competitive industrial development. Third they sometimes picked up industries and gave promotional measures, whose effectiveness are given divergent appraisals between the East Asian economies.

All of these factors, MNEs, local enterprises, and local governments are included in the list contributing to the East Asian success but they are combined effectively in the framework of dynamic interdependence. This justifies our approach in this project.

We have discussed so far the supply side of the industrial development of the East Asian economies. But of course due attention should be given to the high prospect for future demand growth derived from the rapid growth of the East Asian region itself. The United States has long been the main absorber of the East Asian products but it is now being replaced partly by Japan, NIEs and ASEAN themselves. They now absorb 45 percent of their products and 15 percent of the world imports. East Asia is now emerging as a world market as well as a world factory. This bright demand prospect will tend to strengthen the dynamic interdependence and contribute to further growth of East Asia.

Regional economic integration proliferates in the current world and there are identified some tendency toward formal integration in East Asia as well. However, its regional integration differs from those in Western Europe and North America because their development mechanism differs from those of the other two regions. Both the European and North American growth rely on the prospect of larger markets, while the East Asian development is based on its diversity and interdependence within the region. They rely more on trade and investment with outside regions and need the global free trade regime to further realize their growth potential. The “open regionalism” best fits the economic integration efforts within East Asia.

## Statistical overview

Table 2 compares the growth performance of East Asia's market economies (NIEs, ASEAN, and Japan) with those of North America (the U.S., Canada, and Mexico) and EC12 in the latter half of the 1980s. The group growth rate of East Asia was maintained at 5 percent level while those of North America and EC12 were at 2-3 percent except for 1988. In 1990 and 91 North America's growth rate declined to minus and that of EC12 down to 1-2 percent, while East Asia's growth rate remained at 5 percent level.

To compare the economic size of the three regional groups, Europe and North America are about of the same size. EC12 falls short of North America in both population and GNP, but if we add six EFTA countries to EC12, Europe with 376 million population and 6,514 billion dollars exceeds the other two by 40 percent in population but falls short of by the same 40 percent in GNP. However, if the recent divergent growth performance continues into the next century, East Asia will exceed North America in 2011 and Europe in 2016.

It is, of course, a simple extrapolation of the recent trend and it is unlikely that this reversal of the relative economic size will be realized. The widening gap of growth performance with the other two groups will inevitably cause frictions and tend to affect East Asia's growth performance. In addition, in the East Asian group, the growth of ASEAN will continue to be high, that of NIEs will most likely decrease to a moderate level throughout the 1990s.