Economic regionalism in the Asia-Pacific: Macroeconomic core and microeconomic optimization

Abstract

The concept of economic regionalism has long been known. In its pre-WWII manifestation, it centered on the “colonial” mold. In the post-WWII era came a new economic order, based on the U.S. Dollar—for US$ 35 an ounce of pure gold. The progress to a uni-polar macroeconomic core soon was challenged by the hostilities of the Cold War. The response was “strategic” regionalization among groups of allied nation-states. The U.S. Dollar-based international monetary system eventually collapsed on August 15, 1971. A return to one hundred percent pure gold standard was not what happened and in September 1985, a managed exchange rate regime followed, managed first by the G-5 (Group of Five), then by the G-7. The goal was to coordinate the monetary-fiscal policies of the major trading countries by an ad hoc institutional mechanism. Efforts to make perfectly competitive market work by the politically powerful collaborative efforts of the G-7, or for that matter of any other international economic grouping of 150-plus sovereign nation-state members, such as the General Agreement of Trade and Tariff (GATT), have produced only limited results. An alternative paradigm is the one of economic regionalism— a supra-national macroeconomic core of sovereign nation-state based economies in a naturally well-defined geographical region. The experiments in Western Europe, the 12-member European Community (EC), offers a new paradigm. This article examines the concept of economic regionalism in the context of Asia-Pacific economies, as the institutionalization of 17-member Asia-Pacific Economic Cooperation (APEC) continues to unfold.