Introduction: Understanding East Asian cross-regionalism: An analytical framework

Pacific Affairs

Volumn 80, Issue 2, 2007, Pages 229-257

  Solís, Mireya ^a   Katada, Saori N ^b  

^a AMERICAN UNIVERSITY   (United States)

^b UNIVERSITY OF SOUTHERN CALIFORNIA   (United States)

Author keywords

[No Author keywords available]

Indexed keywords

EID: 36048999410     PISSN: 0030851X     EISSN: None     Source Type: Journal    
DOI: 10.5509/2007802229     Document Type: Editorial

References (90)

1. In this special issue, we adopt a pragmatic definition of region as a "contiguous territorial area having sufficiently clear internal cohesion and definitive external boundaries," which matches the characterization by the World Bank and the Organization for Economic Co-operation and Development (OECD) of East Asia as comprising Northeast and Southeast Asia, but excluding the United States, any of the Latin American countries, Australia, New Zealand, and the Pacific Island states. See T.J. Pempel, "Introduction: Emerging Webs of Regional Connectedness," in T.J. Pempel, ed., Remapping East Asia: The Construction of a Region (Ithaca NY, Cornell University Press, 2005), p. 4.
2. The World Trade Organization's (WTO) own nomenclature also has obscured, rather than clarified, the importance of cross-regionalism by loosely using the term "Regional Trade Agreements (RTAs)" to cover all preferential trade deals within and beyond regions. To avoid such confusion, we make an explicit distinction between regional (RTAs) and cross-regional trade agreements (CRTAs). Whenever we refer to preferential trade agreements in general we use the neutral term FTA (or free trade agreement).
3. Edward Mansfield and Helen Milner, "The New Wave of Regionalism, International Organzation, vol. 53, no. 3 (1999), pp. 590-91.
4. The one exception is the United States-Israel FTA which preceded the North American Free Trade Agreement (NAFTA). However, Israel has always been a key strategic priority for the United States deserving special treatment, and in all other instances CRTAs for Europe and North America came after their main regional blocs were firmly in place.
5. In this way we offer an explanation of cross-regionalism that is distinct from the oft-noted motivations behind the selection of cross-regional partners: special security relations (US-Israel), former colonial ties (EU-South Africa), and natural resource diplomacy (Japan and Gulf states, in negotiation).
6. For a more detailed discussion of the reasons behind the proliferation of FTAs, see Jo-Ann Crawford and Roberto V. Fiorentino, "The Changing Landscape of Regional Trade Agreements," WTO Discussion Paper no. 8 (World Trade Organization, Geneva, Switzerland, 2005), p. 16.
7. Scholars have explained this shortage of formal institutions in Asia in various ways ranging from relative disparity shift hypothesis (Grieco); network replacing institutions (Katzenstein and Shirashi); domestic preferences of regional powers (Haggard); the region's external reliance especially on the United States (Crone); to historical US lack of interest in regional mechanisms in Asia (Katzenstein and Hemmer). See Joseph Grieco, "Systemic Sources of Variation in Regional Institutionalization in Western Europe, East Asia, and the Americas," in Edward D. Mansfield and Helen V. Milner, eds., The Political Economy of Regionalism (New York: Columbia University Press, 1997);
8. Peter Katzenstein and Takashi Shiraishi, eds., Network Power: Japan and Asia (Ithaca NY: Cornell University Press, 1997);
9. Stephan Haggard, "Regionalism in Asia and the Americas," in Mansfield and Milner, eds., The Political Economy of Regionalism;
10. Donald Crone, "Does Hegemony Matter?: The Reorganization of the Pacific Political Economy," World Politics, vol. 45 (1994), pp. 501-25;
