly Increasing FTAs in the World

Primary

40.4
8.9
19.2
6.0
4.2
3.0
18.6
15.7
14.5
6.2
28.3
5.4
0.4
0.0
38.5
10.8

36.1
8.9
18.2
6.6
8.3
5.0
19.3
21.2
10.9
3.0
29.9
6.9
0.2
0.0
30.0
13.5

Manufactures

40.6
8.9
19.2
5.9
3.5
2.3
18.6
7.3
14.9
6.8
27.9
5.2
0.4
0.0
39.0
10.4

III. A Shift from Market-Driven to Institution-Driven
Regional Economic Integration
Recent Development Rapid expansion of FTAs in the world (Figure 10)st Rapid expansion of FTAs in East Asia in the 21
century (Table 7)
 ASEAN has become a hub of FTAs
 3 initiatives have been proposed for region-wide
FTA: ASEAN+3, ASEAN+6, and APEC (TPP) APEC Meetings in 2010 in Japan
Special characteristics
 Comprehensiveness: trade and FDI liberalization,
facilitation, and economic cooperation

FTAs in East Asia (March 2010)
Bangkok Treaty(1976)
Thailand-Australia(2005) Malaysia-Pakistan(2008)
AFTA(1992)
Thailand-NZ(2005)
Japan-Philippines(2008)
Singapore-NZ (2001)
Singapore-India(2005)
Japan-ASEAN(2008)
Japan-Singapore (2002) China-Chile (2006)
Japan-Indonesia(2008)
Singapore-Australia (2003)Korea-Singapore(2006) Japan-Brunei(2008)
Singapore-EFTA (2003) Japan-Malaysia(2006)
China-NZ(2008)
Singapore-US (2004)
Korea-EFTA(2006)
Singapore-Peru(2009)
Korea-Chile (2004)
Korea-ASEAN(2006）
China-Singapore(2009)
China-Hong Kong (2004) Singapore-Panama(2006) Japan-Switzerland(2009)
China-Macao(2004)
TPP(2006)
Japan-Vietnam(2009)
Singapore-Jordan(2004) Japan-Chile (2007)
China-Peru(2010)
Japan-Mexico (2005)
Japan-Thailand (2007)
China-ASEAN(2005)
China-Pakistan (2007)

Motives behind FTAs in East Asia
 Increase market access through trade and FDI
 Improve FDI environment Promote domestic reform Rivalry between and among East Asian
countries Financial crisis in 1997-98
 Global financial crisis in 2008-

IV. Japan’s FTA (EPA) Policy
Developments
 In action: Singapore, Mexico, Malaysia, Chile,
Thailand, Indonesia, Brunei, ASEAN, thePhilippines, Switzerland, Vietnam
 In negotiation: Korea, GCC, India, Australia,
Peru Asia → Other regions

Special characteristics
 Trade and FDI liberalization, facilitation,
economic cooperation
 Improvement of business environment
Impacts
 Trade and FDI expansion
 Improvement of business environment
Examples from Japan-Mexico EPA: Protectionof IPRs, Adoption of mutual recognition oftechnical standards, improvement of security,
etc

Impacts of FTAs
 Trade and FDI expansion between andamong FTA members (short run effect) Economic growth (medium to long run
effect) Reduced production and employment (short
run effect)
Economic Obstacles to FTAs
 Opposition from non-competitive sectors

Motives Expand export market for Japanese firms
 Improve investment environment forJapanese firms
 Obtain energy and natural resources Promote structural reform in Japan
 Improve and establish good relationship Provide economic assistance to developing
countries
 Establish a region-wide FTA (CEPEA,ASEAN+6)

Impacts on GDP (%)
EAFTA (ASEAN+3)
Sim 1
Sim 2
Sim 3
Japan
0.01
0.44
0.44
China
0.13
1.66
4.72
Korea
1.13
3.56
3.55
Indonesia
0.07
1.74
3.94
Malaysia
0.39
5.83
8.62
Philippines
0.21
3.94
6.28
Singapore
0.06
4.22
4.24
Thailand
0.68
4.49
7.02
Vietnam
2.21
7.08
9.67
Other Souteast Asia
0.09
0.88
2.91
Australia
-0.03
-0.09
-0.09
New Zealand
-0.03
-0.06
-0.06
India
-0.04
-0.10
-0.10
Hong Kong
0.00
0.00
0.00
Taiwan
-0.06
-0.09
-0.08
NAFTA
0.00
-0.01
-0.01
EU15
0.00
-0.01
-0.01
Rest of the World
-0.03
-0.06
-0.06
ASEAN
ASEAN+3
ASEAN+6

0.36
0.14
0.12

3.60
1.18
1.02

5.67
1.93
1.68

（ASEAN+1）ｘ5
Sim 2
Sim1
-0.01
0.10
0.01
0.20
-0.04
0.20
0.07
1.00
0.51
3.30
0.20
2.20
0.10
2.30
0.80
2.80
2.33
5.00
0.11
0.50
0.01
0.20
0.00
0.10
0.31
0.50
0.00
0.00
-0.03
0.00
0.00
0.00
0.00
0.00
-0.02
0.00
0.41
0.04
0.05

2.14
0.30
0.31

CEPEA (ASEAN+6)
Sim 1
Sim 2
Sim 3
0.05
0.54
0.54
0.14
1.77
4.84
1.15
3.72
3.71
0.07
1.94
4.14
0.50
6.21
9.00
0.25
4.18
6.52
0.05
4.40
4.42
0.74
4.78
7.32
2.25
7.33
9.92
0.10
0.92
2.95
0.16
1.35
1.35
0.10
1.87
1.87
0.41
1.30
3.45
0.00
-0.01
-0.01
-0.07
-0.10
-0.10
0.00
-0.01
-0.01
-0.01
-0.01
-0.01
-0.03
-0.08
-0.08
0.39
0.17
0.19

3.83
1.30
1.30

5.89
2.05
2.11

V. Concluding Remarks

Impacts on Welfare ($million)
EAFTA (ASEAN+3)
Sim 1
Sim 2
Sim 3
Japan
6,436 29,554 29,336
China
624 17,952 54,233
Korea
5,945 18,819 18,719
Indonesia
693
4,527
7,906
Malaysia
1,466 10,443 13,393
Philippines
139
3,367
5,054
Singapore
1,802
7,610
7,765
Thailand
2,851
8,815 11,872
Vietnam
633
2,723
3,488
Other Souteast Asia
-27
691
2,338
Australia-723-1,684-1,694
New Zealand
-146
-230
-224
India
-510
-1,049-1,077
Hong Kong
-460
-691
-487
Taiwan-1,522-3,228-3,250
NAFTA-4,526 -11,843 -12,476
EU15-3,154-7,263-7,710Rest of the World -2,971-9,606 -10,038
ASEAN
ASEAN+3
ASEAN+6

7,557 38,174 51,816
20,562 104,500 154,104
19,183 101,536 151,110（ASEAN+1）ｘ5
Sim 2
Sim1
-903
1,935
-1,457
-301
-267
631
1,733
4,139
3,400
8,717
422
2,334
2,822
6,391
3,878
7,421
942
2,243
12
404
-152
359
-10
82
-602
-79
-69
-40
-753
-1,290-2,541-5,016-2,267-4,048-1,721-3,787
13,20910,581
9,818

31,64833,91334,276

CEPEA (ASEAN+6)
Sim 1
Sim 2
Sim 3
7,048 32,656 32,363
634 18,964 55,270
6,264 19,787 19,690
1,165
5,270
8,661
2,523 12,029 15,040
122
3,457
5,142
2,046
8,236
8,389
2,645
8,829 11,888
645
2,813
3,578
-1
729
2,379
4,832 11,669 11,682
267
1,655
1,669
-885
2,744 13,124
-515
-798
-589
-1,773-3,637-3,659-5,893 -14,282 -15,022-4,112-8,942-9,502-4,311 -13,410 -13,933
9,145 41,364 55,078
23,091 112,771 162,401
27,305 128,839 188,875

Japan can gain a lot from FTAs not only in East Asia
but also with countries in other parts of the worldsuch as the US, the EU, Latin American countries
 Japan should lead CEPEA and join TPP

FTAs face opposition from non-competitive sectors

For Japan, trade liberalization in agriculture is an
impediment Various measures including gradual phase-inliberalization, temporary assistance to negatively
affected workers, structural reform and other policy
measures can moderate the negative impacts during
the transition period

Need strong political leadership to promote FTAs












East Asia’s rapid economic growth has been attributable torapid expansion of trade and FDI, which in turn resulted
from trade and FDI liberalization
To achieve further economic growth, further trade and FDI
liberalization and facilitation would be effective
With difficulty in WTO liberalization, free trade agreements
are second-best solution
Region wide FTA should be established: EAFTA (medium
level), CEPEA (medium-level), TPP (high-level)
Gradual liberalization should be pursued .
Then expand it or merge with other FTAs to lead to global
trade liberalization

References

All the papers contained in Asian Economic Policy Review, vol 1 issue 2, December 2006
Takatoshi Ito, Akira Kojima, Colin Mckenzie, Shujiro Urata, "Editors' Overview"
Hadi Soesastro, "Regional Integration in East Asia: Achievements and Future Prospects"
T.J. Pempel, "The Race to Connect East Asia: An Unending Steeplechase"Charles Wyplosz, "Deep Economic Integration: Is Europe a Blueprint?"
Gordon de Brouwer, Arief Ramayandi and David Turvey, "Macroeconomic Linkages and Regional
Monetary Cooperation: Steps Ahead"
Razeen Sally, "Free Trade Agreements and the Prospects for Regional Integration in East Asia"
Fukunari Kimura, "International Production and Distribution Networks in East Asia: Eighteen
Facts, Mechanics, and Policy Implications "Siow Yue Chia, "Labor Mobility and East Asian Integration"

August 5 (Thu)
Lecuture 1
Prof. Jun-Hyeok Kwak

Jun-Hyeok Kwak is Associate Professor of Political Science at Korea University. He also serves as
Director of EAI Center for Values & Ethics and the Head of Center for Political Theory, Peace and
Democracy Institute, Korea University. He received his Ph.D. from the University of Chicago in
2002. Before joining the faculty at Korea University, he taught political thought at Kyungpook
National University.
His research interests lie at the crossroads of political thought from Socrates to Machiavelli andcontemporary political/ social theory, with concentration on republicanism, nationalism,
constitutionalism, democratic leadership, and human rights. His research currently focuses on
constructing reciprocal nondomination as a regulative principle that guides agonistic deliberation
between peoples in conflict as well as cultures in tension, with special but not exclusive attention toclassical republicans, such as Aristotle, Cicero, and Machiavelli. Besides, he inquires a way in which
reciprocal nondomination can be applicable to various subjects, including patriotism without
nationalism, deliberative democracy, democratic authority, civic responsibility, transnationalism, andmulticultural coexistence, etc.. He is now working on books entitled, Liberty as Nondomination:
Reconsidering Classical Republicanism, Machiavelli’s Silence, and Patriotism before Nationalism,
and running projects “Inherited Responsibility,” “Republican Leadership,” and “Multicultural
Coexistence and East Asian Community.”Inherited Responsibility and Reciprocal Non-domination:
Making Citizens Responsible for Historical Injustices

Jun-Hyeok Kwak (Korea University)
junkwak@korea.ac.kr

I. The Comfort Women Case in Northeast Asia
This year marks the eighteenth anniversary of the first Wednesday Demonstration in Seoul.
Over 900 times, the former ‘comfort women’ and other Korean citizens assembled in front of
the Japanese Embassy in Seoul to demand a sincere and official apology from the Japanese
government. However, the door of the Embassy is still firmly closed to the voices of thesurviving victims and the citizen-led protests. The Korean government similarly disregards
the aforesaid demands, citing the importance of maintaining a peaceful diplomatic
relationship with Japan. A phrase used on the website of the Korean Council for the Women
Drafted for Military Sexual Slavery by Japan (Korean Council hereafter) succinctly expresses
the feelings of the survivors: “Our tears have not dried up yet.”In this respect, the conception that responsibility for historical injustices committed by theprevious generation can be, and is, inherited to the next generation seems to be applicable tothe comfort women case. First of all, with the passage of time, fewer and fewer perpetratorsand victims are left. Without the theoretical basis of responsibility being passed down to thenext generation, historical injustices, such as the ‘comfort women’ case, will be buried andforgotten without ever healing the wounds of victims. Secondly, the principle of inherited
responsibility is expected to guarantee that no similar inhumane deeds will ever becommitted again. By recognizing the graveness of the injustices perpetrated in the past andthe difficulty of healing the wounds, we can share the idea that we must try to do our best
not to become either perpetrators or victims of the same injustice.
However, the ‘comfort women’ issue in the context of inherited responsibility is still stuck inthe middle of contentions without a viable solution. The Japanese government, which has
the role as the agent responsible for the wartime atrocities, tends to either deny the rationale
for any collective responsibility or limit the extent of such responsibility in terms ofrecompense and non-financial measures. In contrast, South Korean victims and protestors,
who have demanded from Japan an official apology and the acknowledgement of historicalwrongdoings, have been too unilateral or nationalistic to shape a non-ethnocentric
deliberation for thick reconciliation with Japan.
Based on these observations, analyzing the comfort women case in the context of inherited
responsibility, I will suggest civic responsibility with reciprocal non-domination as a viable
solution for the ‘comfort women’ case in Northeast Asia. Specifically, I intend to accomplish
the following aims. First, reviewing the theories of inherited responsibility, I argue that these
are not sufficiently applicable to the ‘comfort women’ issue. Two considerations areproposed in accordance with the “agent” bearing inherited responsibility and the “scope” of
its recompense. Second, I propose reciprocal non-domination as a regulative principle formaking citizens responsible for historical injustices in Northeast Asia. Here, reciprocal nondomination is presented as a future-centered regulative principle that encourages both
victims and wrongdoers to have a non-ethnocentric deliberative stance.
II. The Comfort Women Case in the Context of Inherited Responsibility
The ‘comfort women’ case has been a polemic issue in the context of inherited responsibility.
The first reason is that the agents responsible for these misdeeds have not been properly
defined. On the one hand, when we consider the state as an actor involved in inherited
responsibility, two limitations become apparent. First, the concept of the state does not fully
clarify the continuation of responsibility from the past to the present and into the future
because there is no shared and continued identity between the state responsible forhistorical injustices and the current Japanese government. Second, the issue of responsibility
may be delegated to a limited number of political officials or representatives, excluding
public participation. The Japanese government has actually adopted this position on theissue of state responsibility. For instance, Japan’s political leaders have reiterated that their
duty had already been wholly fulfilled because of the international treaties concluded after
the end of the Pacific War, such as the 1951 San Francisco Peace Treaty and the 1965 Treaty
on Basic Relations between Japan and the Republic of Korea. However, this focus on theinternational treaties limits the ability of ordinary Japanese citizens to participate freely inthe deliberation on the ‘comfort women’ issue. As the Japanese government is considered thesole agent in charge of the ‘comfort women’ issue and the government considers all
reparations fully made, its citizens have been expected to disregard this issue.
On the other hand, the theory of national responsibility, which considers the nation as anactor, may be more effective than that of state responsibility. First and foremost, because anation continues regardless of the passage of time, historical responsibility should notdisappear over time. Moreover, not only government officials but also ordinary citizens canbe active agents in addressing historical injustices. However, as a nation is not a tangible
reality but an “imagined community” that is short of legal and political substance, problems
may arise, such as sharing responsibility among citizens and remedying injustices in practice.
Further, appealing to the nation may likely accentuate national shame or purity. Thus
compensating victims may become less important than recovering national pride. In South
Korea, the ‘comfort women’ issue has been depicted as a national shame, causing the victims
to feel moral guilt, which in effect paradoxically reinforces the violation of their humanrights. Furthermore, the nationalists who have emphasized the emotional condemnation ofJapan have measurably impeded sincere or “thick” reconciliation.
The second reason why this issue cannot be dealt with by the existing arguments overinherited responsibility is that the scope problem remains unresolved. Simply put, the scope
problem indicates to which extent one should be responsible for historical injustices. As seenin Japan’s assertion that the problem of providing compensation for war crimes had alreadybeen resolved by the South Korean-Japanese Treaty in 1965, the Japanese government has

tended to confine the scope of its responsibility to legal and material responsibility, without
morally acknowledging its crime. As a result, the Japanese government fails to notice thatthe real demand of former ‘comfort women’ is the restoration of their dignity through thesincere admission of Japan’s wrongdoings. In contrast, South Korea has demanded Japan’s
acknowledgement of historic injustice, an official apology, and the revision of controversial
Japanese textbooks. Even if Japan considers not only legal/material responsibility but also
the restoration of the dignity, honor and human rights of the ‘comfort women’, the “politics
of apologies” constantly stimulates Japan, and an apology becomes more difficult as theinjustices in question were perpetrated a long time ago and as they were committed not by
the present generation but by previous ones.
The Agent Problem: State or Nation
The Japanese government still insists that all reparations for Japanese atrocities had been
made in accordance with the 1965 South Korean-Japanese Treaty and holds the view thatassuming legal responsibility and providing the state-to-state material compensation are
sufficient for its reconciliation with South Korea. A statement made by Cabinet Minister
Morihito Hosokawa during a plenary session of the upper house of the Japanese Diet clearly
illustrates the consistent and unchanging view of the Japanese government. He stated thatthe problem of compensating ‘comfort women’ was completely and finally resolved by the
1965 “Agreement Concerning the Settlement of Problems in Regard to Property and Claims
and Economic Cooperation” in the “Treaty on Basic Relations between Japan and theRepublic of Korea.” Thus, any additional action involving reparations would only be ahumanitarian effort motivated by compassion for ‘comfort women’ who underwent
tremendous suffering, rather than an obligation. In principle, the Japanese government has
tended to regard the state as the proper agent for taking responsibility for the ‘comfort
women’ issue, whereby only the state as an officially composed political entity can carry out
domestic and foreign policies regardless of the people living in its territory.
However, state responsibility cannot be a proper framework for solving the ‘comfort
women’ problem. There are two reasons for this. First, because of the lack of shared andcontinued identity between the empire of Japan and the post-war government of Japan, state
responsibility cannot guarantee that the responsibility for historical injustices done by theJapanese military through the end of World War II in 1945 would be transferred to thecurrent generation(Miller, 2007: 112). Although the state of Japan has remained despite
regime changes, the rationale of state responsibility is insufficient to persuade the state’s
members to be responsible citizens by taking responsibility for their predecessors’
wrongdoings. Worse still, state-centered responsibility inspires an idea that responsibility
for historical injustice does not exist if the victims and/or perpetrators have already passed
away. For instance, political leaders in Japan frequently adumbrate that demands for asincere official apology and compensation to the survivors of the ‘comfort women’ system
would fade away as the survivors die of old age or illness (Lee Hahm, 2001: 128). However,
it is inappropriate for the descendants, who enjoy the benefits the colonial rulers brought
about, to disclaim any responsibility for the harm the colonial rulers brought to thesurvivors, who still suffer from past injustices.

