Striking a balance: Asian institutions and global influence

Author: Wendy Dobson, University of Toronto

Asia’s rapid economic ascent raises expectations in the rest of the world of greater political influence, even leadership, by Asian countries and questions about Asia’s regional institutions. With some exceptions, as when South Korea hosted the G20 summit in 2010, Asian governments tend to focus on their own interests and regional institutions operate with Asian-style pragmatism, with a focus on cooperation and incremental change.

There are good reasons for this diplomatic style but what does it imply for the future? Can Asia’s institutions manage the geostrategic impact of China’s rise or will they be overwhelmed by rivalries among the large powers?

Historical tensions impede regional integration efforts. Asian economies prize national independence and its corollary, non-interference. So ASEAN, the best-established intergovernmental institution in Asia, follows the ‘ASEAN way’ of non-intrusive and gradualist decision-making. It has become a hub in a complex network of bilateral free trade agreements (FTAs) that criss-cross the region but still lack links among China, Japan and Korea. In finance it created the CMIM to be an emergency financing mechanism with an independent surveillance function and IMF links. Indeed participation in global frameworks for trade and finance have been important to some of the region’s economic ‘miracles’ — notably China’s reform and opening since it joined the WTO.

Asia’s focus on economic development was made possible by peace and political stability. Wealth, not bullets, has been the route to power and influence, with stability underwritten in the post war period by US military alliances. More recently the East Asia Summit (EAS), the preferred leaders’ forum for political and security cooperation, has seen its credibility strained by China’s assertive boundary claims and insistence on dealing with them as bilateral issues. The resulting tensions have caused alarmed governments to hedge by calling for a higher US profile in the region.

In short, international relationships and institutions are an important adjunct to regional ones. Without formal agreements among the region’s leading powers none can provide regional leadership. Instead ASEAN’s institutions help to channel rivalry like that between China and Japan into its cooperative forums where it manages their competing initiatives with its variable geometry of ASEAN-Plus memberships.

Looking to the future, trade initiatives show the most promise because they are easier to manage than security and political issues, focusing mainly on tariff reductions in goods, tolerating exceptions and treating lightly the complex issues of liberalising services, competition policy, intellectual property rights and investment. Still, Asia’s trade agreements show the value of a gradualist approach. The China–ASEAN FTA was a catalyst for ASEAN+3 and ASEAN+6 proposals, which ASEAN’s blueprint for a Regional Comprehensive Economic Partnership (RCEP) now aims to harmonise. In finance CMIM, although so far untested, has the potential to promote macroeconomic cooperation and prevent future financial crises.

But it is the evolving trade initiatives that will shape the future in Asia and beyond. It is well known that the benefits of comprehensive trade liberalisation are maximised when the largest countries — on both sides of the Pacific — are included. APEC’s 21 members recognised this when they endorsed the Free Trade Area of the Asia Pacific (FTAAP) as a long-term goal to be achieved if competing agreements head in the same direction. The RCEP and the ASEAN+ negotiations are one track; the Trans-Pacific Partnership (TPP), which aims to be a comprehensive, high-quality FTA, is another. With its 12 negotiating parties, the TPP is generating liberalising momentum through a ‘contest of templates’ designed to shape eventual patterns of integration across the Pacific.

The region’s security institutions face complex challenges. How to manage China’s boundary claims and its so-called ‘coercive diplomacy’? In pursuing its core interests China has neglected to articulate broader goals that might serve its neighbours’ interests and has permitted uncoordinated initiatives to be taken by a plethora of Chinese players. Neither the EAS nor the global framework provided by the Law of the Sea Treaty has yet succeeded in managing these heightened tensions beyond asserting ASEAN’s Declaration of Conduct.

Alternative frameworks for managing regional security cooperation are all contested: China’s neighbours resist any reassertion of its historic hegemony; Australian proposals for a concert of major powers as well as ideas for a China–US G2 are opposed by ASEAN and by other large countries; and ASEAN’s East Asian Community proposal is moving so slowly it could be overtaken by rivalries among the large economies.

Can Asia’s pragmatic regional order manage these intra-regional strains and rivalries? Competition among trade templates will be good for all parties because it will further open markets and possibly supply fresh momentum for global talks. Security cooperation is weaker but so far Asia has avoided zero-sum conflict. Financial cooperation deepens understanding of each other’s macroeconomic performance and can warn of potential problems. As Asia’s economic significance continues to grow and its interdependence deepens, more participation and leadership in the global institutions will serve both regional and global interests. In coming to terms with the Asian Century, Western nations will need to recognise Asia’s new weight and speed up the reforms in global governance necessary to reallocate power accordingly.

Wendy Dobson is Professor at the Rotman School of Management and co-Director of the Rotman Institute for International Business, the University of Toronto.

This article appeared in the most recent edition of the East Asia Forum Quarterly, ‘Coming to terms with Asia’.

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