Date

Wednesday, October 24, 2007, 15:00-16:30

Place

Building 19, Room 711

Presenter

Peter Drysdale, Emeritus Professor of Economics, the Crawford Schoolof Economics and Government, The Australian National University

Title

The Future of East Asian Integration

Moderator

Professor Takashi Terada, Organisation for Asian Studies, Waseda
University

Participants

Professors Satoshi Amako, Shigeto Sonoda, and Shujiro Urata from theGlobal Institute for Asian Regional Integration; 40 PhD and MA
students from the Graduate School of Asia Pacific Studies

Professor Drysdale spoke on the future of East Asian integration and the nature of its
process from an economic perspective. Questions addressed were: 1) how should
economic integration be measured? , 2) what are the drivers of integration in East Asia? ,and 3) how can integration in the region be further developed?
The process of integration is traditionally defined and measured by the share of
trade between countries. There is no question that trade is increasing in East Asia, but
this alone is an inadequate measure of economic integration, which at its core is about
increasing the contestability of national markets. For example, by looking at tradeshares, one might imagine integration between North Korea and China to be very high,when actually the interaction between the North Korean and the Chinese economy isquite small.
The main drivers of integration in East Asia are the success of growth in thescale of the East Asian economies, the region’s commitment at various stages toopenness to trade and investment, and the close proximity of its economies.
The process of regional integration involves the commitment to three
generations of reforms and progress with the second and third generation of reforms
will be crucial to the future of East Asian integration.
The first generation required commitment to trade and investment openness.
This commitment from the end of the 1970s in China continues to fundamentallytransform its economy over a short period of time.
The second generation involves managing reform of national institutions andregulations that opens up domestic markets of the whole range of services. Without
confronting these reforms, the benefits of a global involvement are limited. Second
generation reforms are currently the top priority in the region. Indeed, at the last APEC

Summit in Sydney, a commitment was made to foster this process and deepen regional
integration through support for structural reform processes such as these.
The third generation of regional reform involves creating institutionalframeworks for regional cooperation. East Asia is currently at the very initial stage ofmaking third generation reforms, but two main strategies can already be seen: acrossthe Pacific and within East Asia. Both processes were initially focused of the first
generation of reforms.
A major change in the share of East Asian share (currently third) of world
output relative to that of North America (currently first), the EU (currently second) is
forecast. Deepening integration in this way requires liberalization of national markets
in East Asia and their participation in the global market; the broader the trade
agreement, the more beneficial it is likely to be.
Questions from the audience

Does China have a commitment to structural reforms?
When China joined the WTO, it made many institutional and structural reforms thatwere instrumental to its recent high rate of growth. Future economic success will
require that the state in China be transparent in its dealings with, and separate from,
Chinese enterprise.

What provides the basis for integration?
Economies must have the commitment to interact with each other. This is implicitly orexplicitly a political process. The Atlantic Charter provided a global set of suchcommitments after the Second World War. The growth of the East Asian economy will
have a big impact on, and generate significant response in the rest of the world. There iscurrently little regional cooperation in managing this process which is now a toppriority.

How is the contestability of regional markets different from global integration?
For example, the USA and the EU are integrated, but they do not have a set of formal
economic institutional arrangements. This distinguishes trans-Atlantic integrationfrom European integration.

Regarding the competition between China and Japan for the initiative in regional
integration, will Australia also take part in this initiative?
Competition for initiative is unproductive. There is a commonality of interests in thisregion, and these points need to be emphasized over points of contestation. The time isright for a Japan-China initiative. Australia will be supportive of that.

How serious is Australia’s commitment to integration in East Asia?

Australia has the most East Asian centered economy in the world. Australia’s economic
and political priorities are in this region. Australia’s leaders want to be a part ofinstitutions like ASEAN+3 although it was difficult for them to say so half a decade ago.

Is there a difference between Asian integration and forming an Asian community?
Integration is a policy objective to promote the benefits of regionalism. An economic
community is one instrument that might be used to achieve that objective.
(Troy Knudson, PhD Program – GSAPS, Research Assistant – GIARI)