The second limitation of state responsibility is that the collective agency of taking
responsibility is likely to be restricted to a relatively small numbers of individuals, such as
diplomats and other government officials. We do not question the appropriateness of therepresentatives’ main role in inherited responsibility when public opinion is well formulated
through a democratic deliberation process. We do, however, consider the case in which
Japan does not place sufficient emphasis on democratic deliberation or does not institute any
deliberative process at all. In this case, the responsibility for historical injustices cannot be
maintained in terms of self-determination. Namely, there is no sincere expression ofrespect when there is only a decision made by political officials without a public consensus.
In addition, the insistence by the Japanese government that all reparations had been fully
made because of the earlier international treaties prevents a broader and deeper discussion
on the issue among its citizens. If we cannot expect a change in the attitude of the Japanese
government, it may be the ordinary Japanese citizens who could change the government. Yet
those who fail to acknowledge their obligation to remedy their ancestors’ misdeeds cannot
be expected to pressure their government to initiate feasible solutions and reconciliation.
The limitations of the theories of state responsibility can be complemented if the nation
rather than the state is considered as the proper bearer of inherited responsibility. The
continuity of a nation over time is a powerful rationale for why the future generation is
responsible for injustices perpetrated by the past generations (Miller, 2007: 151-9). However,
it is highly doubtful as to whether the ‘comfort women’ issue would ever be successfully
resolved based on the principle of national responsibility. First, solidarity spurred bynational commonality may provide us with a rationale for inherited responsibility, but
historical responsibility feasible is made feasible largely by actual politics, rather thanimaginative ties. Second, appealing to the nation might give priority to the restitution ofnational pride over the restitution of the victims’ dignity.
In short, inherited responsibility based on either the state or the nation cannot be a proper
ground for solving the ‘comfort women’ issue. For this reason, we need a new paradigm, notonly for the ‘comfort women’ issue but also for achieving thick reconciliation between Japanand South Korea.
The Scope Problem: Punishing or ForgettingWith respect to reparations for historical injustices, there have been two dominant positions.
The first position emphasizes that one party has to pay back whatever was lost or harmed,
without considering the prospective provision for restoring bilateral relations in the future.
No matter how straightforward this may appear, such a simple view of restitution haspractical weaknesses. On the one hand, in some cases, it would be impossible to restore what
was damaged. We can readily find a number of examples, such as the absence of the
expropriator, the victim, or the object taken (Vernon, 2003: 551; Kukathas, 2003: 170).
Actually, all of these three reasons can be found in the ‘comfort women’ issue. Thus, we needto define the problem of historical injustices by using a more sophisticated logic throughwhich one may use a compensatory system even in the absence of perpetrators, victims, andobjects taken. On the other hand, unilateral retribution without restoring relations may not
result in reconciliation between the involved parties but end in deadlock (He, 2009: 25-45).
The ‘comfort women’ issue exemplifies this. Whenever deliberating about the issue, we caneasily find that both Japan and Thus, this indicates the need for a deliberative stance forforward-looking reconciliation in which both parties can overcome the feeling of victimhoodand exclusive nationalism.
The second approach to address reparations for historical injustices is focused on theestablishment or reestablishment of current and future bilateral relations without resolving
the historical injustices themselves. This tactic of forgetting historical wrongdoings may
actually be used as a method to deny all responsibility for historical wrongdoings (Kukathas,
2003: 172; Miller, 2007: 139; Waldron, 1992: 13; 24-7). Denying one’s historical responsibility
would, of course, result in new conflicts between the two parties. For instance, in July 1995,
the Japanese government decided to establish a foundation named “Asian Women’s Fund”
to support former ‘comfort women’ (Han, 1995). Such an attitude, which focuses only on therestoration of bilateral relations in the future, actually aggravates anti-Japanese sentiments
because neighboring countries do not regard the creation of such a fund as a sincere attempt
at thick reconciliation (Schmidt, 2000: 68; 173). Another problem inherent in the restorationof bilateral relations without taking past wrongdoings into consideration is that it cannot
suggest any principle by which such inhumane atrocities could be avoided in future. It isagreeable that the present, in which we live, is precious and that we still face a wide range ofinjustices, inequalities, and unfairness. However, a past injustice hardly, if ever, becomes
justice because what the passage of time provides is not a change from injustice to justice but
a period of time in which we have to show justice by helping those in need.
Shortly put, a new principle is needed to resolve the ‘comfort women’ problem, throughwhich non-ethnocentric deliberation may be realized; the victim’s position will be restored
although nothing would truly replace what they lost; one’s responsibility for historicalwrongdoings will not be neglected; and the repetition of similar injustices will be prevented.
III. Civic Responsibility with Reciprocal-Nondomination
South Korean NGOs have played a pivotal role in drawing national and international
attention to the ‘comfort women’. At the citizens’ level, an increasing number of people inSouth Korea have been paying attention to and getting involved in the ‘comfort women’issue through channels such as the Wednesday Demonstrations, donations, and volunteer
activities. At the national level, as early as 1993, the South Korean National Assembly
enacted a law on providing support to former ‘comfort women’. At the international level,
the UN Commission on Human Rights published Radhika Coomaraswamy’s report on“Violence against Women, its Causes and Consequences” in 1996, 1998, 2001, and 2003. The
International Court of Justice published its final report in 1994 under the title of “Comfort
Women: An Unfinished Ordeal,” while the International Labor Organization (ILO) asserted
that the ‘comfort women’ system violated international laws. The attention paid to the‘comfort women’ issue in international society is also demonstrated by related parliamentary
resolutions passed in a number of countries, such as the U.S., the Netherlands, Canada, andthe EU. To facilitate NGO’s efforts and overcome the limitations of the existing solutions forthe ‘comfort women’ issue, I suggest ‘civic responsibility’ with reciprocal non-domination.
Civic Responsibility as a Framework
Inherited responsibility requires a framework of civic responsibility. Through such aframework, citizens may take responsibility collectively without suppressing theirindividual autonomy and dignity. At this juncture, civic responsibility is embodied at threelevels. That is, reciprocal recognition at the individual level, civic contestability at the statelevel, and civic decency at the international level.
First, a responsible citizen must recognize another community member’s need, even if they
have conflicting interests. This anthropocentric recognition of the other is possible if areciprocal understanding at the individual level is based not on self-interest or altruistic
devotion but on self-love, which can be extended to humanitarian considerations. In thissense, apart from acceptance, indifference, and approval, which are mainly employed byapproaches focusing on self-interest and individual choice, civic responsibility can be
implemented in specific conditions rooted in reciprocal recognition. To put it concretely,
acceptance does not approve of differences, indifference does not approve of individual
preferences, and approval does not approve of a will to coexist. However, tolerance in civic
responsibility accommodates differences with a clear preference and necessitates a will tocoexist despite differences. According to the individual level of civic responsibility, taking
responsibility for the ‘comfort women’ issue is never reduced to individual choice. In
addition, citizens of the victimized country may also try to prevent any violence against
local women that may be similar to the ‘comfort women’ system.
Second, at the state level, we need to establish an institution that can maintain reciprocity at
the individual level and guarantee civic contestability to check the institution. For this, therepublican conception of liberty as non-domination can provide us with an institution aimed
at preserving reciprocity among citizens, and every citizen should have the capacity to checkand monitor the institution’s arbitrary use of political power. By the same token, civic
responsibility based on liberty as non-domination can encourage citizens to check andmonitor the deliberation on the ‘comfort women’ issue to prevent the violation of liberty as
non-domination. As previously noted, the ‘comfort women’ debate in South Korea
frequently becomes a manifestation of extreme nationalism, which compounds the sufferingof former ‘comfort women.’ If this debate had focused on the restoration of liberty as nondomination rather than the healing of national pride, inherited responsibility would nothave guided all of the movements and discourse on the ‘comfort women’ issue, which havebeen based mainly on virulent nationalism.
Third, civic decency is required to apply civic responsibility at the international level. Taking
civic responsibility can be acknowledged by citizens as a way to dignify themselves, but thiswould occur only if it is articulated through democratic deliberation as ethical responsibility.
By the same token, taking inherited responsibility can be accepted by citizens as anextension of civic decency to other people beyond national boundaries only if it isconceptualized by democratic deliberation as a way of consolidating democratic legitimacy.
Actually, inherited responsibility itself is a subject of public deliberation, and so it isconceived neither as prima facie nor as a natural right granted by superhuman power.
Therefore, civic decency as a representation of citizens in a healthy democracy is imperativefor empowering citizens to juxtapose their compatriots’ civic responsibility with ethicalresponsibility for other peoples, particularly in terms of liberty as non-domination. In thisway, anyone who wishes to identify himself or herself with the achievements of his or her
fellow citizens or to find his or her dignity in them would voluntarily take the inherited
responsibility for the misdeeds of previous generations.
With civic responsibility, the ‘comfort women’ issue can be viewed as a question of inherited
responsibility in good shape. This is because not only political elites but also citizens would
actively participate in the deliberation and reach a consensus on how to resolve the issue
satisfactorily. Those who can imagine the grave results that may occur if the ‘comfort
women’ issue is not be resolved properly would persuade others earnestly to prevent thereoccurrence of similar injustices.
Reciprocal Non-domination as a Regulative Principle
There is one more point that we need to consider: how an effective discursive stance can becreated and properly operated. I suggest “reciprocal non-domination” as a regulative
principle that can guarantee equal power to both parties with the aim of facilitating
discussions between them.
Reciprocal non-domination, as a regulative principle in democratic deliberation, would
serve three roles (Kwak, 2009). First, reciprocal non-domination functions as a condition toestablish a discursive stance between countries in conflict over historical injustice. When adeliberative stance is guided, the focus is the conditions under which more open anddemocratic debate can be guaranteed. Reciprocal non-domination may become a coherent
ground that protects an individual from being subjected to the arbitrary will of others,
legitimizes legal and institutional interference and at the same time, draws the limits of suchinterference. For instance, if a victim were forced to forgive a historical injustice due to thepressure by the perpetrator, we could view the situation as a problem of inequality between
the powerful and the weak through the principle of reciprocal non-domination.
Second, reciprocal non-domination not only creates a deliberative stance but also enforces
the participants to follow the outcome of discussions. It is true that if we can simply rejectdecisions resulting from deliberation on the grounds that the involved parties inevitably
have dissimilar and contrary opinions, the deliberation stance itself becomes meaninglessand useless. However, if the result of the deliberation can also be regulated by that principle,
the participants can have reciprocal non-domination as a minimal condition as well as aninvestigation standard during the deliberation. For instance, if the Japanese government
refuses the result that it must acknowledge its historical injustices and apologize to former‘comfort women’, the other participants in the deliberation process can recognize that theJapanese decision violates reciprocal non-domination.

Finally, reciprocal non-domination should contain the process of internalizing liberty as nondomination as a normative principle. The minimal standard to reach an agreement throughdeliberation is reciprocity, which entails the identification of one’s status with thecounterpart’s status. However, reciprocity cannot be achieved automatically; it is shaped
through the daily experience of liberty as non-domination. In the ‘comfort women’ issue, theinternalization of liberty as non-domination can bring about the reciprocity between thevictims and the perpetrators. If the Japanese government viewed that its citizens might also
become victims of similar injustices, it would be far easier for the government to reach an
agreement that would be satisfactory not only to the present victimized party but also to theJapanese people themselves.
IV. Concluding Remarks: Policy Implications
With the exponential increase of exchanges in population and materials, the post-Cold War
period demands to formulate a regional community that transcends the boundary ofhomogeneous nation-states. Similar efforts to realize a European Union-like regional
community are being invested in East Asia. Yet, the case of Northeast Asian countries shows
the opposite side of the coin. Although there have been communications among politicalleaders to envision a regional community, the realization of such a community has become arhetorical or diplomatic game played between the regional powers.
The stagnation of historical reconciliation in Northeast Asia is one of the reasons why all of
diplomatic and scholarly endeavors do not seem to be sufficient to meet the demands ofreconstructing a regional identity. The opposing opinions and memories on the matter ofpast wrongdoings reproduce and aggravate the national adversity and conflict between
Northeast Asian countries, and nationalism acts as a big obstacle in the process of making apeaceful coexistence in the region. Certainly, there have been various endeavors to set up
dialogue on historical issues as well as textbooks and to share different experiences,
perceptions and knowledge. However, these attempts were not so much fruitful for
promoting a culture of peace but provocative of cynical pessimism.
In this context, I suggest civic responsibility with reciprocal non-domination as a viableapproach for solving past as well as present problems and constructing a sharedunderstanding in the region. Here, let me lay out briefly what policy implications may bepractically reasonable.
 Official Apology: The Japanese government should provide an official apology forhistorical injustices including the comfort women case. For the victims in the region,
an official apology for historical injustices is frequently regarded as nothing but lipservice. On the contrary, Japanese suffer from the demands for official apologies,
questioning why they must continue to apologize for historical injustices that took
place long time ago. Nevertheless, an official apology is imperative in terms of civic
responsibility with reciprocal non-domination, since it can open a public discourse
on wrongdoings by the previous generation and help citizens take historicalinjustices more seriously. In this context, I suggest that Yukio Hatoyama, Japan’sPrime Minister, should reinvigorate his original view that historical reconciliation isa very prerequisite for peaceful coexistence in Northeast Asia. Even if we
acknowledge that responsible citizens can call upon their governments to apologize
to victims and compensate them, it would be equally important to realize thatpolitical leadership has a crucial role in persuading fellow citizens to participate
actively in assuming inherited responsibility.
 Forward-Looking Reciprocity: Current civic endeavors for historical reconciliationin Northeast Asia are not so much forward-looking. Here forward-looking signifies afuture-oriented standpoint that aims simultaneously to restitute past victims andregulate inhuman actions in the future. As the comfort women case shows, theunilateral advocacy of restitution or retribution often goes well with the stubborn
denial of responsibility of past wrongdoings. If it so, any demand for official apology
as well as restitution can be helpless in the face of flimsy realism aimed at justifying
war crimes with Japan’s situation during the war. At this juncture, what we need is aregulative principle that can be equally applicable to the victim countries thatcommitted historical injustices similar to that of the comfort women case, such as
South Korea during the Vietnam War. Shortly put, there is a desperate need for a
forward-looking reciprocity through which the Northeast Asian countries can not
only restitute past victims but also prevent future inhuman actions.
 Multilateral and Non-ethnocentric Deliberation: The nationalist advocacies ofretribution in South Korea and China have much in common with their Japanesecounterparts in their efforts to find their philosophical and sociopolitical grounds,
such as the law of the jungle. Even scholarly deliberations for historicalreconciliation between the Northeast Asian countries have gradually gravitatedtoward the virulent antagonism spurred by strong nationalism. At this juncture, themultilateral and non-ethnocentric deliberation for historical reconciliation must be
equipped with a safety device that secures a more open and democratic debate
about irreconcilable understandings. In addition, we need the political persuasion of
civic responsibility that encourages citizens to participate voluntarily in adeliberative stance to resolve historical injustices. I believe that reciprocal nondomination can be a regulative principle that is conducive to regulate differences inopinions and power status between the victimized and perpetrating parties.
Multilateral and non-ethnocentric deliberation coordinated by reciprocal nondomination would become a future-oriented and conflict-regulating mechanism
through which present conflicts with respect to historical injustices would be
resolved and citizens not directly related to such conflicts would join the
deliberation process willingly to prevent history from repeating itself.
References
Han, Guk-Yeom, “Jesamcha Ilbongun Wianbu Munje Asia Yeondea Heoui” [The Third
Japanese Military Comfort Women Asian Solidarity Meeting], Gidokkyo Sasang, Vol. 436(1995).
Kukathas, Ghandran, “Responsibility for Past Injustice: How to Shift the Burden,” Politics,

Philosophy &Economics Vol. 2 (2003).
Kwak, Jun-Hyeok, “Coexistence without Principle: Reconsidering Multicultural Policies inJapan,” Pacific Focus, Vol. 24, No. 2 (2009)
Lee Hahm, Dongwoo, “Urgent Matters: Redress for Surviving “Comfort Women”,” inMargaret D. Stetz and Bonnie B. C. Oh (eds.), Legacies of the Comfort Women of World War II(New York: M. E. Sharpe, 2001).
Miller, David, National Responsibility and Global Justice (Oxford: Oxford University Press,
2007).
Nobles, Melissa, The Politics of Official Apologies (Cambridge: Cambridge University Press,
2008).
Schmidt, David Andrew, Ianfu – The Comfort Women of the Japanese Imperial Army of the PacificWar. (Lewiston, N.Y.: The Edwin Mellen Press, 2000).
Vernon, Richard, “Against Restitution,” Political Studies, Vol. 51 (2003).
Waldron, Jeremy, “Superseding Historical Injustice,” Ethics, Vol. 103, No. 1 (1992).

August 5 (Thu)
Lecuture 2
Prof. Dennis McNamara

Dr. Dennis McNamara, S.J. is the Park Professor of Sociology and Korean Studies at Georgetown
University. He also serves as Special Assistant to the University President for China Affairs. He
joined Georgetown University after receiving his PhD from Harvard University, and has gone on toserve as Chair of the Department, as Chair of University Rank and Tenure. Beyond the university, he
has created and chaired the biannual Georgetown Conference on Korean Society, and thesemi-annual conferences with the China’s Central Party School in Beijing.
He serves as a member of the Council of Foreign Relations in New York, and chairs the weekly
Korea Seminar at the Foreign Service Institute of the U.S. State Department. He is active in theInternational Studies Association and the International Sociological Association, where he has
chaired the Committee on Economic Sociology. In Asia, he participates in the annual conferences of
the APEC (Asia Pacific Economic Cooperation) Academic Centers. He maintains a continuing
agenda of research and occasion lectures in Seoul as Adjunct Professor in the Graduate School ofInternational Studies at Sogang University, as well as at Renmin University in Beijing, Waseda andSophia in Tokyo, and Thammasat University in Bangkok.
His major publications include Business Innovation in Asia - Knowledge and Technology Networks
from Japan (2009); “New Places but Old Spaces –Knowledge Hierarchies among Asian SMEs
Abroad” in Organization (2006); Market and Society in Korea – Interests, Institutions, and the
Textile Industry (2002), Corporatism and Korean Capitalism (1999), Textiles and Industrial
Transition in Japan (1995), and the Colonial Origins of Korean Capitalism (1990).
His current research interests include Japan’s soft power in the East Asia, and the interplay ofinnovation and property rights in China’s knowledge networks.

2008 GIARI Summer Institute My presentation – “Innovation and Regional

East Asia – The Knowledge Region

Integration, focusing on a Sociology ofRegionalism.”

Dennis McNamara
Georgetown University
GIARI 5 August 2010

 Basic concepts of knowledge (Nonaka), flows(Castells), Global Values Chains GVCs
(Gereffi).

 Regionalism (Yoshimatsu; Dent; ) and1

McNamara

techno-nationalism

2

2009 GIARI Summer Institute

McNamara

Knowledge Networks

 My presentation – “Japan’s Regional

Integration: Local System and Global
Strategy. “ Focus – structuring (Giddens) of flows in the

and Technology Networks from Japan (Routledge2009) Hubs or nodes in global value chains as locus

acquisition and application of ideas.

 Text: Business Innovation in Asia - Knowledge

for knowledge creation and exchange –agglomeration, clusters, network holes Data: Japan’s production networks in East

Asia (China, S. Korea, Thailand) in autos,
electronics, and textiles.
 Thesis – upgrade from production toknowledge networks
3

McNamara Knowledge Nodes (McNamara) = strategic

locations for innovation through knowledge
flows

4

Table A: Internet Users/ 100 population
2008

Knowledge Societies
 Historical Shift: beyond energy, technology, or financecapital to recognition of knowledge as driver of
economic growth Links to global knowledge flows critical fordevelopment (e.g., global standards, “best practice”)
 Comparative analysis of national innovation systems

5

McNamara

McNamara

6

Country

Percent of Internet Users

China
Indonesia (2007)
Japan (2007)
Korea (ROK)
Malaysia
Singapore
Thailand (2007)

22.3
10.79
68.85
77.44
62.54
69.98
21

Table B: High Technology Exports as % of
Total Value of Exports, 2007
Country

Share of High Tech
Exports

China

29.69

Indonesia (2007)

10.83

Japan (2007)

18.94

Korea (ROK)

33.46

Malaysia

51.7

Singapore

46.47

Thailand (2007)

26.55

7

Filing/R %&D
Residen
t

China

20.63

93.30

1.72

49%

Indonesi 0.38
a
87.42
Japan

1.26

No data-

2,716.58

2.785%

S. Korea 116.18

2,598.01

4.1

73%

Malaysia 1.66

20.33

No data

7%

Singapor 3.13
eThailand 1.96

142.23

0.15

8%

14.42

No data

6%

8

Table D: Patent Grants 2008
Country

Resident
Grant

Australia 923
China #3 46,590
Japan #1 151,765
Mexico 197
ROK #4 61,115
Russia22,260Fed.
U.S.A.
77,501#2

Techno-regionalism in East Asia

NonResident
Grant

Total
Grants IP fundamental to recognition of standards

10,93847,11625,185
10,24322,408
6,548

11,86393,706
176,950
10,44083,52328,808

 Continuity of state role in shift from80,271

157,772

 Techno-nationalism among Northeast

9

Goal - Knowledge Region Hubs in global value chains for knowledge

creation and exchange – agglomeration,clusters, network holes in major urban
centers such as Tokyo, Beijing, Bangkok,
Singapore, Seoul Focus – Local: National Innovation Systems
 Focus – Regional: Formation and

11

Table C: Patent Intensity, 2006
Country Filings/ Filings/
GDP
Pop

Implementation of Standards, especially ofIntellectual Property Rights– harmonization of IP regimes the basis fortechno-regionalism

techno-nationalism to techno-regionalism,
e.g., “open innovation.”

Asian firms may undermine technoregionalism
10

References McNamara, Business Innovation in Asia –Knowledge and Technology Networks fromJapan.