11. and Peter Katzenstein and Christopher Hemmer, "Why is There No NATO in Asia? Comparative Identity, Regionalism, and the Origin of Multilateralism," International Organization, vol. 56, no. 3 (2002), pp. 575-607.
12. Edward Lincoln, East Asian Economic Regionalism (Washington DC: The Brookings Institution, 2004), pp. 169-73.
13. For example, Paul Bowles, "Regionalism and Development after the Global Financial Crises," New Political Economy, vol. 5, no. 3 (2000), pp. 433-55;
14. Michael Wesley, "The Asian Crisis and the Adequacy of Regional Institutions," Contemporary Southeast Asia, vol. 21, no. 1 (1999), pp. 54-73;
15. and Christopher W. Hughes, "Japanese Policy and the East Asian Currency Crisis: Abject Defeat or Quiet Victory?" Review of International Political Economy, vol. 7, no. 2 (2000), pp. 219-53.
16. The most prominent theoretical work on the "domino theory of regionalism" is by Richard E. Baldwin, "The Causes of Regionalism," The World Economy, vol. 20, no. 7 (1997), pp. 865-88.
17. See also Walter Mattli, The Logic of Regional Integration: Europe and Beyond (Cambridge; Cambridge University Press, 1999).
18. Although Europe has had preferential economic relations with former colonies through the Yaoundé and Lomé Conventions, these were not structured around FTAs, but rather entailed non-reciprocal trade concessions, aid and political dialogue. Ravenhill offers an excellent analysis of the reasons why the EU pushed for the negotiation of FTAs with African, Caribbean and Pacific (ACP) countries in the late 1990s. See John. Ravenhill, "Back to the Nest? Europe's Relations with the African, Caribbean and Pacific Group of Countries," in Vinod K. Aggarwal and Edward A. Fogarty, eds., EU Trade Strategies. Between Regionalism and Globalism (New York: Palgrave Macmillan, 2004).
19. See especially Mansfield and Milner, "The New Wave of Regionalism."
20. Vinod K Aggarwal and Min Gyo Koo, "Beyond Network Power? "The Dynamics of Formal Economic Integration in Northeast Asia," The Pacific Review, vol. 18, no. 2 (2005), pp. 189-216.
21. In Aggarwal and Koo's own words: "pair of countries are geographically concentrated, if they are contiguous on land or within 400 nautical miles; otherwise, we view them as being geographically dispersed" ("Beyond Network Power," p. 196).
22. Vinod K. Aggarwal and Edward A. Fogarty, "Between Regionalism and Globalism: European Union Interregional Trade Strategies," in Aggarwal and Fogarty, eds., EU Trade Strategies: Between Regionalism and Globalism.
23. Heiner Hänggi, Ralf Roloff and Jürgen Rüland, "Interregionalism: A New Phenomenon in International Relations," in Heiner Hänggi, Ralf Roloff and Jürgen Rüland, eds., Interregionalism and International Relations, (London: Routledge, 2006).
24. See Paul Wormacott and Mark Lutz, "Is There a Case for Free Trade Areas?" in Jeffrey J. Schott, ed., Free Trade Areas and US Trade Policy (Washington DC: Institute for International Economics, 1989);
25. Larry Summers, "Regionalism and the World Trade System," Symposium Sponsored by the Federal Reserve Bank of Kansas City, Policy Implications of Trade and Curremy Zones, 1991;
26. Paul Krugman, "The Move to Free Trade Zones," Symposium Sponsored by the Federal Reserve Bank of Kansas City, Policy Implications of Trade and Currency Zones, 1991;
27. Jagdish Bhagwati and Arvind Panagariya, "Preferential Trading Areas and Multilateralism-Strangers, Friends, or Foes?" in Jagdish Bhagwati and Arvind Panagariya, eds., The Economics of Preferential Trade Agreements (Washington DC: AEI Press, 1996).
28. Wonnacot and Lutz, "Is There a Case for Free Trade Areas," pp. 62-72.
29. For example, see Maurice Schiff, "Will the Real "Natural Trading Partner" Please Stand Up?" World Bank, Development Research Department, 1999.
30. APEC best exemplifies the notion of "open regiongism" - that is, a negotiated trade liberalization effort whose benefits are always extended to non-APEC members on the basis of most favoured nation status.
