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Asian regionalism: How does it compare to Europe’s?

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In Brief

Among the six Asian leaders (or seven if you include Australia) who attended the London meeting of the Group of Twenty (G20) on April 2 was the chair of the Association of Southeast Asian Nations—the first time ASEAN had been accorded this recognition in such a high-profile international forum. It was a telling indication of the increased importance of regional cooperation in Asia.

Asia is not yet adopting a common approach to tackling the ongoing global crisis—although neither, to be fair, is the more established European Union (EU). But by helping to form a consensus among their members, Asia’s regional groupings could help bridge the gap between national policies and global action, enabling them to tackle the global crisis more effectively.

This essay compares Asian regionalism with Europe’s. It contrasts their differing approaches to regional cooperation and integration and draws lessons for how they could address the global crisis and other common challenges.

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Models of regionalism

A common thread runs through the turbulent histories of Asia and Europe: the immense dynamism and impressive discoveries of their great civilizations have often been directed towards destruction and death. Fortunately, their collective energies are now channeled more constructively—not least into closer regional cooperation that entrenches peace and enhances prosperity.

Regionalism has progressed much further in Europe than in Asia. The devastation wreaked by two world wars convinced Europeans of the importance of working together to bind their economies and societies together. They realized that by pooling their sovereignty with their neighbors in certain areas they could achieve more than by acting alone. By drafting common rules, promoting close coordination among national authorities, and developing strong regional institutions that advance economic integration, the EU has generated huge economic gains and sharply narrowed the income gap among member countries. EU governments also cooperate closely in foreign and security policy, as well as in justice and home affairs.

The milestones in Europe’s economic integration are the creation of a customs union, followed by a single market, and then a common currency. Very broadly speaking, after adopting a common trade policy, European countries agreed to the free movement of goods, labor and services, then progressively liberalized their capital accounts, and more closely coordinated their monetary and exchange-rate policies before introducing the euro in 1999. Thus the integration of production and trade preceded—and was a precondition for—financial and monetary integration.

The EU now has an extensive institutional structure and a large regional bureaucracy centered in Brussels, its administrative capital. The European Commission, Council of Ministers, Court of Justice, Parliament and other EU institutions employ more than 60,000 eurocrats, while EU governments’ very large permanent delegations in Brussels act as strategically important extensions of national ministries and agencies.

Regionalism in Asia has developed rather differently. Regional integration has been driven more by markets than by governments. Cooperation among national authorities is more recent and less intimate. It remains focused on economic issues (with some social components) and light on formal institutions. For now, it involves no political ambitions, although ASEAN has an advanced security dialogue with several Asian and non-Asian partners.

Asia’s pragmatic and flexible approach to regionalism is partly dictated by history. Asian countries are little inclined to compromise their independence by pooling sovereignty with their neighbors, not least because several Asian nation states have only recently emerged from colonialism and need first to build their national identities. Disparities in economic development, social structures, and political systems are also much greater in Asia than Europe.

Asia’s economic integration has been largely driven by the development of increasingly sophisticated production networks that span the region and enable companies to benefit from each country’s comparative advantages, through an articulated regional division of labor. As industries have been transferred from advanced economies to developing ones, the production of manufactured goods has been fragmented across the region. This, in turn, has generated a huge expansion of intraregional trade in parts and components. But since Asia’s exports of final goods mostly go to the United States and Europe, closer regional connections have gone hand in hand with greater global ties.

The catalyst for the recent enhancement of regional cooperation in Asia was the 1997/8 financial crisis. This created a greater awareness of the region’s shared interests and vulnerabilities. In particular, it created a greater need for financial cooperation—prompting the establishment of the ASEAN+3 Finance Ministers’ Process and several related structures such as the Chiang Mai Initiative and the Asian Bond Markets Initiative—at an earlier stage of integration than in Europe. The emergence of Asian regionalism also reflects the region’s disappointment with the way the International Monetary Fund handled the 1997/98 crisis.

Asia does not yet have a single market in goods and services, although bilateral and subregional trade agreements have multiplied in recent years. This is in part driven by the stalling of the World Trade Organization’s Doha Round, but also by the proliferation of preferential trade agreements around the world. Even so, Asia’s regionalism remains outward-oriented—focused on supporting market relationships rather than supplanting them and on sustaining its openness to global markets.

Asia lacks strong regional institutions and a bureaucratic body to serve the region. Unlike in Europe, regional treaties tend to be short and focused on codifying informal interactions among members rather than introducing a complex set of binding rules, and related sanctions. Asia’s few regional institutions are small and lean, with a limited mandate from national authorities to manage external shocks, internalize regional spillovers, and provide effective regional public goods. Whereas European regionalism is dominated by the EU, Asian regionalism is based on many overlapping subregional organizations that cooperate to varying degrees in different areas and provide a solid backbone to connect markets and people.