 Obama, Barrack. September 2010. “A

Strategy for American Innovation.”
www.whitehouse.gov

 “The OECD Innovation Strategy.” May2010. www.oecd.org
12

Dennis McNamara
Georgetown University
GIARI 5 August 2010

East Asia – the Knowledge Region
References

Cao, Cong, Richard P. Suttmeier, and Dennis Fred Simon. 2009. "Success in State Directed
Innovation? Perspectives on China's Medium and Long-term Plan for the Development of
Science and Technology." Pp. 247-264 in The New Asian Innovation Dynamics, edited by
Anthony P. D'Costa and Govindan Parayil. New York: Palgrave Macmillan.
Castells, Manuel. 1996. The Rise of the Network Society. Volume I, The Information Age:
Economy, Society and Culture. Malden MA: Blackwell.
Drucker, Peter. 1994. Post-Capitalist Society. New York: Harper & Row.
Hatoyama, Yukio. 2009. The New Growth Strategies (Basic Policies): Towards a Radiant Japan.
Tokyo: Cabinet of the Hatoyama Administration. Online Available:<http://www.oecd.emb-japan.go.jp/The%20New%20Growth%20Strategy.pdf> (accessed
6 February 2010).
Hobday, Michael. 1995. Innovation in East Asia: The Challenge to Japan. Cheltenham, UK:
Edward Elgar.
JIPA. 2010. "JIPA Webpage." Tokyo: Japan Intellectual Property Association (JIPA). Online
Available: <http://www.jipa.or.jp/english/what/index.html> (accessed 11 February 2010).
JPO. 2009. "Japan Patent Office Annual Report 2009." Tokyo: Japan Patent Office (JPO).
Online Available HTTP:<http://www.jpo.go.jp/cgi/linke.cgi?url=/shiryou_e/toushin_e/kenkyukai_e/annual_report
2009.htm> (Accessed 2 February 2010).
Keller, William W., and Richard J. Samuels. 2003a. "Innovation and the Asian Economies." Pp.
1-22 in Crisis and Innovation in Asian Technology, edited by William W. Keller andRichard J. Samuels. Cambridge: Cambridge University Press.
—. 2003b. "Continuity and Change in Asian Innovation." Pp. 226-241 in Crisis and Innovationin Asian Technology, edited by William W. Keller and Richard J. Samuels. Cambridge:
Cambridge University Press.
McNamara, Dennis L. 2009a. Business Innovation in Asia : Knowledge and Technology
Networks from Japan. Milton Park, Abingdon, Oxon ; New York: Routledge.
—. 2009c. "Japan’s New Model of Innovation and Regional Integration in East Asia." in Annual
Meeting of the International Studies Association (ISA), edited by Session WB 48:
Regionalism in Asia. New York, New York.
—. 2009f. "Investing in Innovation Abroad - Law versus Market for Japan in China." in
Conference on Evidence-based Anti-corruption Policy, edited by Thailand National AntiCorruption Commission (NACC) in collaboration with the World Bank. Bangkok: Siam
City Hotel.

METI, International Economic Affairs Bureau, Trade Policy Bureau. 2009a. 2009 White Paper
on International Economy and Trade (Summary). Tokyo: Japanese Ministry of Economy,
Trade, and Industry (METI). Online Available HTTP:
www.meti.go.jp/english/report/downloadfiles/2009WhitePaper/summary.pdf> (Accessed
1 December 2009).
—. 2009c. Summary of the White Paper on Manufacturing Industries (Monodzukuri) 2009.
Tokyo: Japanese Ministry of Economy, Trade, and Industry (METI); Ministry of Health,Labour and Welfare, and Ministry of Education, Culture, Sports, Science and Technology.
Online Available HTTP:<www.meti.go.jp/english/report/data/Monodzukuri2009_01.pdf> (Accessed 1 December2009).
Morris-Suzuki, Tessa. 1994. The Technological Transformation of Japan: from the Seventeenth
to the Twenty-first Century. Cambridge: Cambridge University Press.
Preda, Alex. Information, Knowledge, and Economic Life – A Sociology of Markets. Oxford
2009.
Rouvinen, Petri. 2010. “Policies for Knowledge Societies at Global Forefront.” Japan Spotlight(January/February): 10-12.
Samuels, Richard J. 1994. "Rich Nation, Strong Army:" National Security and the TechnologicalTransformation of Japan. Ithaca: Cornell University Press.
Whittaker, D. Hugh, and Robert E. Cole. 2006. "Conclusions and Reflections: Emergent
Models." Pp. 298-320 in Recovering From Success: Innovation and Technology
Management in Japan, edited by D. Hugh Whittaker and Robert E. Cole. New York:
Oxford University Press.
WIPO. 2009. World Patent Report: A Statistical Report (2009). Geneva: World Intellectual
Property Organization (WIPO). Online Available:<http://www.wipo.int/export/sites/www/ipstats/en/statistics/patents/pdf/wipo_pub_941.pdf>(accessed 8 February 2010).
Wyckoff, Andrew and Miriam Koreen. 2010. “Making the Most of Open Innovation in Postcrisis Era.” Japan Spotlight (January/February): 6-9.
Yamauchi, Terunobu. 2010. “How Can Industrial Technology Policy Enhance Innovation?”
Outline of Interim Report by Industrial Science & Technology Policy Committee,
Industrial Structure Council.” Japan Spotlight (January/February): 20-21.
Yoshimatsu, Hidetaka. 2006. "Industrial Competition and Technology Standards: TechnoRegionalism in East Asia." in RCAPS Working Paper No. 06-1 (June). Beppo, Japan:
Ritsumeikan Center for Asia Pacific Studies (RCAPS).

August 6 (Fri)
Lecuture 1
Prof. Christopher Hughes

Christopher Hughes is Professor of International Politics and Japanese Studies in PAIS, as well as a
Research Associate at the Centre for the Study of Globalization and Regionalization, University of
Warwick. Previously he was Research Associate at the Institute for Peace Science, Hiroshima
University (IPSHU). From 2000-2001 he was Visiting Associate Professor, and in 2006 he held the
Asahi Shimbun Visiting chair of mass Media and Politics, both at the Faculty of Law, University ofTokyo. He holds degrees from the Universities of Oxford (BA and MA), Rochester (MA), andSheffield (MA and PhD). He is an honorary Research Associate at IPSHU and has been a Research
Associate at the International Institute for Strategic Studies (IISS) and Visiting Scholar at the East
Asia Institute, the Free University of Berlin. He is currently the Edwin O Reischauer Visiting
Professor of Japanese Studies at the Department of Government and Reischauer Institute, Harvard
University, for 2009-2010.
His research interests include Japanese foreign and security policy; Japanese international political
economy; regionalism in East Asia; Japanese radicalism and terrorism; post-Cold War traditional andnon-traditional security policy, and North Korea's external political and economic relations.
Currently Professor Hughes is working on projects which examine Japan's response to issues ofglobalization and governance; the intersection of globalization and security, with particular reference
to the Asia-Pacific region; the impact on regional and global security of missile defense; and thefuture of multilateral and bilateral security and trading arrangements in the Asia-Pacific.
Professor Hughes is the author of Japan's Economic Power and Security: Japan and North Korea(Routledge, 1999) and Japan's Security Agenda: Military, Economic and Environmental
Dimensions (Lynne Rienner, 2004), Japan's Remergence as a 'Normal' Military Power? (Oxford
University Press, 2004), and Japan's Remilitarisation (Routledge 2009), and co-author of Japan'sInternational Relations: Politics: Economics and Security (Routledge, 2001 and 2005). He has
published articles in English and Japanese in journals such as International Affairs, Asian Survey,
Survival, The Pacific Review, Review of International Political Economy, The Australian Journal ofInternational Affairs, Security Dialogue, Pacific Affairs, and Orbis. He is co-editor of The Pacific
Review.

Abstract

The DPJ's new (but failing), foreign policy grand strategy : implications for the US-Japan
alliance, Sino-Japanese ties, and East Asian regionalism
Christopher Hughes (The University of Warwick)
The DPJ administration came to power in September 2009 promising new directions in Japanese
foreign and security policy. The DPJ thus far has been heavily criticised for the opacity of its foreign
policy, and appears to have precipitated a mini-crisis in US-Japan relations, especially over US basefacilities. This talk dissects the DPJ's policy, asking what is new in its strategic thinking, how the
DPJ has thus far sought to chart a new course in ties with the US and China, its vision of East Asian
cooperation, and the impact on East Asian regionalism, but also what are the international anddomestic obstacles these policies are already encountering.

The DPJ’s New (but failing)
Foreign Policy Grand Strategy

DPJ Foreign & Security Policy• DPJ c. 8 months; work in progress; alreadysome ‘failures’; preliminary assessment of
impact on Japan’s trajectory• DPJ ‘fear and loathing’ in Japan and US• Fools: naïve; wrongheaded; confused; nopolicy?
• Knaves: untrustworthy; hidden agenda?
• DPJ shift (or drift) significant from LDP
trajectory• Negative for US-Japan; negative for Japan• DPJ to be cajoled/coerced on right path (byUS?)

Christopher Hughes
University of Warwick

DPJ Foreign & Security Policy

DPJ Foreign & Security Policy• Re-evaluation; more prosaic conclusions!
• DPJ explicit, coherent, sophisticated, realistic,
grand strategy/vision:--not necessarily problematic for US--BUT immediate and long-term change and friction• DPJ implementation difficulties:--domestic (leadership coordination; Ozawa;
internal divisions; coalition partners; experience;priorities; focus on process; posturing; ‘yuai’)--international (US resistance; China challenge; NK)• DPJ pressure result in non-decisions;‘satisficing’; curtail ambitions• DPJ defaults to LDP-type strategy, esp. short
to medium term
• US-dependent, East Asia underdeveloped• DPJ longer term may yet attempt to pursue
ambitions; create tensions with US• DPJ and Japan lose options, if indeed had any?

What is the DPJ vision?

US-Japan Alliance• Strong/active international power• Recognition of multi-polarity (US relative decline;
China’s rise; Japan decline); escape Cold War, not postwar• Japan risks US-China conflict or condominium• Japan enhance position by breaking past behaviour(over-dependence on US; shirking responsibilities;‘closed’ nationalism; ‘blocking regionalism’)• Japan greater balance between US and China(recentring?)• Cognitive, not tactical, East Asian regionalism• Emphasis on UN and multilateralism• Japan restore autonomy key for ‘normal’ ally/partner• DPJ not anti-US; genuine
recognition/rationalisation ofimportance/sustainability USJapan alliance (deeper than LDP?)• DPJ reorient alliance within
Constitution and security treaty• ‘Equal alliance’; no followership;less military out of area; focus on
East Asia• ‘Multilayered alliance’ (finance,
climate, nuclear)

US-Japan Alliance• Japan withdraw Indian Ocean; civilian/’tokui’contribution; more meaningful?
• Okinawa/Futenma--DPJ questions USMC role; manifesto
commitments; attempt to sustain alliance--Japan domestic pressures and mishandling(and by US)--DPJ plans keep USMC in Okinawa; accepted
deterrence rationale; risk Okinawa andcoalition opposition--Resolution? (will Schwab+Tokunoshima fly?);
Gridlock? (same mistakes; so different from
LDP?)

Japan and East Asia
• DPJ and LDP continuities (Koizumi EAC 2002;
FTA/EPA/CEP; financial regionalism)• LDP ‘US-Japan good = good Japan-East Asia relations’;
regionalism proliferation/dilution• DPJ commit EAC; enmesh China in working macroregion; open Japan; less ideology & history• US exclusion and concerns of ‘bodyguard ‘role• DPJ ‘open regionalism’, not bloc; EAC core regional
format; values & multi-layered functional cooperation;
Japan not cede leadership to China• US interest for integrated cooperative region• DPJ reality check; APT vs EAC?

Japan and East Asia/Other Regions• Australia (security/ACSA &whales)• India (DPJ continuity, but
limited mileage?)• Russia (Hatoyama pledges
and edge?; DPJ Action Plan
continuities; already cracks
in relations, DPJ same
demands/lack of patience)• EU (EU Action Plan drifts
under LDP and DPJ?)

US-Japan Alliance• US realignment/bases--DPRI continues mainland--DPJ caution on HNS and SOFA
• Nuclear issues--’secret pacts’, DPJ not press on
NCND--DPJ caution NFU/US strategy, NE
Asia NFZ--DPJ more cooperative on ‘nuclear
free world’?
• BMD, BISC

Japan and East Asia
• Japan-China--DPJ bandwagoning with China?
--equally tough bilateral stance? (militarytransparency; East China Sea; foodsafety); competition Mekong Delta• Japan-North Korea--Hatoyama mission; coalition; North Korea
probes; coordination issues ?
--DPJ hard-line on nuclearisation; sanctions(link to SPT?); ship inspections billpassed; new Headquarters for the
Abduction Issue; sanctions tightened
post-Cheonan incident

Japan and Multilateralism/
Defence Policy• DPJ increase activism in UN?
--Japan UNSC President April 2010; Amano
IAEA; Haiti mission--DPJ revise UNPKO 5 principles?; press Iran?
• DPJ shift defence policy?
--maintain anti-piracy mission Gulf of Aden--procurement continuity fornational/coalition versus same threats; noshift to resources for multilateral role--NDPG delayed; PM Advisory Groupemphasis on multilateral; but not Ozawa
UN-centred vision?

Conclusions• DPJ has distinct and plausible policy
vision BUT hard to implement• US over-anxious/mistaken strategy?
--LDP continuities; DPJ plans forproactive Japan to be welcomed; DPJ
domestic & international constraints
on full policy realisation--DPJ long-term not abandon vision;
best for US to work with Japan todevelop viable strategy; obstruction
only enhance tensions?

August 6 (Fri)
Lecuture 2
Prof. Peter DrysdalePeter Drysdale is Emeritus Professor of Economics and a Visiting Fellow in the Crawford School of
Economics and Government at The Australian National University. He graduated in Economics
from the University of New England, took his PhD in Economics from the Australian National
University and has held academic positions there (since 1963), Harvard University, Yale University,
Columbia University, Hitotsubashi University, Tokyo University, Kyoto University, Oxford
University, Renmin University in Beijing, Peking University and several other universities in Japan.
He is widely recognised as the leading intellectual architect of APEC. He was founding head of theAustralia-Japan Research Centre and is well known internationally for the leading role he has played
in work on East Asian and Pacific economic cooperation.
He is the author of a large number of books and papers on international trade and economic policy inEast Asia and the Pacific, including International Economic Pluralism: Economic Policy in East
Asia and the Pacific. He is recipient of the Asia Pacific Prize, the Weary Dunlop Award, theJapanese Order of the Rising Sun with Gold Rays and Neck Ribbon, the Australian Centenary Medaland he is a Member of the Order of Australia. He is presently Head of East Asia Forum(www.eastasiaforum.org), the East Asian Bureau of Economic Research (EABER) (www.eaber.org)
and the South Asia Bureau of Economic Research (SABER) (www.saber.org).

Drivers of the East Asian andPacific community
 commitment to economic development

Building an East Asian or Asia
Pacific Community
Peter Drysdale
Crawford School of Economics and Government
The Australian National University

 framework of an open global economy andpost war security
 intensity of economic and political interaction
 trans-Pacific foundations
 now encompassing the huge relationship with
China and India
 new role and responsibilities in global affairs

Waseda Summer Institute Lecture, 6 August 2010

The community we have diversity of economics, politics, culture andvalues the baggage of history
 problems of leadership: the ASEAN anchor
 reactive and inward-looking origins ofregionalism
 inadequate institutions: financial andmonetary, trade and political

Creating an East Asian andAsia Pacific Community
 transforming ASEAN+3 and EAS: principles
and practice who's in and who's out: US does not need to bein but needs to be tied in; the core is EAS
 US needs to be re-assured and linked
 EAC and trans-Pacific dialogue in tandem:
action on both fronts at once complementarity of EAC and APC ideas
 practical steps forward

Imperative of new East Asianand Asia Pacific arrangements
 rise of China and India
 East Asia's place in the world: global impact
and feedback need for new security framework: objective offraternal relations in Japanese plan strengthening regional architecture
 connecting to trans-Pacific and global
arrangements

Students

Outline of the presentation
1. Background
2. Problem
3. Method
4. Result
5. Evidence
6. Conclusion

Regional Environmental Cooperationin East Asia
ODAIRA, Takeshi
i071329@gmail.com

Aug., 20101

1. Background of the research(Con. 1-ii/iii.) Background• Hypothesis of the literature:bilateral & multilateral formal cooperation
is developing to quasi-private cooperation

i. Global environmental cooperation has notbeen successful yet → Regional cooperationis needed.
ii. Matsuoka et al. (2008) formulated hypothesis:
Regional environmental cooperation in East
Asia develops from official to quasi-private
level.
iii. However, the literature lacks sufficient
empirical proof. → Case studies are needed.

2(because relying only on the ODA is not sustainable)• Weakness of the literature:
1. Regional coverage is limited: only on North East Asia
(though the hypothesis covers East Asia)
2. Bilateral coverage is limited: only on multilateral level(though the hypothesis covers bilateral cooperation)

3

2. Research Problem

4

3. Method to get the result• Qualitative case studies
with official documents and press releases• 3 cases of East Asia Summit participants
are covered

How does the regional environmental
cooperation develop in East Asia?

(= Developing-Developed country relations)– China-Japan– India-Japan– ASEAN-Japan
5

6

Diagram: Result of the research

4. Result of the research(development of environmental cooperation in East Asia)

Asian environmental cooperation is developing…

• Ad-hoc
Official • Institutionalized(1) from the ad-hoc official
Quasi-Private• De facto• ???

(2) through the institutionalized official• ???
Regime? • ???

(3) to the de facto quasi-private cooperation.
785-A) Official ad-hoc cooperation:
environmental Yen-loan projects

5. Supporting Evidence
Official environmental cooperation= Projects to improve environmental qualities

A) Ad-hoc level: environmental Yen-loan projects
having positive environmental impacts in (China- /India- / ASEAN-Japan) casesB) Institutionalized level: environmental policy
dialogues
being implemented in (China- / India- / ASEANJapan) cases• China-Japan (1988-): $10 billion; 30% of ODA;
e.g., reforestation, water supply & quality• India-Japan (1989-): $6 billion; 90% of ODA;
e.g., reforestation, water supply & quality• ASEAN-Japan (1974-): $120 billion; 7% of ODA;
e.g., water supply & quality, sewage system

Quasi-private environmental cooperationC) De facto level: Eco-Business matching by govn’ts
creating contracts in (China- / India-Japan) cases

9105-B) Official institutionalized cooperation:
long-term cooperation dialogues

5-C) Quasi-private de facto cooperation:
green business matching by govn’ts= Policy dialogues for long-term environmental
cooperation= Fora to arrange business contracts for environmental
projects, which are promoted by governments• China-Japan (1994-): e.g., “Sino-JapaneseEnvironmental Protection Joint Committee”• China-Japan (2006-): 200 companies; 40
contracts; e.g., “Sino-Japanese Energy
Efficiency/Environment Forum” (1st-4th)• India-Japan (2006-): e.g., “Inter-Governmental
Consultations on Environment and Climate
Change”• ASEAN-Japan (2003-): e.g., “ASEAN-Japan
Dialogue on Environmental Cooperation”

11• India-Japan (2006-): 100 companies; 10
contracts; e.g., “India-Japan Energy Forum”(1st-3rd)12

6. Conclusion
1. The hypothesis was supported– There exists empirical background leading to De facto
quasi-private environmental cooperation in East Asia.
– Regional cooperation has environmentally a positive
impact in East Asia.

2. Limitation of the research: should be addressed– Coverage of the area (lack of the number of cases)– Causal explanations (lack of explanations on factors ofdevelopment of the levels cooperation)
13– Future implication (De jure/De facto regime ?)The Importance of the Maritime Sphere for NEA

Ocean Governance, Maritime
Security, and the Consequencesfor Regional Cooperation in
Northeast Asia
Christian WIRTH
Waseda University
Global Institute for Asian Regional Integration (GIARI) Summer
Institute, Waseda University, August 2nd 2010
Source: Wikimedia at: http://commons .wikimedia.org/wiki/File:East_China_Sea.PNG.

1

2

Military Security

Analyzing Maritime Affairs in Northeast Asia
• Northeast Asian and US policy-makers continue to put emphasis on
modernization of air-forces, air-defence and missile defence
systems, and their navies in particular(IISS 2010; Zhu 2009; Hartfiel and Job 2007; Holmes and Yoshihara 2010)• Concerns with national, energy and economic security, of primaryinterest, also for academics, and China observers in particular(Blanchard 2003; Drifte 2009; Deans 2000; Hagström 2005; Koo 2009; Manicom 2008; Jiang 2007;
Holmes and Yoshihara 2008; Valencia 2007)(Green 1999; Christensen 1999; Fravel 2005; Ross 2009)• Narrow focus on territorial disputes and the related but often
unspecified geopolitical, legal, and economic concerns
Sources: left: DoD (2006:15); right: Noer and Gregory (1996:3)

3

Energy Security

4

Economic Security

Source: Noer and Gregory (1996:18)

Source: Noer and Gregory (1996:66)

5

6

Environmental Security?

