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September 12, 2005

Institutional Mix Key to Building East Asia community
By SHIRAISHI Takashi
This December, Malaysia will host the East Asia Summit with leaders from 16 countries, namely,ASEAN (the Association Southeast Asian Nations) members+3 (Japan, China and South Korea)
as well as India, Australia and New Zealand participating.
Partly due to the upcoming summit, the idea of establishing an East Asia community has
recently become a topic of lively debate.
Both the Liberal Democratic Party and the Democratic Party of Japan in their election
manifestos have called for the building of an East Asia community.
But there is mounting concern in the United States about the formation of a China-led regional
order.
In Japan, questions are also being asked about the compatibility of such a community with theJapan-U.S. alliance. In view of recent anti-Japanese sentiment in China, skepticism exists over
the ability of two countries with different economic and political systems and a history ofmutual distrust to create a community.
Concept of community differs from that of EU
These anxieties are understandable.
To avoid any misconception, however, it is important to remember that the concept of“community” envisaged in the East Asia community is markedly different from that in theEuropean Union.
The EU was formed by a group of states which shared the commitment to never again go to war,with each participant country agreeing to surrender part of its sovereignty to the union.
In contrast, moves to form an East Asia community are based on the ongoing de facto
integration of the region's economies and on lessons learned from the 1997 Asian financial crisis.
Based on these experiences, the idea of an East Asia community has evolved as a framework of1

regional cooperation, mainly economic, under the principles of mutual respect for sovereignty as
well as amity and cooperation.
What institutional architectures are now being created in the name of East Asia
community-building?
The first ASEAN+3 summit meeting was held in 1997 in the midst of the economic crisis toaddress the region’s common problems. The summit in 1999 agreed on a Joint Statement on East
Asian Cooperation. The upcoming East Asia Summit is an outcome of these meetings.
Accordingly, East Asian cooperation over the past eight years has evolved within the frameworkof ASEAN+3. In the currency and financial fields, the ASEAN+3 summit in 2000 reached anagreement known as the Chiangmai Initiative, which formulated a system for fiscal cooperationin the event of a financial crisis. On the basis of the accord, a bundle of bilateral currency swap
agreements was created as the major mechanism of crisis management.
An Asian bond market within the framework of ASEAN+3 is now in the making.
In the sphere of trade and investment, economic partnership agreements (EPAs) are being forged
as a bundle of ASEAN+1 (for example, ASEAN+China and ASEAN+Japan) in the name of theEast Asia community.
In 2002, Prime Minister Junichiro Koizumi proposed a Japan-ASEAN Comprehensive
Economic Partnership initiative, which envisioned not just the liberalization of trade in goodsand services, but also promotion of trade and investment, protection of intellectual property
rights, development of human resources and nurturing of small and medium-sized enterprises.
All these are not usually covered by free trade agreements (FTAs).
ASEAN driving cooperation
Based on Koizumi’s proposal, Japan has already reached broad agreements on EPAs with thePhilippines, Thailand and Malaysia, while negotiations for a Japan-South Korea EPA areongoing. In addition, talks on concluding EPAs with Indonesia and ASEAN as a whole started
earlier this year.
China, for its part, proposed an FTA with ASEAN in 2000, leading to an agreement on theliberalization of trade in goods in 2004. ASEAN is also expected to notch up FTAs withAustralia and New Zealand, India, and South Korea over the next two years.
As we can see, trade cooperation is progressing with ASEAN as a hub. Ever since the 1992 pact
on the ASEAN Free Trade Area, or AFTA, trade within the area has expanded thanks to reduced

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tariffs and the elimination of nontariff barriers. This means that AFTA will be extended through
ASEAN+1 agreements into East Asia and beyond.
Economic partnership will progress in the future in currency and finance, as well as trade andinvestment. Trade volume within the region is rocketing: imports from East Asian neighbors
jumped from 34 percent of total imports in 1980 to 51 percent in 2003, while exports amongneighbors expanded to 60 percent from 35 percent during the same period.
At the heart of this astounding growth is the expansion and deepening of across-the-border
networks of production and distribution. Nurturing the industrial hubs of these networks is vitalto the economic development of any country in the region. Therefore, it is in the interest of thesecountries to promote regional economic partnership.
Institutional architectures for regional cooperation can be created as a bundle of bilateralagreements, as in the case of currency and finance cooperation, or as a bundle of ASEAN+1, forexample in trade and investment cooperation.
In either case, it is clear that ASEAN has been pivotal in enhancing cooperation. ASEAN has
also acted as the hub in larger regional cooperation mechanisms such the Asia-Pacific EconomicCooperation (APEC) forum in the area of trade cooperation, the ASEAN Regional Forum (ARF)in the area of confidence-building, and the forthcoming East Asia Summit. The driving force inregional cooperation in East Asia is not China or Japan, but ASEAN.
This might not be a bad thing for Japan, simply because cooperation in East Asia cannot work if
the prime mover is either Japan or China. In addition, Japan, ASEAN and South Korea would
prefer to deal with a China that is a member of a regional framework and acting in accordancewith global and regional rules instead of unilaterally.
Perfecting a balancing act
Pragmatism will be needed to ensure compatibility between a future East Asia community andthe US-led regional security system.
There are some regional problems that are better solved without direct U.S. involvement. For
instance, preventing another Asian currency crisis should be dealt with by East Asian countries.
The Chiangmai Initiative in 2000 is for this purpose, and has the support of the United States.
The United States can also join the network of economic partnerships now emerging with theASEAN as the hub.
But issues such as security and cooperation involving energy that affect both the stability andprosperity of East Asia will have to be addressed in cooperation with the United States.

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Community building in East Asia is different from that in Europe.
Institutional architectures are now being created in the form of networks in finance, trade,
confidence-building, and other fields with the ASEAN as the hub. The most crucial issue is whatkind of institutional mix or combination of the different institutional architectures will
effectively promote regional cooperation in East Asia.
In this sense, it is hoped that the December summit will address non-traditional security issues
such as terrorism, piracy, weapons smuggling, and drug and human trafficking in addition totrade and investment issues because these issues are important for the region. But the summit
should show as well that regional cooperation in security matters without American involvement
is not necessarily inimical to U.S. interests.
(This is the text of an article by Prof. SHIRAISHI Takashi, Vice President of the National
Graduate Institute for Policy Studies and Member of the Council on East AsianCommunity, which originally appeared in the “Insights into the World” column of the"Daily Yomiuri" on September 4, 2005 and was posted on this website with some revisions
made by the author.)4