Seeking a place for East Asian regionalism: challenges and opportunities under the global financial crisis

Abstract

After the devastating experience of the Asian financial crisis more than ten years ago, East Asia launched regional economic cooperation efforts. East Asia's mixed response to the global financial crisis a decade later, however, reveals how certain impetuses that gave rise to unified efforts to regional institution building in East Asia at the time of the AFC derived, fundamentally, from the region's defensive desire as it positioned itself within the harsh global economic and political environment of that time. The GFC triggered reorganization of global economic governance by discrediting neoliberal principles, introducing a new global governance structure and allowing reliance of domestic stimuli for economic recovery. Those shifts, in turn, led to the loss of East Asia's basic mandate towards regional cooperation. In other words, the focus of solving the region's economic vulnerability has now moved from regional arrangement to national and global stages. In particular, the East Asian governments now see less of a need to counterweight the predominant neoliberal voice through unified regional voice as the expansion of the forum to discuss global economic governance to G20 and IMF reform to provide East Asia more representation.

Keywords:

• financial crisis
• East Asia
• regionalism
• financial integration
• free trade agreement
• IMF
• G20

Acknowledgments

Saori N. Katada is Associate Professor at the School of International Relations, and also the Director of the Political Science and International Relations PhD Program (POIR) at the University of Southern California. She is the author of a book Banking on Stability: Japan and the Cross-Pacific Dynamics of International Financial Crisis Management (University of Michigan Press, 2001), which was awarded the Masayoshi Ohira Memorial Book Award in 2002. She also has three co-edited books: Global Governance: Germany and Japan in International System (Ashgate, 2004), Cross Regional Trade Agreements: Understanding Permeated Regionalism in East Asia (Springer, 2008), and Competitive Regionalism: FTA Diffusion in the Pacific Rim (Palgrave Macmillan, 2009).

Notes

1. A similar discussion on the cause of the AFC proceeded among the economists in the United States. The controversy is best summarized by the contrast between Radelet and Sachs (1998) emphasizing the panic-stricken behavior of domestic and international investors and the failure of the IMF response on the one hand, and Roubini emphasizing the economic distortions among the countries in Asia and the problems of fundamentals (Corsettti et al. 1999) on the other.

2. In that context, then-Malaysian Prime Minister Mahathir's attack on Soros was a good example. Meanwhile a picture of the then-IMF Managing Director Michel Camdessus standing arrogantly tall and cross-armed by the side of Indonesian President Suharto as he signed the IMF agreement under pressure from all sides in January 1998 was seen by many Asian media to signify the continuing colonial attitude of the IMF (Budianta 2000).

3. Focusing on the Japanese strategy towards international financial architecture in the aftermath of the AFC, Katada (2004; 176–7) defines that counterweight ‘strategy involves a mixture of bargaining plus institution and coalition building efforts designed to increase regional and international support for Japan's position, particularly when these contrast with the U.S. position’.

4. Those swaps include Argentina (RMB 70), Belarus (RMB 20), Hong Kong (RMB 200), Indonesia (RMB 100), Korea (RMB 180) and Malaysia (RMB 80).

5. The currency swap arrangements are based on the contractual agreement among the central banks to activate those swaps based on their respective foreign exchange reserves as the CMIM receives requests. In this sense, it is not really a ‘fund’ that keeps certain level of quota pooled under a multilateral umbrella.

6. This incurred discussion of ‘Bretton Woods II’ or revived dollar-standard among the economists (Dooley et al. 2003), where the dollar remains key currency in East Asia as the economies are interested in pursuing a mercantilist policy of trade expansion rather than currency autonomy.

7. India, though not an ASEAN + 3 member, is a G20 member. In addition, the ASEAN secretariat is also invited as an observer.

8. In the last two years, four G20 summits were held in Washington DC (November 2008), London (April 2009), Pittsburgh (September 2009), and Toronto (June 2010). Their respective leaders’ declarations have become increasingly long and more specific. All are available online at http://www.g20.org/pub_communiques.aspx/

9. Updated summaries of economic stimulus packages by the East Asian governments are also available from the United Nations Economic and Social Commission for Asia and the Pacific (ESCAP) at http://www.unescap.org/pdd/publications/survey2009/stimulus/fiscal-stimulus.pdf

10. The G20 was established in 1999 at the G7 Koln Summit that discussed the post-AFC global financial architecture, and the countries’ financial ministers have met annually in the G20 context since then. But the arrangement did not become the core of financial discussion until 2008.