The Persistence of Modern Conceptions of State andTerritory• Persistent conviction that the ocean as mankind’s last frontier must be
developed
Therefore, need for territorial delimitation between the void of the highseas and the areas to be developed under the leadership of national
authorities a prerequisite
Japan: stagnating economic growth, decline of the industrial sector andde-population of regional areas contribute to sense of crisis
China: 8% growth/year is an imperative of national security• Contradiction with the ocean serving as surface for the free circulation of
goods and communication, as well as its sustainable use
15th century European ideology of mercantilism and threat perceptions ofnational containment or isolation

Source: left: J.R.V. Prescott (1993:25 -6); right: Joseph R. Morgan and Mark J. Valencia (1993:129)

7

8Implications for Northeast Asia: the persistence of modernity
and the ‘territorial trap’ of international relations studies

The Persistence of Modern Conceptions of State andTerritory(Agnew 1994)• IR studies’ assumption of a world system comprised of sovereign
territorial nation states is not only unsuitable, but also reifies the‘inside/outside’ (border reinforcing) paradigm (Walker 1993)• Persistent idea that inside state borders is order and security, while
outside is anarchy and danger• Central government is seen as guarantor of order (hierarchy instead ofanarchy), this however, leads to low governing capacity, the pursuit ofpower-politics, and the neglect of domestic issues• The legitimacy of a government therefore seems to depend on how goodit can protect state boundaries rather than how well it is able to provide
for public goods

This problem is also persisting in area studies and even economics
Weak awareness of the ocean as comprehensive social (economic) andecological system, and neglect of connecting aspects as a consequence• Need to redefine the content and the meaning of sovereignty, and with it
the question of what legitimizes political authority• Need for greater focus on networks and flows (communication, people,
goods) instead of the territorial units of social systems through thedevelopment of alternate approaches to the study of Northeast Asia

910

IC G, In te rn a tio n a l C risis Gro u p (2 0 0 8 ) ’C h in a ’s Qu e st fo r Oil ’, Asia R eport , N o . 1 5 3 , 0 9 .0 6 .0 8 , a va ila b le : h ttp ://w w w .crisisg ro u p .o rg /h o m e /ind e x.cfm ? id=2 6 15 &l=1,
a cce sse d 0 4 .1 1 .0 8 .

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Gra h a m , E. (2 0 0 6 ) Japan ’s Sea Lane Security, 1940 -2004:A m atter of life and death?, Ab in g d o n , N e w Yo rk: R o u tle d g e .
Gre e n , M .J. (1 9 9 9 ) ‘M a n a g in g C h in e se Po w e r: Th e vie w fro m Ja p a n ‘, in Engaging C hina: the m anagem ent of an em erging pow er , Jo h n sto n , A.I., R o ss, R .S., (e d s.),
L o n d o n /N e w Yo rk: R o u tle d g e .
H a g strö m , L . (2 0 0 5 ) ‘Qu ie t Po w e r: Ja p a n ’s C h in a Po licy in R e g a rd to th e Pin n a cle Isla n d s ‘, Pacific R eview , Vo l. 1 8 , N o . 2 :1 5 9 -1 8 8 .
H a rtfie l , F., Jo b , B.L . (2 0 0 7 ) ‘R a isin g th e R isks o f Wa r: d e fe n ce sp e n d in g tre n d s a n d co m p e titive a rm s p ro ce sse s in Ea st Asia , Pacific R eview , Vo l. 2 0 , Iss. 1 :1 -2 2 .
H o lm e s J.R . a n d Yo sh ih a ra T. (2 0 0 8 ) ‘Ja p a n ’s Em e rg in g M a ritim e Stra te g y: Ou t o f Syn c o r Ou t o f R e a ch ? ‘, C om parative Strategy , Vo l. 2 7 , Iss., 1 :2 7 -4 3 .
H o lm e s J.R . a n d Yo sh ih a ra T. (2 0 1 0 ) ‘Th e N e xt Arm s R a ce ‘, in The D iplom at , a va ila b le : h ttp ://a p a c2 0 2 0 .th e -d ip lom a t.co m /fe a tu re /th e -n ext-a rm s -ra ce /, a cce sse d
2 0 .0 3 .2 0 1 0 .

11

Wa lke r, R .B.J. (1 9 9 3 ) Inside/Outside International R elations as Political Theory , C a m b rid g e : C a m b rid g e U n iversity Pre ss.
Ya m a m o to , H . (2 0 0 6 ) ‘H isto ry o f th e In te n a tio n a l Asso cia tio n o f M a ritim e U n ive rsitie s (IAM U ) ‘, Ship and Ocean N ew sletter Selected Papers , N o . 7 :1 9 -2 1 ,a va ila b le : h ttp ://w w w .so f.o r.jp /e n /in d e x.p h p , a cce sse d 0 1 .0 4 .2 0 1 0 .
Yo sh ika w a , Y. (2 0 0 7 ) ‘Th e U S Ja p a n -C h in a M istru st Sp ira l a n d Okin o to rish im a ’, Japan Focus , Octo b e r 1 1 th , a va ila b le : h ttp ://w w w .ja p a n fo cu s.o rg / -Yu kie YOSH IKAWA/2 5 4 1 , a cce sse d 2 0 .0 3 .2 0 1 0 .
Zh a D a o jio n g , C h a n Ge ra ld , H u We ixin g (e d s.) (2 0 0 0 ) C hina`s International R elations in the 21 s t C entury: D ynam ics of Paradigm Shifts , L a n h a m : U n ive rsity Pre ss
o f Am e rica .
Zh u , Fe n g (2 0 0 9 ) An Em e rg in g Tre n d in Ea st Asia : M ilita ry Bu d g e t In cre a se s a n d Th e ir Im p a ct ‘, Asian Perspective, Vo l. 3 3 , N o . 4 :1 7 -4 5 .

12Human rights and regionalism: thetopic and its value

Human Rights Exchanges in
Asia: Discourses and Legal
Practice The importance of regional human rights

systems:a) complementarity andsupplementarity with the UN anddomestic systems;b) flexibility;c) inclusion of regional peculiarities.

Elisa Nesossi
SOAS-University of London

 No Asian human rights system but rich

GIARI Summer Institute 2010debates on human rights
1

Main questions
1.

May a human rights regional system ever
emerge as a result of the work of lawyers
at grassroots levels?

2.

To what extent local discourses would be
able to converge into an Asian regional
system on human rights?

2

Anthropological approach tohuman rights
 Human rights as a discourse
 Interaction among actors at different levels– global, regional (i.e. transnational),
national and local
 Hybridization

3

4

Asian regional human rights
discourses (2): the “Asianvalues” debate

Asian regional human rights
discourses (1): UN sponsoredinitiatives

 After 1993 Bangkok Declation

 Rejection of universal applicability of human OHCHR 15 workshops

rights, civil and political rights as Western
imports inadequate in the Asian communitariancontext

 Sub-regional talks

 Primacy of economic development

 Human rights matter but regional

heterogeneity and nationalistic resistance Political instrumentalism and a stereotyped

Orient Is the debate completely dead?
5

6

Lawyers: between grassroots
legal practice and transnational
actions

Asian regional human rights
discourses (3): NGOs Lawyers as the product of historical, social,

cultural, political, economic diversity

 Promotion of a human rights culture –intermediaries between global and local
actors Public interest lawyers – participants indifferent arena of human rights practice andadvocacy Support the creation of human rights

 Lawyers in need of better human rights

instruments

instruments

 Lawyers and NGOs Lawyers as actors for the creation of humanrights instruments

 Globalization and lawyers’s solidarity
7

The legal profession: a stratified
group

8

LAWASIA A professional international organization

 Principle 14 of the Basic Principle on theRole of Lawyers

 Fostering professional and business

relationship among lawyers

 However, is the legal profession reallypromoting the interests of the marginalized?

 The Pacific Charter of Human Rights

 A stratified group with diverse interests:

 The regional elite of lawyers and BAR

individual lawyers, BAR councils andassociations, LAWASIA, IBA, ILA, ICJ etc.

associations -- an elitarian translation of thelanguage of the individual lawyers
9Grassroots level: the weiquan
lawyers in the PRC

10Conclusion
 Human rights talk and human rights

 The emergence of Chinese human rights

practicelawyers in the last decade Lawyers as the potential bridge, but various

 Rights violations and social demand;

tensions

emergence of civil society groups; the media andthe internet

 Ideal of grassroots activism – abstraction of Limited knoweldge of international standards

but struggle to find a practical interpretation of
the human rights concept

elitarian discourses

 International and regional contacts andand human rights education

 Need of cohesion among BAR associations

solidarity

1112Outline

South Korea’s internationalization of higher educationin the context of regional integration

 1.Back ground of the research 2. Present status of IHE in Korea
 3. Government’s policies of IHE
 4. Bilateral relationship between Japan, China and ASEAN countries
 5. Internationalization strategy of 3 leading universities in Korea
 6.Conclusion

Summer Institute, August 2, 2010
Yeeyoung Hong Waseda University

Back ground of the research :Intensifying cooperation of Higher Education in Asian Region

Back ground of the research:Regionalization in higher education
Regionalization is an increasingly important phenomenon and is very evident in the higher education sector .

New regional networks and initiatives for quality assurance, credit systems, research, recognition ofqualifications, among others, are being implemented in all regions of the world.
Knight（2006)

EuropeLatin America

Erasmus Plan

Educational Sector of Mercosur

The Bologna Declaration:（1999）：SEM→ To promote sense of community in European region through human exchange.

AfricaImprove the international competitivenessof European higher education

AHEA（African Higher Education Area ) in AAU→「 We will enhance people-to-people exchange aimed at developing a “we” feeling」

Education cooperation progra
m in West African Economic a
nd Monetary Union(WAEMU)
by ADF 2009- The 11th ASEAN+3 Summit 「Work Plan 2007-2017 」

International/Regional organization of higher education in Asia.
EstablishedYear

Activities

Southeast Asian M inisters of Education
Organizatio n (SEAM EO）

1970

Regional Center for higher education anddevelopment（ RIHED）

11 ASEAN countries, 8 Associate member countries, Japan (as a Partner)

University M obility in Asia and the Pacific（ UM AP)

1991

University Mobility in Asia and the Pacif
ic Credit Transfer Scheme（ UCTS）

Japan, Thailand, Vietnam and 13 official
Member countries, 18 Associate member
countries

1995

Student Exchange program, Hosting Wor
kshops, Cooperation with non ASEAN
countries such as Korea, Japan, and China

21 Main universities of 10 ASEAN countr
ies. Headquarter in Bangkok

The Association of East Asian Research
Universities (AEARU)

1996

Student Exchange, Shared Curriculum, Sh
aring of Infrastructure, Equipment, Information

Research oriented Asian top universities such as Seoul university, Tokyo university,and Peking university (tota17)

Association of Pacific Rim Universities(APRU）

1997

Annual meeting between university Presid
ents, Collaborated Research programs, Re
mote Education

Kyoto university, Waseda university, Seo
ul university, Malaya university and 42 universities from 16 countries

Conference of Asian University Presidents(CAPs)

2000

Annual meeting between university Presid
ents, Programs for young academics

Kyushu university, Yonsei university, Indonesia university, Thammasat university,and 21 other universities

Asia Pacific Association for Internationa l
Education（ APAIE）

2004

Annual meetings (Symposium), Asian vers
ion of NAFSA,EAIE

Korea university, Waseda university, Sing
apore national university, and other Asianuniversities. HQ in Seoul

2004

Quality control seminar, Workshops, Prom
otion of cooperation between the quality control organizations and regional universit
iesName of Organiza tio n

ASEAN University Network (AUN ）Asia-Pacific Quality Network (APQN ） Rapid development of internationalization and increasing demand of higher
education in the Asian region→ In 2003, 45% of total international students were from Asian region. And in 202
5, it is expected to grow to 70% of the entire international students.
Nita (2007) IDP Global Student Mobility 2025
 Both political and economical dependency on each other will increase and stre
ngthening cooperative system will be found within the region→Since the Asia Financial Crisis in 1997, both development and implement of cooperative system and policies within the Asian region have shown rapid increase→The importance of cooperation between human resources that will become the cornerstone in developing the idea of One Asia.
 2005- ASEAN+3 Summit 「Kuala Lumpur Declaration」

Research Purpose

M ember country/Unive rsity

24 Official Members, 10 Intermediate me
mbers, 4 Associate members, 21 Institutio
nal members. HQ in Melbourne

To analyze IHE in Korea from the perspective of regionalization:
How significant is the trend of regional cooperation andintegration in context of HE in Korea?

Present extent of IHE in Korea ②

Present extent of IHE in Korea ①

Source: Data from KEDI(Korean Education Development Institute) 2008

Source: Data from “Korea Education Year book” 1970 - 2008, K E DI (Korean E ducation Development Institute)

Present extent of IHE in Korea ④

Present extent of IHE in Korea ③
16,315
Korean students studying abroad by, 11%

country(2001 Y)4,858 ,
6,614 ,
3%
4% 10,492, 7%

58,457 ,39%

14,925 ,10%
21,891 ,15%

Foreign students in Korea by Region
RegionUSA
CanadaChina
Japan

16372,
11%

Total

1990
2,237

1995
1,983

2001
11,646

2003
12,314

2004
16,832

2005
22,5262006
32,557

2007
49,2702008
63,952

Asia

1,527

1,318

8,755

10,436

14,563

19,96929,22745,62259,375Africa

21

34

100

112

174

184

211

291

Oceania

15

21

156

128

139

145

125

142

178

North America

547

375

1,488

723

925

1,105

1,717

1,692

2,165

South America

77

124

209

127

197

209

200

240

278

Europe

50

111

938

788

834

914

1,077

1,283

1,559

397

24948, Korean students studying abroad
11%

by country (2008 Y)

10183, 5%10792, 5%62392,
29%

China

16774, 8%17000, 8%

USA

Japan
57504,

UK

26%

17274, 8%
Source: Data from Korea M inistry of Education and Science Technology, 2008

Source: Data from Korea M inistry of Education and Science Technology

Korean Government’s policies of IHE

Present extent of IHE in Korea ⑤
Number of foreign faculty by year

74, 17%

4.5

2500

2.5
2

1000

Percent

3

1.5
1

500

0.5

22, 5%

2008

2007

2006

2005

2004

2003

2002

2001

2000

1999

1998

1997

1996

Year

Number of

1993－1997：With the establishment of WTO and the influence of fast changing environment of
the international trading, policies on opening of educational sector was implemented

1998-2002：Policies with emphasis on improving the competitiveness of the Korean higher education in order to suppress the study abroad was introduced.



2003-2007：While maintaining the previous regime’s position of improving the competitivenessof the higher education industry in Korea, Roh’s regime focused on proactively attracting foreig
n students and unifying policies among different government departments and organizations.



2008－ ： President Lee’s regime focuses on the autonomy of higher education institutions and the improvement of research ability among these institutions. Their policy included the develo
pment of WCU (World Class University) where they will attract world class academics in orderto improve the quality of universities in Korea.

Germany
282, 67%

France
Cnada
OthersForeign full time faculty by
Nationality(2008 Y)
643,
19%

0
1995

0

19, 4%

Japan15, 4%

3.5

1500

USA

12, 3%

4

2000

Government policies on Higher Education implemented by each regime since the beginning of IHE in the early 1990s

Foreign full time faculty by
Nationality (1990 Y)

5

1990

Number of Foreign Faculty

3000

1,359,
40%

139, 4%310, 9%USA
CanadaChina

Foreign FacultyJapan
325, 9%656, 19%

UK

Source: Data from “Korea Education Year book” 1990 - 2008, K E DI (Korean E ducation Development Institute)*1993-97： Kim Young Sam regime 、 1998-2002： Kim Dae -Jung regime、 2003-07： Roh Mu-Hyun regime 、 2008present: Lee Myung -Bak regime

Government’s policies of IHE

Government’s policies of IHE
Year

PolicyYear

PolicyMain contents

Improvement policy plan:
Prestigious graduate school
establishment and operation

1996

Permission of joint education programs
between domestic and foreign universities.

1997

Award government grant to selected 9
tional graduate schools.

1999

Foster graduate schools on par with globallycompetitive international schools

Reform of「Law for Educational PublicService」

1999

Permission of recruitment of foreign faculty innational universities

WCU (World Class University)

Master plan of Attracting foreign student

Attract 50,000 foreign students by“Study Korea Project” development plan

2001

Opening Higher Education
Field Project
Policy Support for international
Graduate Schools
Brain Korea 21

Strategies of higher educationinternationalization

2010

Education Service Progress

Bilateral Relationship： KoreaーJapan

Permission of operation on joint degree
program

2004

Attract foreign students to become a key
player in higher education within Northeast
Asia,

2006

To enhance universities’ international
competitiveness and to become a center ofeducation and research in the Asia region

2008

Support foreign universities to build acampus in Korea, Establishment of new
major.

2008

Attract 100,000 foreign students by 2012

2009

「Global Korea Scholarship」、「CAMPUS Asia」

Study Korea Projectinterna

Main contents

2002

Bilateral Relationship： KoreaーJapan•1965-Normalization of diplomatic relationship between Korea and Japan[Treaty on Basic Relations Between Republic of Korea and Japan]•Also in the same year, treaty on cooperation and exchange of cultural assets between
Korea and Japan was signed•1988-Agreement on [Korea-Japan education & cultural exchange] was made•1998-President Kim Dae-Jung visited Japan and announced a Korea-Japan Joint declaration of New partnership for the 21 st century•2005-Commemorating the 40 th Anniversary of Normalization of diplomatic
relationship, 2005 was declared as The year of friendship between Korea-Japan

Number of Japanese students in Korea
1200
1000

16000

800

14000
12000

600

10000
8000

400

6000
4000

200

2000

0
1990

Korea and Japan has a long history in education sector. And even thought there’s no radical
changes to be seen in the number of students going study abroad, the number is gradually
increasing. Considering the geographical advantage and the government level cooperation inplace, it can be said Korea and Japan’s education sector will benefit from on-going
systematic improvement.

Bilateral Relationship： KoreaーJapan

Number of Korean students in Japan
20000
18000

1993

1996

1998

2000

2002

2004

0
1988 1991 1994 1996 1998 2000 2002 2004 2006

Regular student of University /Graduate…

Source: Data from Korea Ministry of Education and Science Technology

Number of Korean…

Source: Data from MEXT, Japan

Bilateral Relationship： KoreaーChina

Change of the number of “Japan related Major” in Korean University
130•1992-Beginning of official exchange since establishment of diplomatic relationship120
Japan related
Major(Undergraduate level)
Japan related
Major(Graduate level)
Germany related
Major(Undergraduate level)
France related
Major(Undergraduate level)

110
100
90
80
70
60
50
2000

2001

2002

2004

2005

2006

2007

2008

S ource: Raw d ata offered by K EDI (Korean E ducation Development Institute)•1994 March-Korea-China cultural agreement was signed•1995 July-Korea-China educational exchange agreement was signed in Beijing

Rapid increase in educational exchange can be seen between Korea-China in the past 10
years.
→ Large percentage of International students in China are from Korea and the same canbe said in Korea as well

Bilateral Relationship： KoreaーChina
Bilateral Relationship： KoreaーChina

Number of Chinese students in Korea

50000
45000
40000
35000
30000
25000
20000
15000
10000
5000
0

Rapid increase in number of China related Majors
Undergraduate：127 departments 20,383 ppl（2000 Y）→179 departments

34,497ppl （2008Y）

Graduate：60 departments 934 ppl （2000 Y） → 94 departments 1,687ppl （2008Y）
Change of the number of “China related Major” in Korean University
120
China related
Major(Undergraduate level)

110

Regular student of University…

Source: Data from Korea Ministry of Education and Science Technology

100
90

70,000

Number of Korean student in China

ChineseLanguage(Undergraduatelevel)
China related Major(Graduatelevel)

80
70

60,00060

50,00050

40,000Chinese Language(Graduatelevel)

40

30,00030

20,00020

10,0002000 2001 2002 2003 2004 2005 2006 2007 2008

0

Source: Data from Chinese Education Year book 1995 -2007

S o urce: Raw d ata o ffered by K EDI (Korean E ducation Development Institute)

Number of Korean student

Education cooperation： KoreaーASEAN

Education cooperation： KoreaーASEAN

2500

Number of Vietnamese &Mongol student in Korea

2000•Fortifying relationship between Korea and ASEAN countries in both economic andpolitical area have developed increased needs in Educational exchange between Ko
rea and South East Asia region•2009-Announcement of [New Asia Diplomacy Plan]

1500
1000

Vietnamese student

500•Establishment of [ASEAN-Korea Center] in Seoul

Mongol student

01990 1992 1994 1995 1998 2001 2003 2004 2005 2006 2007



Even though the number of study abroad students between Korea-ASEAN countries are relatively
small compared to other countries or region, the number has increased exponentially since late
1990s. Recent increase in number of study abroad student to ASEAN countries from Korea can beseen as a new trend resulting from the educational exchange that’s being actively carried out in thisregion.
Example of Education cooperation programs

450

Number of ASEAN student in Korea

400

Malaysia

350

Indonesia

300

Philippine

250
200

Thailand150

Singapore

AUNーDaejeon university’s 「International College Student Exchange Program between Korea and ASEAN」

100



AUNーHankuk university of foreign studies-Korean Studies department research aid

50

Cambodia
Myanmar0
1990 1993 1995 1998 2000 2001 2003 2004 2005 2006 2007

Source: Data from Korea Ministry of Education and Science Technology

Education cooperation： KoreaーASEAN

Number of Korean student in Philippine
16,000700

14,00012,00010,000① Seoul National University

Number of Korean students in
Malaysia,Vietnam,Singapore

Regional strategies
Member of BESETOHA and AEARU.

