Asian economic integration started later than predecessors in
the European Union (EU) and North America, but its pace has
increased in the wake of the Asian financial crisis. During these
years, Asian countries have undergone accelerated economic growth,
and economic cooperation has become widespread. This has been aided
by the establishment of sub-regional economic cooperation
organizations, as well as further exchange and cooperation among
Asian countries-developments that are lubricants to the process of
economic integration. Currently, Asian economic integration has the
following features:
Thriving sub-regional cooperation
Within Asia, sub-regional organizations continue to appear. The
earliest and most important in East Asia is the Association of
Southeast Asian Nations (ASEAN), consisting of 10 countries
(Thailand, Malaysia, the Philippines, Indonesia, Singapore, Brunei,
Viet Nam, Laos, Myanmar and Cambodia) and representing a population
of more than 500 million. Establishment of the ASEAN-China,
ASEAN-Japan and ASEAN-South Korea free trade areas (FTAs) is in
full swing. The three “10+1” FTAs are expected to be whole by 2015.
Meanwhile, a “10+3” FTA, including ASEAN, China, Japan and South
Korea, along with East Asian cooperation, is still being discussed.
But ASEAN’s total GDP is less than one ninth of the aggregate of
China, Japan and South Korea-the most economically powerful and
most heavily populated parties. Without their participation, East
Asian regional cooperation can’t be realized. ASEAN plus the three
countries will be the most energetic mechanism in East Asia and
could potentially become a main channel of regional cooperation.
The “10+3” FTA will be established through the integration of the
three “10+1” FTAs.
In South Asia, to strengthen economic, social, cultural,
scientific and technological cooperation, the South Asian
Association for Regional Cooperation (SAARC) was established. The
SAARC includes Bhutan, Bangladesh, India, the Maldives, Sri Lanka,
Nepal, Pakistan and Afghanistan. In January 2004, the SAARC
countries agreed to create an FTA, which took effect on January 1,
2006. The SAARC, expecting to establish an updated FTA on January
1, 2014, has cooperated widely with East Asian countries. India has
begun FTA building with ASEAN, China, Japan and South Korea. A free
trade agreement between Pakistan and China has already taken
effect.
The Gulf Cooperation Council (GCC) is an important regional
cooperation organization in West Asia. Its members include the
United Arab Emirates, Oman, Bahrain, Qatar, Kuwait and Saudi
Arabia. Since the founding of the GCC, its conference has rotated
between the capitals of the six countries annually. These nations’
ministers of foreign affairs, national defense, domestic affairs,
petroleum and finance will hold regular meetings, discussing
political, economic, military and diplomatic issues, coordinating
opinions and taking joint actions. The GCC plans to build a common
market and launch a uniform currency in 2010, and has already
started talks with China, India, Japan and South Korea on setting
up FTAs.
The Shanghai Cooperation Organization (SCO) in Central Asia was
formally constructed by China, Russia, Kazakhstan, Kyrgyzstan,
Tajikistan and Uzbekistan in Shanghai on June 14, 2001. The SCO
aims to strengthen mutual trust and good relations among its
members, encouraging them to effectively cooperate in the fields of
politics, economy and trade, science and technology, culture,
education, energy, transportation and environmental protection. The
body works jointly at protecting and safeguarding regional peace,
security and stability, as well as moving to establish a
democratic, fair, sound and new international political and
economic order. Mongolia, India, Pakistan and Iran have become
observers of the SCO.
Increasing the strength and cooperation of sub-regional
organizations will promote the process of Asian economic
integration.
Deepening economic and trade cooperation
Asian countries have created different economic growth models to
facilitate their economic development and strengthen regional
economic and trade cooperation. For the past six years, all Asian
countries’ economies have been in the fast lane.
As Asian economic development has accelerated, inter-regional
trade has rapidly expanded. In the 1980s, inter-Asian trade only
accounted for 34.7 percent of the total trade volume, while the
proportion rose to 57.3 percent in 2002. This is higher than within
the North American Free Trade Area (NAFTA), which was 46 percent
that year, and second to the EU’s 62.4 percent. China, Japan, South
Korea, India and Viet Nam contributed greatly to the substantial
increase of inter-regional trade (see table 2). Although China’s
exports to Asian countries grew 37.7 percent from 2001 to 2005, it
exported even more to other regions during this period, drawing
down its percentage in 2005 compared with what it was in 2001.
However, China’s imports from other Asian countries rose 6.5
percentage points to 66.9 percent in 2005. Japan’s figures indicate
that it has gradually returned to focusing on Asia. South Korea,
India and Viet Nam have all deepened their trade relations within
Asia.
In the field of inter-regional investment, China, Japan, South
Korea, India and Viet Nam are also major players. Among China’s
paid-in foreign direct investment in 2001, 61.2 percent came from
Asian countries, while in 2005 the ratio was 59.9 percent.