31. Kanishka Jayasuriya, "Embedded Mercantilism and Open Regionalism: The Crisis of a Regional Political Project," Third World Quarterly, vol. 24, no. 2 (2003), pp. 339-41.
32. See also T.J. Pempel, Regime Shift: Comparative Dynamics of the Japanese Political Economy (Ithaca NY: Cornell University Press, 1997).
33. At the time of writing (probably either late 2002 or early 2003), he remained skeptical about the conclusion of both the Japan-Mexico or South Korea-Chile agreements, for both Japan and South Korea remained fairly resistant to the idea of liberalizing their respective agriculture sectors. See John Ravenhill, "The New Bilateralism, in the Asia Pacific," Third World Quarterly, vol. 24, no. 2 (2003), p. 314 and footnote 29.
34. Christopher M. Dent, "Networking the Region? The Emergence and Impact of Asia-Pacific Bilateral Free Trade Agreement Projects," The Pacific Review, vol. 16, no. 1 (2003), pp. 1-28.
35. Vinod K. Aggarwal and Shujiro Urata, eds., Bilateral Trade Agreements in the Asia-Pacfic: Origins, Evaluation, and Implications (London: Routledge, 2005).
36. Mireya Solís, "Japan's New Regionalism; The Politics of Free Trade Talks with Mexico," Journal of East Asian Studies, vol. 3 no. 3 (2003), pp. 377-404.
37. Mark Manger, "Competition and Bilateralism in Trade Policy: The Case of Japan's Free Trade Agreements," Review of International Political Economy, vol. 12, no.5 (2005), pp. 804-28.
38. Min Gyo Koo, "From Multilateralism to Bilateralism? A Shift in South Korea's Trade Strategy," in Aggarwal and Urata, eds., Bilateral Trade Arrangements in the Asia-Pacific.
39. Jose L. Tongzon, "Research Notes: US-Singapore Free Trade Agreement: Implications for ASEAN," ASEAN Economic Bulletin, vol. 20, no. 2 (2003), pp. 174-78.
40. This group of fifteen East Asian economies includes ASEAN, Japan, Korea, China, Taiwan and Hong Kong. Figures are taken from Masahiro Kawai, "East Asian Economic Regionalism: Progress and Challenges," Journal of Asian Economics, vol. 16 (2005), p. 32.
41. The index value for East Asia is 2.2, while it is 2.5 for NAFTA and 1.7 for Europe; see Kawai, "East Asian Economic Regionalism," p. 32. The intra-regional trade intensity index takes into account the weight of a region in the overall world economy to avoid overestimating the importance of intra-regional trade for regions that are registering above-average growth. See Lincoln, East Asian Economic Regionalism.
42. See Walter Hatch and Kozo Yamamura, Asia in Japan's Embrace: Building a Regional Production Alliance (Cambridge: Cambridge University Press, 1996);
43. Roger van Hoesel, New Multinational Enterprises from Korea and Taiwan: Beyond Export-led Growth (New York: Roudedge, 1999);
44. Mireya Solís, Banking on Multinationals: Public Credit and the Export of Japanese Sunset Industries (Stanford: Stanford University Press, 2004).
45. Lincoln, East Asian Economic Regionalism, p. 47.
46. All figures from Kawai, "East Asian Economic Regionalism," pp. 32-33.
47. Lincoln, East Asian Economic Regionalism, pp. 51, 55, 58.
48. IMF, Direction of Trade Statistics.
49. See Naoko Munakata, "Has Politics Caught up with Markets? In Search ofEast Asian Economic Regionalism," in Peter J. Katztenstein and Takashi Shiraishi. eds., Beyond Japan: The Dynamics of East Asian Regionalism (Ithaca NY: Cornell University Press. 2006).
50. However, as we will elaborate later on in this and the subsequent articles in this volume, the objective of securing preferential access with key extra-regional economic partners is by no means the most important rationale behind many cases of East Asian cross-regionalism. Rather, more defensive economic reasons (counter trade diversion) or security ang leverage motives frequently guide the selection of cross-regional partners at this early stage in East Asia's FTA diplomacy.