600

Established 「Silk Road Scholarship」 in 2007. Every semester, they select 5 graduate students from South East Asi
a studying in Social studies and provide scholarship for both tuition and living expenses.

500「Korea-Japan-China International Summer School」 with Waseda & Peking University

400

8,000

300

6,000

200

4,000

100

2,000

2001 2003 2004 2005 2006 2007

Number of Korean student

0
2001
2003
Malaysia

2004
2005
Vietnam

2006
2007
Singapore

Source: Data from Korea Ministry of Education and Science Technology

Source: Raw data from “Seoul National University Year book 2008”

② KOREA University③ Yonsei University

Regional strategies

Regional strategies

Declared 「Global KU-Frontier Spirit」 in 2008

Underwood International college (UIC) 「Three-Campus Comparative East Asian Studies Program」 With Keio University & Hong Kong University

Development Plan for the LA campus and the introduction of Asian Economics and AsianRegional studies department, Korea university aims to become the hub for developing experts on
International affairs.
「S3 Asia MBA」 with National University of Singapore & Fudan University

The 3 campus cooperation East Asian research program began in 2008. Throughout this program, 16
students from each university would spend 1 year in these 3 campuses learning East Asian history,
culture, economies, politics, and international relations.

APAIE–Main office

Source: Raw data from Korea University website

Source: Raw data from Yonsei University website

Conclusion
 In general conclusion, it can be said that Korea is moving towards regionalizationof higher education with focus on Asia region in context of IHE.

1.

Differences among each actors on IHE: such as individuals (students), institutions(universities) and government




2.

Korea illustrated different approaches towards East Asian countries(Japan and china) and
ASEAN countries for IHE.
3.

It is very significant that student mobility within Asian region in relation to educational exchange has grownSome Korean universities have developed regional-specific strategies, and also made an effort to enhance the cooperation with other Asian universities. However, the influence of western countries still remains quiet strong.
The Korean government demonstrated large interest in obtaining good human resources and increasing competi
tiveness of its high education institutions and showed little interest in mutual understanding regional integration. However, recently they have realize the importance of regional cooperation in education sector.

For Korea, the relationship between Japan and China seem in context of IHE, seems focused on producing hum
an resources they can both benefit from and creating a common knowledge community. On the other hand, for
ASEAN countries, Korea’s focus seems to be close to providing Aid and export its education sector.

Influenced highly by china.
It will be hard to explained the trend of Korean IHE without discussing the China factor.

THANK YOUeyoung202@ruri.waseda.jp / eyoung202@hotmail.com

FOCAL POINTSTHE INTEGRATION IN EAST ASIAN ECONOMIES:TOWARDS SPECIALIZATION OR DIVERSIFICATION?

 A. Economic integration and specializationin East Asia. (Indonesia, Malaysia, Philippines,
Singapore, Thailand, China, Japan and Korea)
 B. Herfindahl Index.

Summer Institute 2010

 C.

Factors effecting trade specialization in
East Asian economies.
 D. Fixed effect panel data model analysis.

Global Institute for Asian Regional Integration
Ferdous Farazi Binti
August 3rd, 2010
1

A. ECONOMIC COOPERATION IN EAST ASIANECONOMIES

Although ASEAN was formed in 1967, its economic integration efforts began
seriously in 1992 with ASEAN Free Trade Area (AFTA). Along with AFTA,
individual ASEAN member countries aggressively (and selectively) lowered
their tariff barriers unilaterally and non-referentially.

In recent decades, East Asian economies have gone through a dramatic shift in
trade patterns toward machinery and transport equipment, parts, andcomponents.

2

A. SPECIALIZATION OR DIVERSIFICATION?


As economies evolve over time from low skilled production, of agricultural andlabor-intensive goods, into more sophisticated products, their comparativeadvantage tend to come together. Economic integration changes from interindustry trade to intra-industry trade. Recent trends of trade in East Asia
clearly draw attention to this process.



International trade and specialization are closely interrelated as trade requires
specialization, and specialization requires trade as a means for the resulting
surplus.
A high degree of overall specialization - implying concentration of resources infew sectors - may be hazardous considering the risk associated withasymmetric shocks.
In order to reduce the excessive dependence on primary commodities forgenerating export earnings, countries need to diversify their range of
production of export commodities. This study identifies growing specialization
as an uneven increase in the propensity, or proportion of commodities
exported.
To achieve sustainable long-term growth, it is important for a country that itshould not only diversify from the commodity sector into high-value-added
manufactured goods but, at the same time, it should also attempt to expand
the latter sector and strengthen the former.

3

A. LITERATURE REVIEW










4

A. RESEARCH QUESTIONSAgosin et al (2009) found that trade openness induces specialization and notdiversification.
Parteka and Tamberi (2008) confirmed that poor countries tend to have highly
homogeneous (specialized) export structures.
Matthee and Naude (2007) argued that regions with more diversified exports
generally experienced higher economic growth rates and contributed much
more to overall exports from South Africa.
Agosin (2005) found that export diversification is highly significant in
explaining per capita GDP growth over the 1980-20003 periods for Korea,
Taiwan, Mauritius, Finland, China, and Chile. All these countries havedepended on export diversification for their growth.
Damuri et al (2006) showed that pattern of trade specialization in East Asian
countries has moved towards manufacturing products.

5

 Whether the economies in East Asia havebecome more specialized or less specialized(diversified) in their exports as a result of greater
integration?
 What is the trend of change in the export sector?
 Is there any relationship between integration andtrade specialization?
 What other factors are affecting the East Asian
trade specialization?
6

B. HERFINDAHL INDEX (CONT.)

B. HERFINDAHL INDEXHERFINDAHL INDEX IN ASEAN5+3 (1980-2008)(OWN CALCULATION FROM WTO STATISTICAL DATA SETS )
0.7

0.6

I n d o n esia

0.5

Ma l a ysia
Ph i l ip pines

0.4

S i n ga pote
Th a i land
Ch i n a0.3

 Herfindahl

Index is used to measure the degree of export
specialization.

Ja p a n
Ko re a0.2

0.1

 The higher the index, the more specialized the country is.

0
1975

1980

1985

1990

1995

2000

2005

2010

8

7

B. HERFINDAHL INDEX (CONT.)THE CLASSICAL TRADE THEORYHERFINDAHL INDEX IN ASEAN5+3 (2000-2008)(OWN CALCULATION FROM WTO STATISTICAL DATA SETS )When a country opens itself
to trade with other countries,
it will be compelled to
specialize in products where it
has comparative advantages
vis-à-vis its trading partners.

Comparative advantage
Specialization

0.3

0.25

0.2

I n d o n esia
Ma l a ysia
Ph i l ip pines

0.15

S i n ga poreTh a i land
Ch i n a

0.1

Ja p a n
Ko re a

0.05



0
1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

NEW TRADE THEORY

Krugman (1979, 1981)
develops a model where tradeis driven by economies ofscale. The model essentiallyargues that trade occurs evenbetween countries withidentical tastes, technology
and factor endowments
because consumers have ataste for a variety ofdifferentiated products.
 Economies of scale


2009

9

C. FACTORS AFFECTING SPECIALIZATIONTRADE THEORY

10

C. TRADE INTENSITY INDEX AFTA has resulted in more intense intra-regional trade.

 Trade Intensity

To verify this, a commonly used indicator - tradeintensity index – is used.
 The trade intensity index takes the ratio of the tradeshare of the source and the world trade share to thesame destination.

 Tariff rates
 GDP (to see the effect of the size of the economy

to its export diversification).
 Exchange rates (exchange rate management
plays a crucial role in providing incentive forexports).

 It takes a value between 0 and infinity, with value

greater than 1 indicating the export relation is greaterthan average.

1112

C. TRADE INTENSITY IN EAST ASIA, 1991-2001
SOURCE : DAMURI ET AL. 2006

C. TRADE INTENSITY CONT.
Data Source: ARTNET. APTIAD Interactive Trade Indicators.
13

14

C. TRADE INTENSITY CONT.

C. TRADE INTENSITY CONT.

Data Source: ARTNET. APTIAD Interactive Trade Indicators.

Data Source: ARTNET. APTIAD Interactive Trade Indicators.

15

D. FIXED EFFECT PANEL DATA MODEL(2000-2008):

C. TARIFF RATES16

It is difficult to measure the extent of a country’s trade thatutilizes FTA preferential tariffs because of-various exceptions and exclusions-lack of data on utilization rates of tariff preferences, and-lack of data on the sources and definition of a country’s service
trade.

 Hypothesis: Greater economic integration (throughtrade) will lead to diversified trade in the selectedeconomies of East Asia
 Δlog(hindex) =α +β1 log(oxr) +β2 log(gdp) +β3 tia +β4
tapsimple + εhindex= Herfindahl Index (own calculation)oxr= Official exchange rate (WDI online database) gdp= Gross Domestic Product (WDI online database) tia= Trade intensity(ASEAN) (Compiled from ARTNET)
 tapsimple= Tariff rate, applied, simple mean, all products(%)(WTO online data source)

A low margin of preference (MOP) between Most Favored
Nations (MFN) –applied tariffs and FTA preferential tariffs indicate
little incentive for businesses to utilize FTA preferences when set
against the administrative costs of obtaining ROO certificate.
(Chia, 2010)
17



18

D. RESULTS OF THE MODEL:

D. ANALYSIS OF THE RESULTS:

 Variables are statistically significant at 1% level of oxr: higher the exchange rate, lower the hindex,

significance.

diversified trade.

 Negative: oxr, tia, tapsimple.

 gdp: higher the gdp, higher the hindex, more specialized Positive: lgdp

the country.

 R-sq: 85%
Hindex tia: higher tia, i.e. more integration; lower hindex,

diversification in trade.

Coef.

Std. Err.

t

loxr-.0060195.0008458-7.12***

lgdp.0107492.002305

4.66***

tia-.0158378.0029291-5.41***

tapsimple-.003697.0006974-5.30***

 tapsimple: higher the tariff rate, lower the hindex,

diversified trade. lower tariff, more integration, more
specialized trade [intra-industry trade].
19

20

D. CONCLUDING REMARKS

D. FUTURE PLAN AND LIMITATIONS OF THE STUDY Greater economic integration in East Asian economies

 The

study needs to use AFTA tariff (CEPT) rate tounderstand the clear relation between tariff rate andtrade specialization in the East Asian economies.

leads to trade diversification.
 All the countries have concentrated trade in

manufacturing products.
 Different factors help to create different degree of It also needs to do deeper study on diversification using

specialization. Exchange rates and tariff rates havesignificant negative impact on specialization.
 GDP of the exporting country tend to be positively
related with the trade specialization of that economy.

detail commodity level data for the extensive margin ofdiversification.
 Additionally, it is necessary to do all these analysis alongwith the regional trade diversification within ASEAN.
21

Comments

THANK YOU!
23

22

Contents

The Role of Global Companies in Asian Regional
Cooperation through CSR and its Prospect

Kim Insun
GIARI, Waseda University

1

Introduction

2

Literature Review

3

General Survey of the UNGC

4Practices of East Asian Countries

5

Conclusion

Research BackgroundDefinition
CSR: a concept born in the development of globalization

Debate on Asian regional integration andthe role of global companies in Asia

2

Global governance and regulation ofmultinational companies in the world3

Corporate Social Responsibility(CSR)
as a key for the international
competitiveness of global companies.

Introduction of
CSR to domestic laws
O verseas activities ofmultinational corporations
tend to be conductedbeyond the regulation ofhome countries

diplomaticconflicts

state sovereignty,
diplomatic protection andgovernance over foreign
branches, the conditionsof extraterritorial
jurisdiction, foreigncompanies and national
jurisdiction→Need for a supranational and global framework.
4

International Frameworks for CSR

Research Question & Hypothesis

UN Global Compact(2001)

European Alliancefor CSR (2006)-It is widely recognized that
CSR constitutes animportant condition for thesustainable developmentof enterprises.

Company Logo

possibilities of CSR cooperation
among multinational companies in
Asia?
-It was decided to establish aregional support center within
UNESCAP at the Global
Compact Annual Networks
Forum (2007 Bangkok)

the knowledge and understanding of CSR tends
to vary, as Asian countries are in a different
stage of economic development.

No further actions
no concrete steps
have been taken.

→This is regarded as the most important reason
for the difficulties of regional CSR cooperationin Asia.

6

Research Goal

Literature Review

This paper aims to examine the possibilities of Asian regional
cooperation in CSR through examining the present practices of Japan,
South Korea and China in UNGC.

The
Beginning

Transition(mid -90s)

Finally
Second.

First
general surveyof the UNGC.

present practices
of Japan,South Korea
and China
in UNGC.

possibilities ofAsian regional
cooperation in
CSR.

“ the social
obligation ofenterprises ”
・H.R. Bowen(1953)
・Carroll (1989)“stakeholders”
・Clarkson(1995)

The
Present(After 2000~)“Businessprocess ”
or“moral-based
responsibility”
・ Swanson(1995)“operational
strategy”
・Porter&
Kramer(2002)

UNGC as an International Initiative of CSR(2001)
Graph 1: 10 Principles of the UN Global Compact•

Human rights

implementationof the proclaimed
UNGC
Principle 1: Businesses should support and respect the theprotectionof internationallyrelies on the spontaneous practices ofhuman rights; and3

General survey of the UNGC

globalenterprises,
Principle 2: make sure that they are not complicit in humanrightsabuses.
the responsible operation of• Labourenterprises does not follow a top-

Principle 3: Businesses should uphold the freedom of association and the effective recognition of
down regulation approach; instead, it
the right to collective bargaining;favors a bottom-up “learning”
Principle 4: the elimination of all forms of forced and compulsory labour;
Principle 5: the effective abolition of child labour; andapproachPrinciple 6: the elimination of discrimination in respect of employment and occupation.
• Environment
Principle 7: Businesses are asked to support a precautionary approach to environmental challenges;
Principle 8: undertake initiatives to promote greater environmental responsibility; andPrinciple 9: encourage the development and diffusion of environmentally friendly technologies.
•

Anti-corrupt ion

Principle 10: Businesses should work against corruption in all its forms, including extortion andbribery.

Graph 2: Participants of the UN Global Compact by Country ＊ (Top 23）

Participants of the UNGC grewfrom 34 in July 2000 to 6,662(5,039 enterprises) by February 17, 2009.
More than 60 countries have establishedtheir local networks.

*Statistics of member groups and enterprises as of November 14, 2008.
Source: Ebashi, Takashi, “CSR to Kokuren Global Compact no Kanosei,” in Kigyo no Shakaiteki sekinin keiei,Tokyo: Hoseidaigakugendaihokenkyujo, 2009, p.111.

The limitations of UNGC
no established procedures for joining orwithdrawing from the UNGC,
the level of practices of the UNGC principles“inactive” list?
vary, and regulatory means are
not complete“Against
to the COP+. the report system”=31%(of the participants)“fulfilled both the COP+ the report system=479,
since there is no regulation foror 22% of the 2,144 members of enterprises
disengagement with the UNGC,
of the(latemisuse
June 2005)
UNGC name and logo is not limitationa rare happening.
of common principles on a global
basis- local networks suitable for each region
needed.

The Global Compact Annual Network Forum(April 2007, Bangkok)

4

Practices of East Asian Countries

UNGC-Japan
GC-JN(2008) calling leader corporations
73 participants (12.2008)
First join (2001)
GCJN established (2003)

UNGC Asia Regional Network aiming at:• supporting the exchange of experience among
Asian Network Members;• making long-term strategies for existing
networks and developing new networks; and• conducting investigations of consciousness, aswell as the benefits and problems of the
Global Compact.

Environmental CSR-Centered Japan

2008 NOW

Since the 1990s, Japan has begun to realize the necessity to change
its economic system and way of development characterized by mass
production, large-scale propaganda, mass consumption and massdisposal of industrial waste to a pattern characterized by joint efforts
with environmental NGOs, energy-saving, CO２ reduction, andrecycling and reusing of resources.
Labor market,

employment andother sectors

Early 2000s

environment

Philanthropy to CSR

The later half of the 1990s
Introducing
philanthropy

1970s U.S–Japan trade disputes

16

Government’s strong regulation power
By the end of 2008, only
two groups were nonenterprise organizations(3%), which is much lower
than the international
average of 25%.

Japanese enterprises

Environment
policies

Government to play a leading rolein labor market, employment andother sectors,
Can government solve dismissal of
temporary employees, unilateral
termination of labor contracts
effectively?

National regulations

China’s Development of a CSR Strategy
Worries

Challenges

changes• New trade barriers?

• Food security• “Construct a• Limit the• The rights ofharmonious
society”

development oflabor-intensive
industries?

• Cost increase?
• Largest challenge
to cultivating
national
enterprises andbrand!

migrant workers• Major mining
accidents• Environmental
pollution• Ever-widening
income gap

18• Revised“Company Law”

• Welcomes theeffort ofmultinational
enterprises in CSR

China’s Development of CSR Strategy
・January 2005: Global Compact Promotion Office established.
November 2005: UNGC China Summit (Shanghai)・Many participating
enterprises
have not・Number of participating enterprisesin the Global
Compactgrew sharply toprovided a COP
report; no analyses
187 (of which 168 were enterprises)
by November
2008, 6ofth theirin the world.
activities made;・Largeof UNGC
・Most participating enterprises
ofparticipating
the UNGC enterprises
are large state-owned
use it as effective means to improve image;companies-an increasing numberof private business expected to join the・Problems with labor-intensive middle andGlobal Compact.
small businesses unrsolved;
・ Use of the UNGC by large state-owned
enterprises as decoration severely criticized;
・CSR defined solely as a donation or othercharity activity

CSR in South Korea
International standards
Principles of the UNGC
concerning labor

Koreanconglomerates

・forbids the establishment oflabor organizations
・conventional tension
between conglomerates andlaborers

China’s Development of a CSR Strategy
・Though China is fully aware of the importance of international
standards of CSR and actively participated in the making of
the ISO 26000 standard, it has not fully acceptedinternational standards concerning CSR;
・China the China CSR Confederation established in 2005; China
CSR High-Level Forum held annually; the China CSR
Benchmark Draft;
・Beijing Declaration on Corporate Social Responsibilities
published recently；
・Endeavor to make its own CSR standard suitable to Chinesecharacteristics.

Conglomerates-led CSR Practices: South Korea
Background:・In late1990s heated discussions about whether conglomerates should be allowed toexist;
・Since 2000 illegal political donations and other various misbehaviors ofconglomerates revealed, inciting fierce criticism from society;
Actions:・Conglomerates begun to care about the legality and morality of enterprise
operations;・Moral guidelines made by conglomerates, claiming to obey various laws; social
activities initiated as contributions.
・After 2000 South Korean enterprises also introduced CSR as a strategy for better
competitiveness of its enterprises.
Conclusions:
・CSR strategy of South Korea created to overcome the negative image of
conglomerates among the domestic market and civil society, and to change the low
profile of South Korea brands in the international market.

Conglomerates-led CSR Practices: South Korea
Background

Actions

・In late1990s heated・Conglomerates begun to careabout the legality and morality of
discussions about whether
enterprise operations;conglomerates should be・Moral guidelines made byallowed to exist;
Conclusions conglomerates, claiming to obey
・Since 2000 illegal political・CSR strategyvariousof South Korea
createdto overcomesocialactivities
donations and otherthe negative image oflaws;
conglomerates
initiated ascontributions.in domestic
various misbehaviors
of and civil
marketsociety,andtochange・After 2000 South Koreanthe low
conglomerates revealed,profile of South
Korea brands
international
enterprises
also inintroduced
CSR
inciting fierce criticism frommarket.
as a strategy for better
society;competitiveness of its
enterprises.