Statistics also show that by the end of 2004, China’s outward
direct investment had reached $44.78 billion-70 percent of that
invested in Asia. Japan’s outward direct investment is also
Asia-bound, with the proportion climbing from 19.5 percent in 2001
to 35.6 percent in 2005. In 2001, 19.7 percent of South Korea’s
outward investment flew to Asian countries, with the ratio soaring
to 60.1 percent in 2005. India absorbs investment mainly from the
EU and the United States. But investment from Asia to India also
increased from 2.9 percent in 2001 to 12.7 percent in 2005. Viet
Nam mainly attracts Asian investment, grasping 36 percent in 2001
and a whopping 70.2 percent in 2005.
A diversifying Asia
An important feature of Asia is its diversity. Asia has a
multitude of countries, races and a large population, and Asian
countries have taken on different political, economic, cultural and
religious forms and development models. These are reasons why Asian
regional cooperation is different from other regions, and why it is
much slower compared with the EU and NAFTA. But since the beginning
of the 21st century, propelled by economic globalization and
regional integration, and along with the development of Asian
economies and inter-Asia trade, as well as the deepening of mutual
understanding, many countries have become more tolerant toward
regional cooperation. Asia has already been developing a
multi-area, multi-level and multilateral cooperative mechanism in
order to create a cooperative model that transcends social systems
and ideologies.
Looking outside Asia
Asian cooperation doesn’t shut the door on new countries and
regions, and more members are welcome to join in. Australia and New
Zealand have already been participants. Russia, the United States,
the EU and other countries and organizations have established
relationships with Asian cooperation organizations-a development
not only beneficial to the prosperity and stability in Asia, but
also toward playing a positive role in global peace and
development.
Asia insists on opening up to and learning experiences from
other regions, especially from the EU. It also strengthens
communication and exchange with other countries and regions, and
enhances mutual understanding and support among all parties.
Admittedly, opening should have its limits. East Asian
integration is only the first step of the process of Asian
integration. East Asia comprises Southeast Asia and Northeast Asia,
including ASEAN, China, Japan, South Korea, North Korea and
Mongolia, making up one third of the world’s population. The
aggregate GDP of East Asian countries accounted for 20 percent of
the world’s total in 2004, and foreign trade 25 percent.
However, during this initial stage, East Asian regional
cooperation should be limited to the “10+3” framework. Otherwise,
unlimited expansion will bring another APEC, a situation unhelpful
to the healthy development of regional integration.
International practice also shows that in the initial stage of
regional cooperation, it is not advantageous to have too many
members; otherwise, too many opinions are difficult to be
coordinate. The current EU with 27 members had only six countries
at first, while the ASEAN grew from the original five to 10.
Stressing sustainable development
Asian economies are in different developing phases, with many
featuring developing industry. To these countries, equal attention
should be paid to environmental protection as is paid to economic
development. Asian countries should stick to the path of
sustainable development.
While developing industrial production, Asian countries should
attach importance to environmental issues, including global
warming, air and soil pollution, water and food safety, and public
sanitation. Meanwhile, energy cooperation should be strengthened.
The Asian economy is developing rapidly along with the demand for
energy. International energy organizations estimate that East
Asia’s demand for energy in 2020 will be 3.2 times that in 1997,
and East Asian dependence on imported oil will ascend to 80 percent
by 2020, up from 60 percent in 1997. By then, East Asian countries
will all be oil net importers. Therefore, Asian countries should
increase their oil reserves, ensure the safety of seaways for oil
transportation, strengthen technological cooperation, exploit new
and alternative energy, and put more efforts on energy saving.
Asian countries should also emphasize technological innovation
and lay solid foundations for hi-tech development. Technological
research and development, production and sales should be organized
to form a pan-Asian industrial or enterprise network consisting of
Asia’s new industrial segments. Inter-regional technological
transfer should be promoted; industrial standards and
authentication should be acknowledged mutually; and industrial
specifications, information communication standards and
intellectual property rights protection policy should be
unified.
It is essential for Asia to achieve healthy development of its
regional cooperation and free flow of human resources. Developed
countries and regions should open their labor markets. Asia should
also build its capital market and financial center in an effort to
gradually unify its capital and financial market systems, and
realize investment liberalization within the region.
Along with the healthy development of Asian integration is a
general trend to establish a uniform currency. But, before a
standard currency comes into being, we should support the Asian
Currency Unit proposed by the Asian Development Bank in June 2006,
as a transition toward this future.
Taking one step at a time
With the development of inter-regional trade and the increased
exchange of human resources, Asian people’s minds have also
changed. This is the great momentum of regional cooperation.
However, Asia’s diversity determines that regional cooperation
should not proceed hastily, but instead must go forth
gradually.
During this cooperation, interests of all involved parties
should be taken into account. Discussions and exchanges among
governments, non-governmental organizations and academic fields
should be deepened.
The current mechanism should be brought into full play and all
kinds of projects should be implemented so that the Asian people
can witness the benefits as soon as possible. The gaps among Asian
countries can be narrowed, laying a solid base for regional
cooperation.
During the past several years, Asian economic integration has
made remarkable achievements through the joint efforts of Asian
countries. The Asian people are confident in the future of their
common continent.
The author is a professor and director of the Department of
Asian and African Studies under the Chinese Academy of
International Trade and Economic Cooperation, a think tank of the
Ministry of Commerce.??
(Beijing Review April 19, 2007)