The criteria for admission to the EU are quite clear—democracy, a market economy, and the transposition into national law of EU laws and regulations (the acquis communautaire). Compliance with these rules can be monitored fairly objectively. Candidate countries must also be approved by a consensus of existing EU member states. In the case of Asian regional bodies, however, it is difficult to identify an unambiguous set of rules governing membership issues, as they are generally based on ad hoc decisions by political leaders.

Important regional players such as the People’s Republic of China (PRC), India, and Japan have yet to start a concrete dialogue on formulating a vision, shared goals and roadmap for regional cooperation in Asia. But the creation of the East Asia Summit (EAS) in 2005—which brings together the 10 members of ASEAN, plus the PRC, Japan, and the Republic of Korea (which together make up ASEAN+3), as well as Australia, India, and New Zealand—could eventually provide a forum for such an impetus. While the EAS has no plans for now to create an ‘Asian Commission’ and emerge as the Asian counterpart to the EU, EAS, ASEAN+3 or ASEAN could help Asia to act together and speak with a single voice.

Facing the future

Europe and Asia both face the huge challenge of articulating a response to the ongoing economic crisis. Although its ultimate impact on regional cooperation and integration is still unclear, it could give a new impetus to Asian regionalism, as the 1997/8 crisis did. In fact, history shows that major steps to enhance regionalism are usually taken as a reaction to shocks—while the Second World War prompted the creation of the European Coal and Steel Community in 1951, the ASEAN+3 Finance Ministers Meeting was established in response to the crisis of 1997/98. And while a global crisis requires a global response, closer regional cooperation can be useful to enhance the effectiveness of global action. For instance, European countries need to harmonize their approaches to financial regulation and supervision, while Asian ones should start a dialogue in areas such as exchange rates and fiscal policy that they have neglected up to now. In so doing, both Asian and European regionalism could provide a stepping stone to solving the global crisis.

The two regions can also learn from each other. Europe would do well to emulate the flexibility of Asia’s production structures and labor markets, its emphasis on investment in productivity-enhancing research and development (R&D), and its concept of open regionalism, which minimizes discrimination against non-members.

Asia could adopt some of the EU’s governance principles. These include: (i) deciding some issues by qualified majority voting and others by consensus; (ii) giving additional weight to small countries and minorities in decision-making, so as to make regionalism more inclusive; (iii) the ‘subsidiarity’ principle, whereby decisions are taken at the lowest sensible level of government; (iv) the open method of coordination, which allows member countries to agree on initiatives for intergovernmental cooperation without legal constraints; and (v) mutual surveillance through peer review and peer pressure, to ensure that members respect commitments before resorting to sanctions.

Asia could also take inspiration from Europe’s pro-activeness in creating common institutions. Although trying to establish strong regional institutions that involve the pooling of members’ national sovereignty would be premature, much could be done to enhance Asia’s institutional capabilities for economic cooperation. As the ongoing crisis is reshaping the global financial architecture, enhancing Asia’s economic dialogue and cooperation is an important step to shape and raise its profile in global institutions.

The EU is often presented as the integration model for other regional groupings, in Asia and elsewhere. But while regions can learn from others’ experiences, their needs and circumstances vary. Asia must find its own path to greater cooperation and integration. This requires visionaries, people with great ideas who—as Jean Monnet, Robert Schumann, and Altiero Spinelli did in Europe—can influence opinion makers, inspire national leaders, and eventually enable the region to speak with a more prominent common voice in global forums.

Dr Giovanni Capannelli is a Senior Economist with the Asian Development Bank’s Office of Regional Economic Integration and lecturer on the political economy of Asia-Europe relations at the Ateneo de Manila University. The ideas expressed in this article are exclusively the author’s and do not necessarily reflect the views or policies of the Asian Development Bank, its Board of Directors, or the governments they represent.

Asian and European representatives attending the G20 London Summit

Country/Group Representative, Title APEC ASEAN ASEAN+3 ASEM EAS EU
ASEAN Abhisit Vejjajiva, Chair (*) (**)
Australia Kevin Rudd, Prime Minister
China, People’s
Rep.
Hu Jintao, President
European
Commission
Manuel Barroso, President
European
Council
Mirek Topolanek, President
(***)
France Nicolas Sarkozy, President
Germany Angela Merkel, Chancellor
India Manmohan Singh, Prime Minister
Indonesia Susilo Bambang Yudhoyono,
President
Italy Sivlio Berlusconi, Prime Minister
Japan Taro Aso, Prime Minister
Korea, Republic
of
Myung-Bak Lee, President
Netherlands
(****)
Jan Meter Balkenende, Prime
Minister
Spain (****) Jose L. R.Zapatero, Prime
Minister
United Kingdom Gordon Brown, Prime Minister