Conglomerates-led CSR Practices:
South Korea
In 2007, Ban Ki-Moon became the UN Secretary-General. The
Global Compact Korea Network was established in June 2008.
After the Asia International Forum was held in Seoul and the“Seoul Declaration” was adopted, the number of Koreanparticipating groups in UNGC reached 139 (among which 105
were enterprises) ranking15th in the world.
Proportion of Non-enterprise groups among all participatinggroups:Japan: 3%
China: 20%
South Korea: 25%
Demand of civil society for CSR expected to grow even stronger.

日・中・韓Implications of the Research“Environmental CSR cooperation as its pillar”

J
・Less

commendable
exceptenvironmental
CSR
・CSR practices
less encouragedby civil society
Environmental
CSR-CenteredC・regarded as an
operational
strategy
・narrow meaningof CSR・low expandingof CSR
Development of a
CSR Strategy

・KConglomerates

refuse to adopt
international
standard
・ regarded as aoperational
strategy
・ low expanding of
CSR
Conglomeratesled CSR
Practices

effective means for CSR cooperation.

Environmental
cooperation
frameworks and theconstruction of an
East Asian
community has been
going onAll three countries
already realizedthat environmental
issues remain acore issue in theirpursuit of sustained
development

Japan is expected toplay a leading role in
Asian regional CSR
cooperation centeredon environmental
issues.

Summer InstituteEconomic Integration Process:Trade, Investment & Financial

Waseda University

AFTA,BFTA & ITRO Effect on
Trade & Investment Relations:Southeast Asia

3 Pillars of ASEAN:
1.

Security2.

Socio Culture

3.

Economic Community

Financial
Integration

Investment
Creation
Kiki Verico
PhD Program
GSAPS,Waseda University,Tokyo

3 Pillars of EU:
1.

Trade
Creation

Foreign & Security Policy

2.

Police & Justice
Cooperation

3.

Economic Integration

Author’s Illustration,2010

Number of RTA & BFTA
Number of BFTAs and RTAs
2010

Facts about“Noodle-Bowl” inSoutheast Asia

BFTAs
Country

BFTA

China

Mexico (1999),ASEAN(2003), Australia, Costa Rica, Peru(2010),
Singapore (2009),Pakistan (2007), India (2007), Hong Kong
(2004), Macao (2004), Chile (2006), NZ (2008)

Japan

ASEAN (2008), Indonesia (2008), Philippines (2008), Malaysia(2006), Thailand (2007), Singapore (2006), Vietnam(2009), Brunei (2008), Mexico (2005), Chile (2007),
Switzerland (2009)

South Korea

ASEAN, Singapore (2006), India, EFTA (2006), Chile (2004),
Peru, USA

Singapore

China, Japan (2002),South Korea (2006), EFTA, India (2005),
Sri Lanka, Pakistan, Australia (2003), EFTA (2003) Chile,
Jordan (2006), Bahrain, Egypt, Kuwait, UAE, Qatar, New
Zealand (2001), Australia (2003), Panama(2006), Peru
(2009), USA (2004)

Malaysia

Japan (2005), Pakistan (2008)

ThailandJapan (2007), Australia (2004), India, Peru, New Zealand(2005), Singapore, Laos (1991)

Philippines
Indonesia

Japan (2008)
Japan (2008)
Source: Author’s identification fromhttp://www.worldtradelaw.net/fta/ftadatabase/ftas.asp,
http://rtais.wto.org/UI/PublicAllRTAList.aspx

Year
BTAs
RTAs
1983
0
2
1989
3
2
1991
5
2
1992
6
2
1993
9
4
1994
12
5
1995
19
5
1996
27
5
1997
33
6
1998
37
6
1999
39
6
2000
41
6
2001
47
6
2002
57
6
2003
70
10
2004
109
13
2005
151
13
2006
176
17
2010
195
30
Source: From 1983-2006 was adopted from Jayant Menon,ADB Institute Discussion
Paper No. 57,Bilateral Trade Agreements and the World Trading System. Data 2010 isauthor’s calculated from the WTO database on this following link:
http://rtais.wto.org/UI/PublicAllRTAList.aspx

Facts: Asian Noodle Bowl in ASEAN

Why Sub Regional?
ASEAN has several sub-regional cooperation:
SIJORI, BIMP, IMT-GT, etc BUT…

Why choose agriculture
product?

• No specific commodity like ECSC
• No specific organization to manage commodity

Naturally, agriculture
products are oligopolistic• Unclear objectives

ASEAN has ITRO/IRCo for managing natural rubberthat established by Indonesia, Malaysia & Thailand, akind of sub-regional cooperation

Why rubber?
It has organization that manage
natural rubber’s production &trade (important for time dummy)

RCA & CMSA
Commodities (20032007)

RCA

Agricultural products
Food
Fuels and mining
products
Fuels
Manufactures
Iron and steel
Chemicals
Pharmaceuticals
Machinery andtransport equipment
Office and telecom
equipment
Electronic dataprocessing andoffice equipment
Telecommunications equipment
Integrated circuits
and electronic
components
Automotive products
TextilesClothingIndonesia
CMSA

Malaysia
CMSA

RCA

History of
Natural Rubber Cartel

Thailand
CMSA

RCA

2.49

7,695,711,313

1.15

1,556,495,144

1.86

123,151,348

2.11

5,182,495,770

0.94

1,325,929,242

1.64-1,024,533,277

2.31 -16,821,233,999
2.26 -17,754,050,504
0.72 -4,135,280,882
0.47
355,067,146
0.58
584,637,723

0.64
0.75
0.82
0.38
0.41

-3,468,022,434-2,933,141,377-13,515,309,027-137,771,116
636,776,217

0.30
0.28
0.99
0.52
0.67

1,605,863,207
1,210,129,927
12,890,752,558
1,134,615,311
2,486,420,450

0.07-49,112,314

0.03

15,359,163

0.05-5,787,271

0.44-1,313,330,297

1.10-13,786,791,364

1.11

9,529,138,236

0.61-3,381,506,620

2.74-10,112,907,460

1.69

1,314,693,076

0.64-1,181,127,854

2.94

2,503,299,037

2.28

4,500,500,910

0.81-2,338,104,049

1.58-5,713,864,576

1.05-2,603,679,102

0.30-200,945,031

4.01-5,080,383,854

1.77-100,175,289

0.21
2.21
2.39

1,111,318,326-188,974,116-114,239,557

0.05
0.37
0.53

487,067,003
70,926,049
121,713,559

0.77
1.12
1.16

6,235,048,370
140,673,987-1,262,770,459

1.

2.

3.

International Natural Rubber Agreements (INRA):
1979 (regulate maximum 550,000 tonnes: 400,000
for normal and 150,000 for contingency), followedby two agreements (1987 & 1995) but remain to
keep the same objective as 1979’s agreements.
Market power over multilateral collusive: INRO
(exporting members) headquarter in KL in 1998
proposed increasing price up to 5%. It was totally
rejected by import members. Then Malaysia,
Thailand and Sri Lanka pulled out in September
1999.
In 2001 three main producers: Indonesia, Malaysia
and Thailand established ITRO with IRCo,LTD

Sources: Author’s calculation based on WTO Statistic Database,2009% of NR Production to World’s Total Volume
ITRO ; ITRO+P ; ITRO+P+V

Natural Rubber Production(in volume MT/Year)
3500000

82%
80%

Thailand
3000000

Indonesia

2500000

80%

79%

78%

78%

78%

76%

2000000

ITRO + P + V

74%
1500000

Malaysia
India

1000000

China
50000072%
72%

ITRO + P

70%

Vietnam

68%

68%

Philippines

ITRO

66%

0
1987

1988

1989

1990

1991

1992

1993

1994

1995

1996

1997 1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

64%
Bolivia

BrazilCambodia

Cameroon

China

Congo, Democratic Republic ofCôte d'Ivoire

Ecuador

Gabon

Ghana

GuatemalaGuineaIndia

Indonesia

Liberia

Malaysia

MexicoMyanmarNigeria

Papua New Guinea

Philippines

Sri Lanka

Thailand

Viet Nam

Sources: Author’s calculation , Figured out based on FAO Statistic Database,2009

62%
60%
1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007

ITRO

ITRO P

ITRO P V

Sources: Author’s calculation based on FAO Statistic Database,2009

Trade (AFTA-2002) & FDI Liberalization in Each
Particular Countries (2005):NR
TRAD E
LIBERA LIZATI ON
BETWEEN MEMBERS(P RODUCTS
LIBERALIZED)

Rubber is one of top 11 priority
products for AEC, 2015

FD I LI BERALIZATIO N(PRODUCTS OPEN TO NON MEMBER INVESTO RS)

AFTA

Indonesia

Malaysia

ThailandCement, Ceramic &Glass, Chemicals,
Cooper Cathodes,
Electronics,
Fertilizers, Gems &Jewelry, Leather s,
Pulp & Paper,
Plastics,
Pharmaceuticals,
Rub ber, T extiles,
V eg etables Oils,
Wooden & Rattan
Furniture

Animal Breeding,
Brown Sugar, Coal,
Coffee, Coconut,
Corn, Cashew Nuts,
Clove, Cacao
Processing, Carpet,
Chicken Processing,
Crude P alm Oil, Fish
Cultivation,
Feedstock, Fruit
Processing, Industrial
Plantation Forest,
Layer, Meat, NaturalGas, Orange, Pepper,
Palm Fruit, Peanut,
Pineapple, Rattan,
Rhizome, Rubber,
Sugar, Soybean, Tea,
W ood F urnitur eP lyw ood

Electrical &Electronics,
Eng ineering
Supporting, Food
Processing, L ife
Sciences, Machinery& Equipment,
Chemicals, Rubber ,Textiles & Apparel,
Transport Equipment,
Basic M etal, Wo od
Ind ustry, Real Estate,
ICT , Financial
Services, Utilities,
Hotel & Tourism

Beverag es,
Chemicals, Cleaning
Preparation,
Construction
Materials,
Equipments,
Electro nic &Electrical, Furniture,
Foods, Footwear, Iron
and Steel, Leathe r,
P aper, Petroleum,
Rubb er, Jew elry,
Software, Yac hting

Bali Concord II designs gradually approach inachieving trade-investment relations startingfrom 11 priority sectors(the Singapore Institute of International Affairs, IISD, January 2007)

Healthcare, Air transport, Tourism,
e-ASEAN, Electronics, Automotive, Textiles, Wood,
Fisheries, Agriculture in general and Rubber

Sources: Verico, Kiki, Journal of EFI, 2007

1.

SystemModel,OLS,Panel
Regression

2.

Time Series Tests

3.

Cournot-Nash
Analysis4.

I-O Analysis

5.

Literature Review

6.

In-depth Interview‘ASEAN’s Noodle Bowl’
Phenomena

Choosing Observed Countries
ASEAN - 10

Multilateral(MFN)

Jagdish Bhagwati,1995¦ BFTA z MTA

Pascal Lamy, 2007
(The ‘pepper in the multilateral ‘curry’)2

Batubara,2008

Regional

Richard E Baldwin,1997

1(BFTAs are Building Block)

Close
(CU)
Anne Krueger

Historical approach,

8

ASEAN - 4

i 1

BFTAs are Stumbling Block)

Falianti,2006;

ASEAN - 6

1 18 , 721(RTAs are not necessarily
effective while

Open regionalism(FTA)

WTO accession

Sub-Regional
ECSC;
IMT, BIMP, SIJORI;
ITRO

success

AFTA+
AFTA+

4

Bilateral

6(First mover advantage &Snowballing effect &Triggered action)

Singapore •GDP/Capita
Brunei •Non-Industrial(inflationsimilarity)
similarity)(inflation

3

Malaysia
ThailandIndonesia•MFN vs CEPT
•Existing SubRegional
Cooperation in
CommonCommodities(rubber)

AFTA, BFTA,
ITRO

Source: Author’s description based various articles,2010

Average Common Effective Preferential Tariff (CEPT) :ASEAN Members &Trade Restrictiveness Index (TRI)
from ASEAN Members to Non Members:

Average Common Effective Preferential Tariff (CEPT) :ASEAN Members & Most Favored Nations (WTO) i.e. Tableware &Kitchenware (after AFTA)

1993, 2001-2006
ASEAN-5 CEPT-AFTA MFN-WTO
TRI**

Malaysia

0% - 5%30%

2002 2006* 2006

Indonesia

0% - 5%30%

Thailand0% - 5%30%

Philippines

0% - 5%5%Singapore

0% - 5%0%Brunei0% - 5%

0%

CEPT
1993

•AIA Deadlines

Sector or Industrial
SectorPhilippines

Source: Author’s description based various articles,2010

COUNTRY•Inclusion Lists,
CEPT Deadlines

7

Ensuring

5

Malaysia
ThailandIndonesia
Philippines•Historical
Backgrounds

2001

Thailand
19.8%
5.6%
5.2%
4.5%
20%
Indonesia
17.2%
4.2%
3.6%
2.0%
11%
Philippines
12.4%
4.4%
4.1%
3.6%
7%
Malaysia
10.7%
2.7%
2.5%
1.7%
26%
Brunei
3.7%
1.1%
0.9%
0.9%
8%
Singapore
0%
0%
0%
0%
0%
Source: calculated by author based on various sources**TRI (Tariff barriers only) from Kee, Hiau Looi, Alessandro Nicita, Marcelo Olarreaga:
Estimating Trade Restrictiveness Indices, World Bank Policy Working Paper No.3840, 2006

Source: Author's Calculation based on WTO & ASEAN
Statistical Data,2009

Selected Variables
VARIABLES

http://www.nationsonline.org/oneworld/map_of_southeast_asia.htm

Dependent Variable: Aggregate Net FDI for AFTA, Net FDI in each particular country for BFTA,
Natural Rubber’s Net FDI of each country for ITRO (Sub-Regional)
Independent Variables:
1. Consumption Value as an approach to demand size (regarding that C is dominant in ‘GDP by
expenditure side’ of the countries)
2. Nominal GDP represents economic size
3. Number of Population represents demand capacity
4. Number of employed people represent production input (L) and as an approach to number ofskilled labor
5. Economic growth represents ‘macroeconomic good performance’
6. Electricity consumption (KWh) represents ‘sound infrastructure’ as this variable is a mainconcern for investors in these observed countries especially for Indonesia (the largest GDP)
7. Government expenditure on Education as an approach of expenditure on R&D due to thelack of data availability
8. Degree of Openness as an approach of ‘trade liberalization’9. RCA (Revealed Comparative Advantage as approach of ‘trade performance’
10. Real Wage as an approach to MPL (Marginal Productivity of Labor)
11. FDI Profit as an approach to FDI incentives & as an approach to unavailable data of tax rate
for 21 years series for these three countries
12. Exchange Rate represents economic stability, an approach for J-Curve (SEA economic crises)
13. Intratrade represents intra industry trade among ASEAN members. The most appropriate
indicators of intratrade adopted from previous study by Verico, 2008.
14. AFTA Dummy represents regional trade cooperation within ASEAN’s members
15. Bilateral FTA dummy represents bilateral agreement between members & ASEAN’s nonmembers
16. ITRO dummy represents an approach for sub-regional cooperation in Southeast Asia
Other variables such as corruption index, political stability, distance, English speaking capacity
are not observed due to limited data availability or irrelevance to the research hypothesis

Methodology:
Regression Models
Basic Assumption for
Choosing Appropriate
ModelsDummyTime for
Officially
SignedAgreements

Model’s Interpretation for Intratrade Model:
AFTA’s Impact on Trade

Trade-Investment
Relations
DirectEffectIndirect
EffectSimilarTime

Sub-Regional
i.e. ITRO(Panel Data:
PLS,FE,RE)

Regional
i.e. AFTA(Original 2-SLS,
2-SLS; System:
SUR,SEM)

Different
Time

Bilateral
i.e. Each IMT(OLS:I,M,T)

Multilateral
i.e. WTO(Not Included)“AFTA generates Positive
Impact on Intratrade (ASEAN)
together with GDP’s Size”

Source: Author’s Illustration,2010

Model’s Interpretation for Regional Level:
AFTA’s Impact on IMT’s Investment (FDI)
1.

2.
3.
4.
5.
6.
7.

Intratrade (AFTA) Æ Negative Æ Trade Creation
Effect instead of Trade Diversion Effect,
Ineffectiveness on Investment Creation but Investment
Diversion
Consumption ÆNegative ÆTrade Deflection Effect
FDI is not significant enough to affect Intratrade Æ
Non-SEME, a one-way direction effect
RCA Æ Positive Æ Trade-led Industrialization
RW Æ Positive Æ Vital Role of Labor Productivity
ER Æ Negative Æ J-Curve Phenomena
PopulationÆ Positive ÆDemand Pulling

Model’s Interpretation for Country’s Level:
BFTA’s Impact on Investment (FDI)
1.
2.

3.

4.
5.
6.

BFTA Æ Positive only for Malaysia Æ the Smaller
the Gap, Easier to Achieve Agreements
Consumption & Intratrade Æ Negative in Thailand Æ
Trade Deflection & Trade Creation Effect, Ineffective
increasing FDI flows
Electricity Consumption ÆPositiveÆ Importance ofElectricity on Industrialization Process especially forIndonesia, Thailand then Malaysia
FDI Profit Æ Positive in Thailand Lag 1 Æ Positive FDI
Expected Profit, a promising market
RWÆ Positive & Significant for Indonesia andMalaysia
ERÆ NegativeÆ J-Curve and proves more significant
impact of economic crises in Indonesia & Thailand
than Malaysia

Interpretation Model for Sub-Regional Level:
ITRO’s Impact on Rubber’s Investment (FDI)
1.

2.

3.

4.

5.

ITRO Æ Negative Æ Confirms Seemingly Inelastic
DemandÆ Potentially Buyer-Market Biased
Production of Rubber Æ Positive Æ Quantity
follows Consumption Æ Seemingly Inelastic Demand
Price of Rubber Æ Negative Æ Low Oligopoly PowerÆ Seemingly Inelastic Demand
Electricity Consumption ÆPositiveÆ Importance ofElectricity on Rubber Industrialization
ERÆ NegativeÆ J-Curve and proves that economic
crises hits rubber production in IMT notably proved the
INRA break-up due to the ‘increasing price proposal’
proposed by main producers back then in 1998

Challenges for Cartel
Huck Steffen, Hans-Theo Normann and Jorg Oechssler, Learning in Cournot Oligopoly –An Experiment, 1999, The Economic Journal, 109, pp. 80-95, Blackwell Publishers,USA:1.
…unlikely that inexperienced players would immediately coordinate on an
equilibrium, there is a general intuition that over time players would learn to playaccording to the Cournot-Nash Equilibrium…(p.80)
2.
..inverse demand is non-stochastic and decreasing in quantity…there have been
few individual attempts to establish cooperation by supplying limited quantities. But
this was always exploited by other firms so that the cooperators eventually
gave up…(p.87)
3.
In all treatments average behavior was more competitive than Cournot
prediction. (p.87)…There were no successful attempts of collusion….
4.
Imitate the best is always better than imitate the average (recited from p.93).
Competition, however, is always strong enough to frustrate any attempts tocollude (p.93).
Karp, Larry S and Jeffrey M.Perloff, 1988, Dynamic Oligopoly in The Rice Export
Market,UCLA,…Probability that price lies between price taking and Nash-Cournot is greater thanbetween Nash-Cournot and collusive price (recited, p.468)
Pindyck and Rubinfeld, Microeconomics, 6nd Edition, Prentice Hall:
Success cartel: OPEC, International Bauxite Association
Unsuccess cartel: Copper, Cocoa, Tea, Coffee, Rice, Not tested yet: Rubber, Palm Oil

Market Proportion
ITRO’s Founding Members (Indonesia, Malaysia, Thailand/IMT)and The Rest Exporters (Non-IMT) in Tones
1987-2007

CNE: ITRO

Year

IMT
Strategy
Oligopoly1987

Q1t = 481,462.58-0.58*Q2t
p:0.0000 p:0.0004
t-stat:6.64 t-stat:-4.24
SE: 72,54 SE: 0.14
Q2t = 343,184.45 - 0.39*Q1t
p: 0.0035
p: 0.057
t-stat : 3.33 t-stat: -2.03
SE: 103,16
SE: 0.19

1988

Competitive Oligopoly

1989

Oligopoly

Oligopoly

1990

Oligopoly

Oligopoly

1991

Oligopoly

Oligopoly

1992

Oligopoly

Oligopoly

1993

Oligopoly

Oligopoly

1994

Oligopoly

Oligopoly

1995

Oligopoly

Oligopoly

1996

Oligopoly

Oligopoly

1997

Oligopoly

Oligopoly

1998

Oligopoly

1999

Cournot-Nash Equilibrium (Q1t*,Q2t *):Q1t* : 364,973 (tones/year)
Q2t * : 200,845 (tones/year)

Non-IMT
Strategy
OligopolyCompetitive

Oligopoly

Oligopoly

2000

OligopolyCompetitive

2001

Competitive Oligopoly

2002

Competitive Oligopoly

2003

Oligopoly

2004

Competitive Oligopoly

2005

Oligopoly

2006

Competitive Oligopoly

2007

Competitive Oligopoly

Competitive
Competitive㪈㩷㫅㫆㫅㪄㪺㫆㫆㫇㪼㫉㪸㫋㫀㫍㪼㩷㪫㫉㪸㫅㫊㫀㫋㫀㫆㫅㩷㫀㫅㩷㫐㪼㪸㫉㩷㫆㪽㩷㪺㫆㫅㪽㫃㫀㪺㫋㩷㪹㪼㫋㫎㪼㪼㫅㩷㫇㫉㫆㪻㫌㪺㪼㫉㩷㩽㩷㪹㫌㫐㪼㫉㩷㫀㫅㩷㪠㪥㪩㪘㩷㪘㪻㫁㫌㫊㫋㫄㪼㫅㫋㩷㫇㪼㫉㫀㫆㪻㩷㫃㪸㪾㩷

Source: Author’s calculation based on FAO statistic data, 2010

Investor’s Incentive on
Primary ProductConclusion &Recommendation (Future Study)

Expected Profit
Enter
Oligopoly

AFTA+ isThe Best Option

90

BFTA Way:
Hub-Spoke
Problem

Decision
Stay Out

0
AFTA(Intratrade)

MarketStructure

AFTA+

Sub-Regional

Enter

-10

Decision
Competitive
Stay Out0

Enhancement :Market biased

BFTA
Sub-Regional,i.e ITRO

1.
2.

