Regional Economic Integration in East Asia

Abstract

The postwar political economy of East Asia was initially structured under the aegis of the US, reflecting the political and economic conditions in the region at the time. For geopolitical considerations against communist influence in the region in the context of the Cold War, Washington adopted a strategy in East Asia that encouraged closer economic ties among its allies centered on Japan in the postwar years. The development of postwar economic relations between Japan and other capitalist economies in the region basically proceeded along this line.1 By the mid-1960s, with the normalization of diplomatic relations between Japan and South Korea, the East Asian political economy had been solidly established. Thereafter, the major market economies in East Asia successively achieved economic miracles with Japan emerging as a new economic superpower and South Korea, Taiwan, Hong Kong and Singapore becoming NIEs. In this process, these economies became increasingly interdependent through growing trade and FDI flows among them. In the late 1970s China moved away from Mao’s policy of self-reliance and began to participate in the regional and international economy.2 The new orientation of China’s policy not only changed the political and economic environment in East Asia and opened up new prospects for effective regional cooperation, but also vastly expanded the region’s markets, natural resources and industrial potential.