APEC = Asia-Pacific Economic Cooperation.
ASEAN = Association of Southeast Asian Nations. It includes Brunei Darussalam, Cambodia, Lao PDR, Indonesia, Malaysia, Myanmar, Philippines, Singapore, Thailand, and Vietnam.
ASEAN+3 includes the 10 ASEAN members plus the People’s Republic of China, Japan, and the Republic of Korea.
ASEM = Asia-Europe Meeting.
EAS = East Asia Summit. It includes ASEAN+3 members plus Australia, India, and New Zealand.
EU = European Union. It includes Austria, Belgium, Bulgaria, Cyprus, Czech Republic, Denmark, Estonia, Finland, France, Germany, Greece, Hungary, Ireland, Italy, Latvia, Lithuania, Luxembourg, Malta, Netherlands, Poland, Portugal, Rumania, Spain, Slovak Republic, Slovenia, Sweden, and United Kingdom.
(*) Abhisit Vejjajiva is the Prime Minister of Thailand, but was invited to attend the G20 London Summit in his capacity as Chair of ASEAN.
(**) Cambodia, Lao PDR, and Myanmar are members of ASEAN but not of APEC.
(***) Mirek Topolanek is the Prime Minister of the Czech Republic, but was invited to attend the G20 London Summit in his capacity as President of the European Council.
(****) The country is not a recognized G20 member.

4 responses to “Asian regionalism: How does it compare to Europe’s?”

  1. Giovanni,

    Nice piece. Not many people are in a position like you who have looked at both regions very closely.

    I do not have lots of views that are different from those of yours. I conqur that Asia should collaborate much better, in areas of economic and financial policies. Latest development confirms that Chiang Mai is way insufficient. And, Asia as a group can certainly play a greater role in the G20 process.

    The question I like to raise is what kind of regional integration will take place in Asia? I will look at the EU model (in which equal parties reach agreement) and the NFTA model (in which smaller economies integrate with a large economy).

    As you suggested, there are many reasons, historical, political and economic, why regional integratuion is very difficult. What are the chances that regional cooperation will remain in a loose framework until some superpower emerge?

    Cheers,

    Yiping

  2. A positive feature of the article is that it does not fall into the trap of seeing a regional preferantial trade bloc as the ultimate aim of regional integration. PTAs only address the old issues of shallow integration.

    A weakness is that the article does not acknowledge that APEC is providing a model for the kind of integration feasible among very diverse groups of economies, such as the Asian group of economies.

    Why promote Asian-only forums, as against trans-Pacific cooperation at the same time?

    Perhaps it is also time to think about globalism again: the G20 could also draw on APEC’s experience to begin work to promote genuine economic integration, going beyond the limited idea of ‘free trade’.

    Please see my post Economic integration: an opportunity for the G20

  3. While in the new millennium, the bandwagon of regional integrtion is on a roll again; what we are now confronting is a ‘second regionalism’. But if an open world trading system continues to be our ultimate goal, then several questions arise as to whether we should welcome these RTAs as a step that will ultimately reinforce global free trade. We are highly skeptical about the value of these RTAs; and whether these RTAs are building blocs or stumblign blocs in a globalising wrold, is still an open issue.
    As Paul Krugman recently observed, we still need to ask why such regional blocs are emerging. Also why nations feel that they are able to negotiate better at a regional level than at global level.
    While for SEAsian region, I am dead sure nothing in the form of any formal institutin will ever come up here; as since the early 1960s, several doyens of integration- Prof Kiyoshi Kitamura, K.Kojima toiled for years to develop PAFTA, AFTA, APEC, Asian common Market but governments in the region did not bother for their innovative ideas; even now after years, ASEAN is a closed group promoting interests of its own group only
    Raemshwar Tandon

  4. The study of regional integration is helpful in understanding the determinant factors that make integration possible and the potential impact on member states. But it would be of no avail if we set in motion a distinctive form of what integration should be. Significantly, successful regional integrations should not be measured on how closely they are integrated. Instead, they should be measured on how effectively they are in dealing deal with cooperation. As mentioned in regard to the experience of European regional integration, it evolved within a distinctive configuration which in turn has produced a distinctive model of internationalization of its own. It is for this reason that such a model should also be used to explain the distinctive model of ASEAN regional cooperation as well. Like benchmarking, a comparative approach is mainly done to analyze the evolution of regional cooperation and integration rather than looking at the possibility or the way to accomplish the ultimate goal of cooperation. Importantly, there is not an explicitly explanatory factor to assert that the pattern of European regional integration is an advantageous style of regional integration when it is adopted by other regional organizations, especially in the case of ASEAN or even elsewhere in the rest of the world.

    Thanawat Pimoljinda

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