51. See Katzenstein and Hemmer, "Why is There No NATO in Asia?"
52. Kent Calder and Min Ye, "Regionalism and Critical Junctures: Explaining the 'Organization Gap' in Northeast Asia." Journal of East Asian Studies, vol. 4 (2004), pp. 204-08.
53. See Joanne Gowa, Allies, Adversaries, and International Trade (Princeton: Princeton University Press, 1994);
54. and Edward D. Mansfield and Rachel Bronson, "The Political Economy of Major-Power Trade Flows," in Mansfield and Milner, eds., The Political Economy of Regionalism.
55. Peter Katzenstein, A World of Regions; Asia and Europe in the American Imperium (Ithaca NY; Cornell University Press, 2005), pp. 50-60.
56. Mattli, The Logic of Regional Integration, p. 71.
57. Yoichi Funabashi, Asia Pacific Fusion: Japan's Role in APEC (Washington DC: Institute for International Economics, 1995), pp. 105-18.
58. Ellis Krauss, "Japan, the US, and the Emergence of Multilateralism in Asia," The Pacific Review, vol. 13, no. 3 (2000), pp. 473-94.
59. See Saori N. Katada, Banking on Stability: Cross-Pacific Dynamics of International Financial Crisis Management (Ann Arbor: University of Michigan Press, 2001). The one important exception was China, which opposed the AMF. Bowles notes that the Chinese opposed the idea because they feared this initiative would enhance Japan's leadership position in the region, while Amyx notes that the Japanese government, going through the Hong Kong Monetary Authority first, made it harder for the Chinese authorities to reach a decision.
60. Paul Bowles, "Asia's Post-Crisis Regionalism: Bringing the State Back In, Keeping the (United) States Out," Review of International Political Economy, vol. 9, no. 2 (2002), pp. 255-56;
61. Jennifer Amyx, "What Motivates Regional Financial Cooperation in East Asia Today?" Asia Pacific Issues, no. 76 (February 2005), pp.2-3.
62. The United States has not reacted strongly against its exclusion from the East Asia Summit held in Kuala Lumpur because it remains skeptical it can yield an inclusive regional block given the open disagreements between China and Japan over the future evolution of this forum.
63. Lincoln, East Asian Economic Regionalism, pp. 256-57.
64. Gilbert Rozman, Northeast Asia's Stunted Regionalism: Bilateral Distrust in the Shadow of Globalization (Cambridge: Cambridge University Press, 2004).
65. The factors that have led to the souring of the Sino-Japan bilateral relations are many, including the phasing out of Japanese official development assistance (ODA) loans, a bilateral trade imbalance and occasional trade wars, the exploitation of gas reserves on the East China Sea, pending territorial disputes, the Japanese bid for a permanent seat at the UN Security Council, controversy over the official visits in Japan to the Yasukuni shrine, approval of history books that downplay wartime atrocities and the anti-Japanese riots in China.
66. Authors' interviews with officials from Japan External Trade Organization (JETRO), Ministry of Economy, Trade, and Industry (METI), and Japanese politicians, summer 2005.
67. Ernst Haas, Beyond the Nation-State (Stanford: Stanford University Press, 1964). Although economic objectives (managing growing interdependence) are of central importance in explaining the demand for regional integration, neofunctionalism is essentially a political explanation in that it explains how the lobbying activities of interest groups to establish supranational institutions that erode state autonomy will move forward the integration process. We thank an anonymous reviewer for pressing us to clarify this important point.
68. See Mattli, The Logic of Regional Integration. In fact, Bhagwati, Greenaway and Panagariya argue that the trade creation effect may be larger in cross-regional FTAs (contrary to the expectations of the natural trading partner hypotheses) due to the reduction in transportation costs and the greater elasticity of export curves with more distant partners.
