The challenge of institution-building in Asia and its implications for Asia-Europe relations

Abstract

East Asia, including Northeast Asia and Southeast Asia, has developed tightly-linked production/distribution networks through globalizing corporate activities. The vertical chain of production in East Asia has been even more sophisticated than economic integration in East Europe or Latin America. However, the political environment of East Asia for trade and investment has been far from borderless. The integration effort at the policy level has been very much limited so far, due to the historical background as well as geopolitics surrounding East Asia. The Asian currency/financial crisis provided these countries a historical turning point. After the burst of the crisis, East Asians realized that they have to take care of themselves in their difficulties, not depending on outside forces. A natural choice for them was to step into the realm of regionalism. In 1998, Japan and Korea officially announced that they would discard the long-lasting GATT/WTO-only approach and adapt the multi-layered approach, including both regionalism and multilateralism. The ultimate goal of regionalism would be a region-wide integration including ASEAN+3. As a steppingstone, Japan signed the Japan-Singapore Economic Partnership Agreement (JSEPA) in January 2002. In a parallel move, the ASEAN and China Leaders announced in November 2001 the establishment of an ASEAN-China Free Trade Area (ACFTA) within 10 years. This article will follow up the most recent advancement of regional institutional building in East Asia with the emphasis on peculiar characteristics of economic integration in the region and discuss its implications for Asia-Europe relations.