Only AFTA
Adopted & Adapted fromvarious Microeconomics
Text Book, 20103.

Hub instead of Spokes (Urata, 2007),equal for all

Trade Creation Æ Investment Diversion (Urata & Okabe,2007),defunct BFTAs‘Building Blocks’ for Multilateral Agreement (T&I) as long as
Regionalism type are Soft & Open (Baldwin, 1997)

Source: Author’s description based various articles,2010

AFTA & BFTA Effects on IMT’s Intratrade޽ࠅ߇ߣ߁ߏߑ޿߹ߔ
Terima Kasih
Thank You

Dependent Variable:
Intratrade

OLS(ORIGINAL
TSLS)

R-squared
Adjusted R-squared
Sum squared resid
Durbin-Watson stat
F-statistic

0.66
0.62
0.001
1.75
17.09
Constant
0.12
0.004
24.91
0.00
GDP***
3.98E-14
1.06E-14
3.77
0.001
AFTA*
0.01
0.005
1.83
0.08

Coefficient
Std Error
t-statistic
Probability
Coefficient
Std Error
t-statistic
Probability
Coefficient
Std Error
t-statistic
Probability

Original TSLS

2.

TSLS

3.

SUR

4.

SEM

(Aggregate Data)

0.75
0.64

TSLS(IV)
CONS(-1) ;POP; RCA;
RW(-1);INTRA; ER(-1)
0.8
0.7

6,827

56,734,169

56,754,793

1.82

2.79

2.80

2.79

6.67
0.0021
Constant***-261,508
75,216-3.48
0.004
Consumption (-1)

8.47
0.00069
Constant***-330,293
95,804-3.45
0.0043
Consumption (-1)

none
Constant***-328,971
77,226-4.26
0.0002
Consumption (-1)

none
Constant***-330,293
95,804-3.45
0.0017
Consumption (-1)

Dependent
Variable:
FDI
R-squared
Adjusted Rsquared
Sum squared
resid
Durbin-Watsonstat
F-statistic
Prob (F Stat)
Coefficient
Std Error
t-statistic
Probability

Original TSLS

Coefficient
Std Error
t-statistic
Probability
Coefficient
Std Error
t-statistic
Probability
Coefficient
Std Error
t-statistic
Probability
Coefficient
Std Error
t-statistic
Probability
Coefficient
Std Error
t-statistic
Probability
Coefficient
Std Error
t-statistic
Probability

0.8
0.7

0.8
0.7
6,734,169

***

***

***

***

-2.19E-07
5.88E-08-3.72
0.0026
Population***
1,086
308
3.52
0.0038
RCA***
28,6338,322
3.44
0.0044RW(-1) ***
16.69
3.98
4.19
0.0011
Intra*-119,892
65,340-1.83
0.0895ER(-1) *
-4.79
2.56
-1.87
0.0835-2.18E-07
4.74E-08-4.60
0.0001
Population***
1,083
249
4.35
0.0001
RCA***
28,5776,708
4.26
0.0002RW(-1) ***
16.73
3.20
5.21
0.0000Intra**-124,133
52,668-2.35
0.025
ER(-1) **
-4.74
2.06
-2.30
0.028

-2.19E-07
5.88E-08-3.72
0.0008Population***
1,086
309
3.52
0.0015
RCA***
28,6338,322
3.44
0.0018RW(-1) ***
16.69
3.98
4.19
0.0002Intra*-119,892
65,340-1.83
0.077
ER(-1) *
-4.79
2.55
-1.87
0.07
FDI
-8.00E-07
4.74E-07-1.686367
0.1025

8. PLS
9. PLS-Fixed
10. PLS-Random
H0: PLS Estimator is appropriate(Restricted)
H1: Fixed Effect Estimator is appropriate(Non-Restricted)

CT

Simultan(SYSTEM)-1.83E-07
5.68E-08
-3.23
0.007
Population***
1,071
249
4.3
0.0009RCA**
22,746
8,324
2.73
0.017
RW(-1) ***
18
4.4
4.12
0.0012Intraesti**-595,312
247,443
-2.4
0.032
ER**
-4.50
1.65
-2.73
0.017

Coefficient
Std Error
t-statistic
Probability( RRSS URSS )
N 1

SUR
(SYSTEM)URSSNT  N  K= 9,684.4 > F-Stat; FEM

H0: Random Effect Estimator is appropriate
H1: Fixed Effect Estimator is appropriate
Hausman Test: Chi-sq is 0,
Hausman Statistic set 0, RE
is invalid, FEM

Source: Author’s
Estimation of
econometric analysis
2010

FDI
NONE

Dependent Variable: Net
FDI in Rubber

PooledLEAST
SQUARE

R-squared
Adjusted R-squared
Sum squared resid
Durbin-Watson stat
F-statistic

0.87
0.86
20,7690.76
72
Constant-72.0714-5.15
0.0000
Elecons***
0.023
0.00455.13
0.0000ER(-1)**-0.0020.0012-1.8
0.08
PRODRUB***
7.69E-05
5.07E-06
15.16
0.0000
PRUB**-0.014
0.005
-2.49
0.016
ITRO*
-17
9.13
-1.86
0.07

Coefficient
Std Error
t-statistic
Probability
Coefficient
Std Error
t-statistic
Probability
Coefficient
Std Error
t-statistic
Probability
Coefficient
Std Error
t-statistic
Probability
Coefficient
Std Error
t-statistic
Probability
Coefficient
Std Error
t-statistic
Probability

Intratrade &Macroeconomic
Effect on
IMT’s Net FDI

POOLED EGLSCROSS SECTION(SUR)FIXED EFFECT
0.92
0.91
55.6
1.6
89
Constant
-64.9
9.84
-6.59
0.0000
Elecons***
0.037
0.003311.29
0.0000ER(-1)***-0.0030.00069-4.48
0.0000PRODRUB***
6.14E-05
6.09E-06100.0000
PRUB***-0.0140.0035-3.91
0.0003
ITRO**
-12.1
5
-2.39
0.02
Fixed Effect(Cross)Indonesia :22.3
Malaysia :-32
Thailand :9.7

5.

OLS - Indonesia

6.

OLS - Malaysia

7.

OLS - Thailand

Dependent Variable:
Net FDIR-squared
Adjusted R -squared
Sum squared resid
Durbin-Watson stat
F-statistic
Prob (F Stat)
Coefficient
Std Error
t-statistic
Probability
Coefficient
Std Error
t-statistic
Probability
Coefficient
Std Error
t-statistic
Probability
Coefficient
Std Error
t-statistic
Probability
Coefficient
Std Error
t-statistic
Probability
Coefficient
Std Error
t-statistic
Probability
Coefficient
Std Error
t-statistic
Probability

Source: Author’s
Estimation of
econometric analysis
2010

POOLED EGLSCROSS SECTIONRANDOM
EFFECT
0.80
0.78
15567
0.98
44.3
Constant-73.8118.8-3.93
0.0002
Elecons***
0.038
0.00566.77
0.0000ER(-1)**-0.0020.0013-1.85
0.07
PRODRUB***
6.57E-05
6.87E-06
2.46
0.017
PRUB**-0.012
8.57
-2.46
0.017
ITRO**
-21.2
8.58
-2.47
0.017
Random Effect(Cross)Indonesia : 20
Malaysia : -28.5
Thailand : 8.5

SIMULTAN(SYSTEM)

0.69
0.64
0.001
1.88

0.74
0.67
0.001
1.99

Constant
0.12
0.005
23.46
0.0000GDP***
5.84E-14
1.46E-143.99
0.0004AFTA*
0.0085
0.005
1.72
0.09
BFTA
-0.0097
0.0059-1.63
0.11 (NS)Constant
0.12
0.006
21.12
0.0000GDP*
8.00E-07
4.74E-07
1.69
0.10
AFTA**
0.01
0.005
2.01
0.05
BFTA
-0.0090.006-1.44
0.16 (NS)Indonesia

Malaysia

Thailand

0.70
0.61
37,859,662
2.00
8.6
0.00081Constant***-9,0182,568-3.5
0.00320.92
0.90
13,604,948
1.69
45.69
0.00000
Constant***-13,3592,854-4.68
0.0003

Consumption
Not sig nificant

Consumption
Not significant

Elecons(-1)***
21.05
5.96
3.53
0.003
RW ***
5.94
1.31
4.51
0.0004
BFTA **-2,898
1,409
-2
0.057
ER(-1)***
-0.47
0.15
-3.03
0.0083

Ele cons(-1 ) ***
2.83
0.73
3.87
0.0015
RW ***
4.18
0.53
7.86
0.0000BFTA* **
3,188
1,084
2.94
0.01

0.94
0.92
8,069,010
1.87
41.34
0.00000
Constant ***14,4192,327
6.19
0.0000Con sumption ***-6.14E-08
1.22E-08-5.03
0.0002
Elecons(-1) ***
7.77
0.90
8.63
0.0000

BFTA
Not
Significant

Coefficient
Std Error
t-statistic
Probability

1.

SUR(SYSTEM)

Coefficient
Std Error
t-statistic
ProbabilityER
Not significant

FDIP rofit
Not sig nificant

FDIP rofit
Not significant

Intra
Not sig nificant

Intra
Not significant

BFTA, Intratrade &Macroeconomic
Effect on
Each IMT Net FDI

RWNot Significant

BFTA
Not Significant
ER(-2) ***
-189
36.92
-5.12
0.0002
FDIP rofit(-1) ***1.82E-06
2.70E-07
6.75
0.0000Intra***-87,585
20,931-4.18
0.0011Forthcoming Study:
Rubber’s Impact on
Indonesia Economy 2005
Rubber Impact on Indonesia Economy
Input Output Table Analysis
2005
Top
Product Description - IO 2005
RubberRank
Code
12
Backward Linkages (BL)0.89
BL Rank
125
75%
Forward Linkages (FL)1.49
FL Rank
16
10%
Wage & Salary
0.57
W&S Rank
7
5%Profit0.53
Profit Rank
50
30%
Indirect Tax (IT)0.03
IT Rank
56
35%
0.00005
Export to Final Demand
Export Rank

Source: Author’s
Estimation of
econometric analysis
2010

123

Source: Author’s calculation based on 2005 I-O Table, 2010

71%

Source: Author’s
Estimation of
econometric analysis
2010Forthcoming Study:
Rubber’s Impact on
Indonesia Economy 2000 vs 2005

Rank Tax 2005
2005
Rank Tax 2000
2000
Rank Profit 2005
2005
Rank Profit 2000
2000
Rank W&S 2005
2005
Rank W&S 2000
2000
Rank FL 2005
2005
Rank FL 2000
2000
Rank BL 2005
2005
Rank BL 2000
2000

56
0.03
30
0.05
50
0.527
43
0.531
7
0.57
2
0.72

"Multiplier Effect of Natural Rubber"Indonesia
I-O Analysis
2000 & 2005

16
1.49
11
1.80
125
0.89
131
0.85

Source: Author’s calculation based on 2000 & 2005 I-O Table, 2010

Outline• Introduction

Spaghetti effects in Asia –A QCA analysis of Free Trade
Agreements• Parallel to trade multilateralism

Po-Kuan WU• FTA/RTA mushroomed (also in E. Asia)

PhD Candidate
European University Institute
Paper presented in Summer Institute
Waseda University
1

Introduction

2

Regional integration• A global picture- Spaghetti bowl effects• RTA=Regional Trade Agreement(ex. NAFTA, ASEAN, MECOSEUR)• FTA=Free Trade Agreement(ex. US-Korea, Japan-ASEAN, EU-Mexico)• Custom Union= no internal tariff(ex. EU, EU-Turkey etc)

• Parallel to trade multilateralism• FTA/RTA mushroomed (also in E. Asia)

3

Proliferation of FTAs
- Spaghetti bowl effects

4

Oh!
No more spagehtti, please!

5

6

Protests
In Thailand

NO!We don’t wanna sign on that
(Korea-US FTA)

7

Nay in Taiwan against ECFA

8

Regionalisation vs Multi-lateralism• WTO Plus
• FTA/RTAs are exempted from the rules,
as long as they aim to further liberalise thetrade amongst the contracting parties(GATT Art. VIXX)

9

Research Question

10

Theories• Assumption: a FTA/RTA can beunderstood as a strategic move by thenegotiating parties• What are underpinning rationales for FTAs
in East Asia?

11• IPE literature – trade liberalisation
enhances the political mobility• Economic rationale – trade creation
effects/competition• Political rationale – institutional factors

12Research Method

The Conditions (variables)• QCA – Qualitative Configurative Analysis• Strength –a. comparative study with a few cases(small-medium size cases)b. qualitative configuration with logicalcombinations• Economic rationalesA. Exports
The more exports to a trade partner, themore likely a FTA can be concluded
B. Competition
If another Asian economy concludes a
FTA with the trade partner, it is more
likely to conclude a FTA
13

The Conditions (variables)

14

Equation• Political rationalesA. Veto players
The more political constraints (vetoplayers) in the political institutions, theless likely a FTA can be initiatedB. PartisanshipThe right government in office is more
inclined for a FTA• FTA conclusion –• C+E+R+V Ш FTA

15Case selection

16

Examples• Sufficient conditions –The cause of A leads to event B
ex. Heat (A) leads to the water boiling (B)• FTA concluded in E. Asia–• Japan (11)
• S Korea (7)• Taiwan (6)• Singapore (12)• Australia (5)• New Zealand (8)• Necessary conditions When event B happens, we observe cause A
ex. War (B) and fresh air (A)1718Results

Results• Necessary conditions-• Necessary conditions
Consistency

Coverage

Consistency

Coverage

RIGHT

0.869565

0.930233

RIGHT

0.869565

0.930233

EXPORT

0.239130.785714

EXPORT

0.239130.785714

VETO PLAYER

0.804348

0.948718

VETO PLAYER

0.804348

0.948718

COMPETITION

0.347826

0.888889

COMPETITION

0.347826

0.888889

19

Equation

20

Conclusion• export*RIGHT+ VETO PLAYER*competitionШ+export*COMPETITION+RIGHT*COMPETITIONШ
FTA• no individual sufficient condition is
identified• two necessary conditions confirmed

raw coverage

uniquecoverage~EXPORT*RIGHT

0.652174

0.130435

1

VETO PLAYER*~COMPETITION

0.521739

0.152174

0.96~EXPORT*COMPETITION

0.195652

0.043478

1

RIGHT*COMPETITION

0.304348

0.152174

0.875

consistency

21• Asian variances of FTAs?! (morehomogeneous)22

International Political Economy (IPE) Model

Japan's FTAs as Tools for Achieving a Firm's
Commercial Interests: Do Japanese Corporations
Need a Region-Wide Trade Liberalization Treaty?

Based on Aggarwal's framework (2006)

Anna Jerzewska
PhD Candidate
University of Leeds,
White Rose East Asia Centre

1. Situation Before 1990s

Internationalisation of Japan's Production Networks- Shifting the production base
- The Plaza Accord of September 1985
- Internationalisation of production networks
Newly industrialized economies (NIEs) - Hong Kong, South
Korea, Singapore, and Taiwan
ASEAN countries
China- 2000 China proposes an FTA to ASEAN- Beginning of negotiations with ASEAN members

2. AFTA

3. Japan's Bilateral FTAs
Increasing competition
Supported mainly by MNCs vertically integrated operations
Procurement of parts and components
EPA- style approaches – improving operations of production
networks
Defensive or reactive FTAs
3rd parties FTAs – India-Thailand and Australia-Thailand-New
Zealand3. Japan's Bilateral FTAs

4. ASEAN-Japan Comprehensive Economic Partnership2008

5. Lead TimeThank you
Q&A

Outline Areas of Interests
 Research Objectives
 Research Rational 1-2
 Literature Review 1-3

Sae SHIMAUCHIPhD Student, Graduate School of Asia-Pacific Studies, Waseda University
Research Fellow, Global Institute for Asian Regional Integration (GIARI)
Research Fellow, Japan Society for the Promotion of Science (JSPS)

Research Objectives

Areas of Interest
Higher
Education

Language
Policy- Region- East Asia
- East Asian Higher Education
 Problem Statements
 Research Questions
 Theoretical Framework 1-2
 Methodology
 Tentative Findings
 References

Regional
Cooperation

 To provide a comprehensive analysis of…
 The impact of globalization on language issues such as
domination of English as lingua franca Recent trend on language issue in the context ofInternationalization on Higher Education in East Asia
 To examine the role and perceptions of medium

language of education and the role of Lingua
Franca in the context of Higher Education in EastAsia
 To look for the significance of regional
cooperation on language issues in East Asia for
future East Asian

Research Rational 1

Research Rational 2

Why do language issues matter in the context ofEast Asia?
 Linguistic Diversity as an asset
 Colonial Experience in Education
 National Sovereignty and Nationalism in Languages

Why do language issues matter in the context ofHigher Education?

Language = not just a tool for communication
 is/was to educate people to comply the dominantpower is/was the tool for empowerment, upward social
mobility and privileged position in society Competency in language is important qualification

 Importance of medium language of education forinternational students to determine thedestination country for studying abroad.
for university students since it’s the empowerment
tool for them to increase their socio-economic
status in many counties.

Literature Review 1
Learning from European Experience LINGUA programme (promotion of official national

language?) + SOCRATES/ERASMUS (promoting
higher education mobility)
 Response to dominance of English: “Plulilingual” education (Council of Europe)
to strengthen linguistic and cultural links
between Europeans in different nations
 Huge burden in terms of financial and humanresource management for the multilingual policy……Can we do this in the context of Asia?

Literature Review 3

Literature Review 2Concerns about medium language of Higher Education
 Core-Periphery Structure in Higher Education(Altbach 2004)
 Glowing number of student mobility intra East Asia
 “Regionalization”
 International cooperation and networks in higher

education institutes level: “International Program”(Knight 2008)
 Linguistic divide (English divide, dominant language
divide)(Phillipson 1992, 2010) English has already become de facto lingua franca in East
Asia among political dialogue, civil society(Crystal 2003)

Language of Domination and its Response

Problem Statements

Dominance

Not against the idea of situating English as

 English as de facto “Lingua Franca” in academic,

economic and political world
 International program is the new trend of“Regionalization” of higher education in East Asia
Response Promotion of national language (China, South

Korea, Japan)

lingua franca in East Asian higher education,
but questioning the domination of English as
lingua franca Linguistic divide in English (elite – non elite) No framework of language policy, no vision as one

region ( Traditional approach to those language

issues has been taken only by nation-state level) Linguistic rights, mother tongue education

Research Questions
How do students perceive the role and value of
medium language of education? (What kind of
hidden agenda do students have or inf luence on
students when they determine the destination
country for studying abroad?)
2. What is the role of lingua franca in higher educationin East Asia for individual perspective?
3. Can English be a counter-hegemonic medium
facilitating mutual understanding in East Asian
region?
4. How well does the existing theory about languages
fit the situation in East Asian Higher Education?
1.

