Constrained, competing and eking – the limits of economic statecraft in East Asia after national development

Abstract

This paper highlights the highly contingent and constrained possibilities for states concerned with gaining and maintaining economic and, relatedly, strategic advantage in East Asia in a world dominated by global value chains (GVCs) owned and controlled by transnational capital. While the reorganisation of production has given rise to new contender states such as China, challenging the economic and strategic positions of others, the ability for states to engage in non-market conforming behaviour designed to reduce technological dependence, accumulate reserves and embolden national positions against competitors is far more constrained than it once was. Prioritising the relative power and leverage of states operating in various contexts over time, three types of state are identified within contemporary East Asia: former developmental states under persistent competitive pressures compelling very different policy agendas to those that underpinned their respective development stories; a somewhat exceptional constrained “aspirant state”, attempting mercantilist strategies to achieve strategic upgrading under the spectre of systemic exclusion and formidable domestic challenges; and, finally, relatively vulnerable “eke-out” competition states, attempting to leverage labour cost, geography and regulation to maintain economic relevance within the context of hyper competitiveness while also engaging in forms of quarantining and patronage. Our overarching argument is that the latitude to both pursue and leverage ES strategies common in the past is all but gone, even for the most powerful of contender states.

Keywords:

• Asia
• competition
• economic statecraft
• neoliberalism

Disclosure statement

No potential conflict of interest was reported by the author(s).

Notes

1 The WDR notes: “Countries are under pressure to engage in tax competition by lowering the burden of corporate income tax to retain domestic and attract foreign investment. Meanwhile, lower communication and transport costs are facilitating the relocation of firms and the fragmentation of production across countries. Indeed, firms can locate production chains and procurement across the globe, choosing countries that make the most sense from a business perspective. That includes taking advantage of differences between national tax systems to shift production to lower-tax jurisdictions. Countries compete by lowering corporate income tax rates and granting tax incentives such as tax holidays and preferential tax zones. … Revenues from corporate income taxes are further eroded by international tax avoidance, which takes advantage of loopholes and weaknesses in the international tax architecture. In GVCs that involve affiliates of the same common corporate structure, firms can locate activities that generate high profits with relatively little input, or “substance,” in jurisdictions where those profits are taxed at low rates… . Firms can also manipulate transfer prices between their affiliates to shift profits to lower-tax jurisdictions (World Bank 2020: 92).”

2 Some sub-sections below draw upon and extend (Carroll 2020, 2017a, 2020b).

3 Thurbon and Weiss , for example, point to a host of initiatives from a number of South Korean administrations (cf. Watson 2014), Park Geun-hye’s ‘Creative Economy’ project and President Moon’s agenda for Korea’s ‘Manufacturing Renaissance’”. However, they “leave to one side an assessment of the results of these initiatives”, focusing instead on “the shift in strategic focus (Weiss & Thurbon 2021, 476)”. The problem here, of course, is that we are unable to weight these initiatives classed as “economically motivated statecraft”, especially against initiatives documented by the likes of the TPR, to determine the degree to which ES is an extension of or substantive shift from the developmental state.

4 Tan (2022, 7) notes that, for example, that three distinct strategies towards economic policymaking can be observed (“even within a single industry”): “directive” (command-oriented), “developmental” (akin to developmental states) and “regulatory” (market-conforming).