69. See Jagdish Bhagwatti, David Greenaway and Arvind Panagariya, "Trading Preferentially: Theory and Policy," The Economic Journal, vol. 108 (1998), pp. 1128-48.
70. See Gene M. Grossman and Elhanan Helpman, "The Politics of Free-Trade Agreements," The American Economic Review, vol. 85, no. 4 (1995), pp. 667-90.
71. In fact, preferential rules of origin are now considered one of the most pernicious elements of FTAs in that they provide an effective and hidden form of protection for bloc producers. We thank Steph Haggard for pointing this out to us. Some of the best works on rules of origin are by Anne O. Krueger, "Free Trade Agreements as Protectionist Devices: Rules of Origin." Working Paper no. 4352 (Cambridge: National Bureau of Economic Research, 1993);
72. and Antoni Estevadeordal and Kati Suominen, "Rules of Origin in Preferential Trading Arrangements: Is All Well with the Spaghetti Bowl in the Americas?" Economia (2005), pp. 63-103.
73. See Baldwin, "The Causes of Regionalism."
74. See Mattli, The Logic of Regional Integration, p. 60.
75. See Baldwin, "The Causes of Regionalism," p. 879.
76. Perhaps one of the most compelling accounts of such practice remains Hirschman's study of Nazi Germany's use of economic diplomacy to create webs of asymmetrical dependence to increase its power among neighbours. See Albert O. Hirschman, National Power and the Structure of Foreign Trade (Berkeley: University of California Press, 1980).
77. See Mansfield and Milner, "The New Wave of Regionalism";
78. Mattli, The Logic of Regional Integration; World Bank, Trade Blocs (New York: Oxford University Press, 2000);
79. Vinod K. Aggarwal, "Bilateral Trade Arrangements in the Asia-Pacific," in Aggarwal and Urata, eds., Bilateral Trade Arrangements in the Asia-Pacfic,
80. Stephen Hoadley, Negotiating Free Trade: The New Zealand-Singapore CEP Agreement (Wellington: New Zealand Institute of World Affairs, 2002).
81. Zheng Bijian, "China's 'Peaceful Rise' to Great-Power Status," Foreign Affairs, vol. 84, no. 5 (2005), pp. 18-24.
82. Elaine S. Kwei, "Chinese, Trade Bilateralism: Politics still in command," in Aggarwal and Urata, eds., Bilateral Trade Arrangements in the Asia-Pacific, p. 133.
83. And Wong and Chan point to lack of complementarities in trade structures between China and ASEAN; see John Wong and Sarah Chan, "China-ASEAN Free Trade Agreement: Shaping Future Economic Relations," Asian Survey, vol. 43, no. 3 (2003), pp. 516-23.
84. World Bank, Trade Blocs, p. 19.
85. Alejandro Ibarra-Yunez, "Spaghetti Regionalism or Strategic Foreign Trade: Some Evidence for Mexico," Journal of Development Economics, vol. 72 (2003), pp. 567-84.
86. Jiro Okamoto, "Introduction," in Jiro Okamoto, ed., Whither Free Trade Ag?reements? Proliferation, Evaluation, and Multilateralization (Tokyo: Institute of Developing Economies, 2003).
87. Aggarwal and Koo make exactly the same argument when they note that Korea selected Chile as its first FTA partner with the explicit goal of capacity building (for a more expansive discussion of this issue see the article by Park and Koo in this volume). See Aggarwal and Koo, "Beyond Network Power," p. 7.
88. Andrew Moravcsik, "Preferences and Power in the European Community: A Liberal Intergovernmental Approach," Journal of Common Market Studies, vol. 31, no. 4 (1993), pp. 473-524.
89. Ronald Rogowski, Commerce and Coalitions: How Trade Affects Domestic Political Alignments (Princeton: Princeton University Press, 1989).
90. The same reservation applies to the efforts of Thailand and Korea noted above to position themselves as trade hubs: access to their FTA network is contingent on the compliance with different rules of origin.