Theoretical Framework 1
Robert Phillipson’s Linguistic Imperialism
 English is now entrenched worldwide, as a result of Britishcolonialism, international independence, ‘revolutions’ intechnology, transport, communications and commerce, andbecause English is the language of USA, a major economic,
political, and military force in the contemporary world.
 English Imperialism:
the dominance of English is asserted and maintained by theestablishment and continuous reconstitution of structuraland cultural inequalities between English and otherlanguages
 English is used widely for supranational and international
links, English linguistic imperialism operates globally as a key
medium of Centre-Periphery relations.
(Phillipson, 1992)

Theoretical Framework 2
Antonio Gramsci’s “Language and Hegemony”
 Hegemony is used to illustrate that whether or not

individuals, institutions or states ‘choose’ (seeming
freely) to learn, teach or facilitate English, the spread ofEnglish is part and parcel of unequal power relations.
(Kachu 1997, Tollefson 2000) = “Spontaneousity”
 Language use is intimately tied to education, culture,ideology and politics. It cannot be divorced fromquestions of subordination and domination but also
contains possibilities for resistance and struggle inwhat Gramsci calls the ‘war of position’ in preparation
for social change and ‘war of maneuver’ (Ives 2004)

Tentative Findings 1
Dependent variable:
Motivation toward English / National language (Japanese)
Independent variable National factors
 Current national Economic power Ethnic diversity in their country National potential (expectation toward future economic/politicalpower)
 Individual factors
 Cultural interest Capacity building for future career Starting point to upward social mobility
 Interests in foreign language learning itself

References (selected)• David Crystal, “English as a Global Language”(Second

Edition), Cambridge University Press, 2003
• Jane Knight, “Higher Education in Turmoil –The Changing

World of Internationalization”, Sense Publishers, 2008

• Peter Mayo, “Gramsci and Educational Thought”, Wiley-Blackwell, 2010

• Peter Ives, “Language & Hegemony in Gramsci”, Pluto

Press, 2004
• Philip. G. Altbach, Toru Umakoshi, ”Asian Universities:

Historical Perspectives and Contemporary Challenges”,
Johns Hopkins University Publishing, 2004
• Robert Phillipson, “Linguistic Imperialism”, Oxford
University Press, 1992
• Robert Phillipson, “Linguistic Imperialism Continued”,
Orient BlackSwan, 2010

Methodology
Qualitative research Pilot Interviews (forming questions and guideline) In-depth and Semi-structured interview to international students
enrolled in international program in some Northeast and ASEAN
country Selected countries are: South Korea, Japan, Thailand Selected universities are: Waseda University (Japan), Yonsei University(Korea), Mahidol University (Thailand) All leading university which has international program in English andnormal program in national language 30 students from each country, 15 students from international programand 15 students from normal program Re-structuring questionnaire
Quantitative research Questionnaire to the international students in 3 countries above
 Utilize secondary date from AsiaBaromater

Tentative Findings 2
Necessity toward Lingua Franca (English) Different role with national language in terms of identity
and nationalism Neutrality of English
 Tool to overcome negative historical heritage in East Asia
 Improving social life Facilitating cross border mobility

The Present Conditions andProblems on Historical Recognitions
between Japan and Asian
Neighboring Countries
Kinuyo Kawaji
Graduate School of Political Science,
Waseda University

What are the effects of the historicalproblem?
• Mutual distrust on a deep level(despite economic, social and cultural exchanges extend)• The obstacle to the development of the relationship among
Northeast Asian countries.
→meaningless or harmful mater? / important matter toresolute ?(Is historical reconciliation possible?)→Joint history research among Northeast Asian countries＊positivism and its limitation＊a vicious circle of nationalisms?
• Reactionary movements (neo-nationalism, historicalrevisionism etc.)• Anti-Japan protests• Diplomacy card

What do you think about the relations
between Japan and China and the historicalproblem between the two countries?
[Japan]If the historical problem cannot be
resolved, the relations between
Japan and China doesn't seem todevelop

100%
90%
80%
70%
60%
50%
40%
30%
20%
10%
0%

As the relations between Japan and
China develop, the historicalproblem seems to resolve gradually

If the relations between Japan and
China develop, it seems to bedifficult to resolve the historicalproblem

don't know

2005

2006

What is the Historical Problems?
•

The differences of history recognitions based on national history cause the clash ofnationalisms among Northeast Asian countries.
The history of empire/colony→orthodoxy of national history (imperialist nationalism VS anti-imperialist
nationalism, aggression VS resistance)• Memories of the World War II (of a nation)→ “imagined community” (Anderson), community feeling the pastsacrifices(Renan)→self-victimization? (massacre, war dead for the state, occupation etc.)＊symbol• Nationalized universal ideas (crime against peace, crime against humanity＊war of the 20th Century: weapons of mass destruction, massacre, racism, unfree(forced) labor, sexual violence (as for Japan, “(war) comfort women”)＊human rights movement from the 1990s• Issues and controversies about:
Yasukuni shrine, history textbook, “comfort women” etc.
••

the others
1%

What do you think the biggest obstacles to thedevelopment of relations in Asia?
don't know
2%
territorial
dispute8%
resources problem
10%

national sentiments
19%

militarizing power ofneighbor countries
7%

difference of history
recognition20%

difference of culture11%

gap betwwen richand poor
16%

economic friction
6%

Source: Asia-Vision Survey, 2009

If the historical problem don't be
resolved, relations don't develop[China]
100%
90%
80%
70%
60%
50%
40%
30%
20%
10%
0%

As the relations between Japan and
China develop, the historicalproblem seems to resolve

Despite the development of therelations between China and Japan,
it is difficult to resolve the histricalproblem between the two countries

don't know

2005

2006

2007

2007

Source: Genron NPO, The 3th Japan-China Joint Opinion Poll in 2007 (arranged)

Source: Genron NPO, The 3th Japan-China Joint Opinion Poll in 2007 (arranged)

What causes the historical problem?
(1) Appearance• Nationalism• National sentiments• School education of national history( including nation-centered history, education
for patriotism, ) under state control (Ex. The
textbook authorization system in Japan,
censorship etc.)→the history textbook
controversies• Mass media

What is the main sources of yourknowledge of other Asian countries?
My experience friend or
moviesthe others don't
and dramaknow or family's acquaintance's
1%
3%
1%experience1%1%internet
7%
book andmagazine10%

press ofnewspapers , TV
and radio
18%

school education
57%

memorials andhistrical museum
1%

Source: Asia-Vision Survey, 2009

What causes the historical problem(2) background＊The process of war reparation under the Cold War system:
bilateral agreements at the intergovernmental level
Rise： Since the late 1980s-90s• The collapse of the Cold War →breaking the seal of thehistorical problem* The process of Japan’s war reparations under the divisionof the East / West
• Globalization →reaction and adaptation(neo-nationalism, inter-nationalism,
trans-nationalism, globalism etc.)• Regionalization under globalization

How far do you care about the historical problem?

don't so
care
18%

don't
care
2%

don't
know
0%
very care
24%

care
56%

Source: Asia-Vision Survey, 2009

What do you think the most effective toresolve the historical problem?

China
Japan's apology satisfying South
Korea and China
review of war reparation problem

ROK

joint research to agree on history
recognition
improvement of the view of Japanin China and South Korea
broad exchange among nations

Japan

0%

50%

100%

Source: Asahi Shimbun, 27 April, 2005

GIARI Summer Institute 2010, Waseda University Tokyo, 5 August 2010

Regional integration

Regional identity

History(past, memory, historiography)

Torsten Weber
Jacobs University Bremen, Germanyt.weber@jacobs-university.de“[…] have been pushed towards disunity by their
history and by selfishly defending misjudged interests.
But they have overcome their past enmities […].”“Nations are not something eternal. They havebegun, they will end. They will be replaced, inall probability, by a European confederation.”‘Declaration on European Identity’ (Copenhagen, 14 December 1973)“[…] the peoples of Europe are determined to transcendtheir ancient divisions […]”

Ernest Renan, “Qu’est-ce qu’une nation?” (1882)

Draft Treaty Constitution for Europe (Brussels, 25 June 2004)“common glories in the past”, “a heritage of glory”,“heroic past”
 “common suffering” and “having suffered together”


Instrumentalisation of history for political ends

“the political currency of the past”◦ The past’s omnipresence, “its pervasiveness and intrusiveness”◦ “medium of exchange”: “Past suffering and misfortune may be
converted into moral capital”

“control its framing, storytelling, andinterpretations, and to shape (some would say
manipulate) public or collective memories for
current partisan, factional, national, or ideologicaladvantage”

Martin O. Heisler, “The Political Currency of the Past:
History, Memory, and Identity”, 2008.



Region as natural entity (despite “ancient divisions”)
Region as goal of historical development→ teleological view of history

 “a political idea and mobilizing metaphor”, “anideology” with “subtexts of racial and culturalchauvinism”

 “xeno-stereotypes” derived from “auto-

stereotypes” (or vice versa)

Bo Stråth, “A European Identity:
To the Historical Limits of a Concept”, 2002.




Official level (politicians, bureaucrats)
Case studies: Hatoyama Yukio, Wang Yi









“Private” initiatives (scholars, teachers, civil society
actors) → “memory culture”, “history culture”

Asian integration: trend of timesAsian identity: critique of “Western dualism”

Asian integration: central role of history

Modern history of enmity ↔ ancient history of coprosperity (“common glories of the past”)
self-seclusion, internal disputes, Western & Japanese invasions↔
“For a long period, Asia stood at the forefront of history and made somedistinguished contributions to the human race. […] The three great
religions of the world, Christianity, Buddhism, and Islam, all have their
origins in Asia. […] a number of outstanding inventions by Asians haveinfluenced the progress of global civilization. Also, for a long time Asia
was leading the world economy.”

Asian integration: emphasis on historical unity & focus
on historical commonalities“[…] unresolved historical and territorial issues are obstacles to theregion’s trust-building efforts. The Foundation strives to diagnose
the precise causes of the region’s historical and territorial disputes
and prescribe appropriate responses and strategies. […] The
Foundation will continue to spare no effort to protect historical andterritorial sovereignty, advance a shared understanding of history formutual development, and build a Northeast Asian regional
community that pursues peace and prosperity.”

Focus on highly disputed historical issues
Strategic focus on history: moral surplus, “Korean
pride”



Critical view of Asian integration & Japan-centred:“not to promote, but to study the concept of an East Asian Community”
and “to pursue what the strategic response of Japan should be”◦ “Northeast Asia” as an entity since the 7th century, disturbed by great
power politics“[…] despite bitter historical memories of domination and subjugation,
Northeast Asia shares a common cultural and historical heritage thatshould be emphasized more than contentious past insults”
Critique of ‘Asia’ concept:“In fact, it is rather difficult to consider ‘East Asia’ as a regional concept.
At any rate, it is a fact that there is not even an agreement on ‘Asia’ as ageographical division. When it comes to considering a common ‘Asia’
within the framework that includes identity, such as ‘cultural bloc’,‘religious bloc’ or ‘political bloc’ the concept becomes even more
ambiguous.”

Critique of the usage of history “to pursue parochialnationalism at the expense of regional cooperation” as“a Faustian bargain with the forces of the past”
Moon Chung-in/Suh Seung-won, “Burdens of the Past: Overcoming History,
the Politics of Identity and Nationalism in Asia”, 2007

Modern history of enmity ↔ ancient history of coprosperity (“common glories of the past”)“[…] we must not repeat the unfortunate history of the past hundred years inwhich the seas of East Asia were made into seas of conflict.”↔
“If we trace history back still further in units of several hundreds or
thousands of years, we see that these seas have also yielded prolific rewards[…]. The sea did not create differences in language or antagonism among
religions; instead it blended such differences and served as the foundation
for mutual development. Had this not been so, we would not have so many
people living in this region with an awareness of themselves as Asians.”

Think tanks (foundations etc)

Case studies: Northeast Asia History Foundation, East Asia
Foundation, Council on East Asia CommunityAsian integration: Europe as model

History as a proof of Asia’s diversity → scepticism

‘distant past’modern period

instrumentalisationof the past
“Common glories”,
Golden Age

Regional integration:
goal of historicaldevelopment, returnto natural entity

Disunity, enmity,
distortions
Prescription:

Prescription:

remembrance(Europe as ‘Other’)overcoming(Europe as ‘model’)“Politicalcurrency ofthe past”

Rationale of the research
Regional integration in East
Asia/Southeast Asia and Central
Asia: politics and policies compared

Chinara Esengul
Assistant professor, PhD candidate
School of International Relations, KNU
GIARI , August 6, 2010

• Study Asian regionalism• Track non-European features• Compare cases of Asian regionalism• Identify differences/similarities• Draw policy lessons

Definitions

Locations• Region- a certain group of countries (outsiders
vs. insiders)• Regionalism (regional integration)– a set ofpolicies• Regionalization – increased commercial andhuman transactions in a defined geographicalspace• Post-Soviet space (15 former soviet republics)
presented in the paper as a case of regionalism• Central Asia - a case of sub-regionalism(Kazakhstan, Kyrgyzstan, Tajikistan, Turkmenistan,
Uzbekistan)• Southeast Asia (ten ASEAN member-states) a caseof sub-regionalism• East Asia (ASEAN+3 and other countries ofNortheast Asia and Asia Pacific), a case ofregionalism

Political map of CA

Comparison and differences• ASEAN – principle of non-intervention into
internal affairs and a dialogue platform withexternal powers (1967)• Commonwealth of Independent States (CIS,1991) disintegration and integration(December 8, 13 and 21, 1991)• Issue of regional leadership (Russia andJapan???)

Regional leadership/hegemony
Sub-region:• Kazakhstan vs. Uzbekistan
Region:• Relations of Japan and other East Asian states• Relations of Russia with other post-Soviet states
Global :• the USA and its attitude towards regionalism inEast Asia and Central Asia

Japan’s role
According to Terada, the role of Japan was
critical in three normative transformations inEast Asian regionalism
1. Gradual involvement of the government
2. From economic cooperation to tradeliberalization
3. Open membership (APEC /USA vs. East Asian
Community/Summit)

Why different?

Changes in policy

Geopolitics of regions (USA-Russia, Greater Central
Asia project, China’s position)

Conceptual:• Regional cooperation is about compromiseand sacrifice;• Interdependence - not only depending oneach other, but being capable to support eachother
• A shift from talking to doing

Contextual conditions (Central Asia- “Soviet
experience” and East Asia – a periphery ofcapitalism)
ASEAN in SEA and ??? in Central Asia (the pacematters, Customs Union, 2010)

Concrete recommendations

Difficulties and limitations• To revive a purely CA regional institution• To create non-governmental policy networks• Their policy suggestions discussed andimplemented by heads of states/governments• To give priority to regional development
projects along with trade liberalization(marketization)• To improve governance in each CA country• Regime or personal interests over national orregional;• External factor as a limitation (geopolitics andIslamization
Conclusion:• Common challenges but different ways toaddress• Functionalism in ASEAN way

Thank you• For your attention• Time and feedback• Please write to chinara.esengul@gmail.com

 Region and regionness

 Regionalism – definitions

 Asiancollective identities and regionalism refer
to political, economic and cultural processes thatare creating new relations between places andpeople.



C. Dent: Northeast Asia and Southeast Asia
M. Beeson: Northeast Asia (without Macao
SAR and Mongolia) and the member states of
ASEAN
D. McDougall: Northeast Asia (including
Pacific Russia) and Southeast Asia
For the purpose of the paper: the states in
ASEAN + 3 (the member states of ASEAN and
China, Japan and South Korea)The process of regional integration ondifferent levels and on different aspects
between the states in East Asia.
Diversity and unity in East Asian and theregionalism



SEATO in 1954 (Manila, the Philippines);
Association of Southeast Asia in 1961 (thePhilippines, Malaysia and Thailand);

Asia and Pacific Council – ASPAC, in 1966;




ASEAN Free Trade Agreement in 1992;
ASEAN Regional Forum in 1994;



Asia-Europe Meeting in 1996;



ASEAN+3 in 1999;

East Asian Summit in 2001.









The peaceful rise/development as
strategy

ASEAN in 1967 (Bangkok, Thailand);Outside ASEAN: FDPA in 1971.

The definition of comprehensive national
strength
The hegemony from the perspective of thepolitical realism
Im. Wallerstein, the Modern world systemand the changes in the hegemonic influence
The hegemony in the eyes of the political
economy theories (P. Kennedy and B.K.
Gills)

The four periods of China-ASEAN
relations 1967-1978

 1978-1989

The three periods of PRC participation ininternational governmental organisations

 1989-1997 (1999)
 1999-2009 (the Global economic crisis)

 Reforming the system (1949-1971)
 Support of the system (1971-1980)
 Using the system (1980-nowadays)

China in ARF, APT and EAS

China and U.S.-Japan Alliance2010 Summer Institute

China’s Changing Perception of U.S.Japan Military Alliance
Xie Zhihai
School of International Studies,
Peking University

Evolving Process of U.S.-Japan
Alliance in China’s Eyes
1951-1989 U.S.-Japan Alliance in ColdWar
 1989-1994 Floating situation of U.S.Japan Alliance 1994-2001 Redefinition and adjustmentof U.S.-Japan Alliance 2001Strengthening of U.S.-Japan
Alliance since 9.11

“Security Dilemma” : A Security
Game between one country and one
military alliance.
 “Perception and Misperception”: One
actor’s perceptions of other actors’
military intentions and actions
greatly influence its own intentions
and actions.


Floating of U.S.-Japan AllianceEnd of Cold War and the losing of thecommon enemy: “Enemy Deficiency
Syndrome”
 New world order and the trend of Multipolarity made the alliance loose
 Chinese officials and scholars predictedthat the alliance would go to an end
 Good opportunity for Sino-Japanese
Relations

Redefinition of U.S.-Japan
Alliance

The Impact of Redefinition of
U.S.-Japan Alliance

The pivot implement for U.S. Grand
Strategy in Asia
 The platform for Japan’s Rearmamentand its pursuit for a military power China Threat provided the legitimacy
and incentives
 To contain the emergence of China as agreat and unified power

Changed the nature of the alliance:from a military alliance to acomprehensive bilateral alliance Broadened
the scope of U.S.-Japan
military cooperation
 Violated the regulation on “collective
self-defense” in Japan’s Constitution
 Japan’s “Exclusively Defense-Oriented
Policy” was challengedStrengthening of U.S.-Japan
Alliance after 9.11
U.S. security strategic adjustment, thecounter-terrorism war and the shared
responsibility.
 The opportunity for SDF’s expansion
and the promotion of constitutional
revision Strategic necessary for Japan to
defense from a rising China

New Thinking about U.S.-Japan
Alliance
A keystone for regional security andstability
 U.S. and Japan have a lot of disputewithin the alliance China has to keep balance between the
two and reduce the negative impact of
the bilateral alliance Military transparency comes frommutual military communication

Traditional Thinking about U.S.Japan Alliance
A heritage of the Cold War
Bilateral alliance to separate friend fromenemy, “the Cold War mentality”
 Firmly linked with U.S. hegemonism andJapan’s eagerness for a military power
 Direct containment and strategic
besiegement towards China
 The only choice: confrontation with thealliance

U.S-Japan Alliance’s Positive Side
Restraining Japan’s buildup of militarystrength and limiting Japan’s ambition
to become a military power
 Maintain the security order and stability
in Asia-Pacific region
 Relieve the other states’ anxiety about
China’s rising power in the region

U.S-Japan Alliance’s Negative
Side

Military Integration: Is it
possible?

Barrier for the establishment of multilateral
security regime
 Increase the security dilemma and cause newarms races (especially for China ) Included Taiwan into U.S.-Japan collaborative
defense area, making Taiwan issuecomplicated for China
 Japan’s dependence on U.S. making SinoJapanese relations harder to deal with, ChinaJapan-U.S. an unbalanced triangle

Possibility 1：integrate China into the U.S.Japan military alliance, develop into a triangle
military alliance Possibility 2: a more broader multi-polar
security community, diluting the bilateralalliance Possibility 3: security order dominated by
U.S.-Japan Alliance arrangement
 Possibility 4: Somewhere between thebalance of power and a community-based
security orderConclusion
China’s changing perception of U.S.-Japan
Alliance greatly influences its security policy
and arrangements.
 China has long regarded U.S.-Japan allianceas a containment towards China, and thus
raises its defense expenditure significantly.
 Owing to the reassessment, China takes thealliance as a long-term existing bilateralalliance and changes its policy from
confrontation to conversation with bilateral
military exchange.

Thank you!



Any advice or criticism
would be more than welcome!