EAST ASIAN ECONOMIC CAUCUS (EAEC) : PROBLEMS AND PROSPECTS

Abstract

The East Asian Economic Caucus (EAEC) has generated much heated debate both from its proponents and its opponents regarding its viability and necessity. This academic exercise hopes to provide some insights into the subject by presenting certain indicators that best describes the region's present outlook and by giving a general scenario of the current global situation to better understand the factors that has provided impetus to increased economic cooperation in East Asia. There appears to be a trend towards regionalism with countries forming blocs based on geographical proximity. While regionalism may not necessarily lead to protectionism, there is a tendency to be inward-looking when forming trade blocs. In order to keep afloat in the test of the survival of the fittest, increased cooperation in East Asia in the form of EAEC is argued to be necessary to guard against protectionism. But will EAEC survive? Does it have the clout to be considered in the same distinction as economic titans EEC and NAFTA? Protectionism is not the only challenge facing East Asian nations. As they move towards the 21st Century, popularly touted the "Asian Century", the challenge is to make full use of the current growth momentum to achieve the long-desired graduation to developed country status for some and to be global economic leaders for others. To this end, EAEC hopes to serve as a two-prong approach of guarding against protectionism and for increasing cooperation to boost economic growth. Chapter 1 provides a discussion on the growth of regionalism in the world. An insight into the workings of GA TT and the breakdown of the Uruguay Round is given. This leads us to the rationale for EAEC, and EEC 1992's and NAFTA's impact on this region is then examined. Chapter 2 seeks to give an explanation for the necessity of EAEC in view of existing regional initiatives such as ASEAN and APEC. What sets EAEC apart from them? The criteria for successful economic integration is introduced here and will be used as a gauge of the viability of EAEC in subsequent chapters. A macroeconomic survey of the region is given in Chapter 3. Selected macroeconomic indicators such as GNP per capita, GDP growth, population size and macroeconomic balance are provided and a comparison is subsequently made with NAFT A and EEC. Increased cooperation will be better facilitated if there are already existing ties that bind the member countries together. Chapter 4 will look into the existing interdependence in trade by calculating certain indicators such as intra-regional trade share of total EAEC trade, export dependence levels and world trade shares of EAEC countries. The trade intensity concept will also be provided and the export intensities of EAEC countries will be computed to give a better view of their bilateral trade relations with one another and with NAFTA and EEC. Chapter 5 looks into the complementarity factor, a factor that is vital to ensure greater cooperation among the countries. The "flying geese" hypothesis that is so often used to describe the pattern of economic development in the region is endorsed by providing comparative advantage indexes for the countries in EAEC. The intra-industry trade concept is also discussed and a detailed breakdown of the commodity composition of EAEC's trade is given to examine if intra-industry trade exists in the region. Cooperation in technology transfer and the importance of foreign direct investment to EAEC are also discussed in this chapter. Finally, the concluding chapter, Chapter 6, will summarize the findings of the academic exercise. A brief discussion on recent intellectual thoughts about regionalism and multilateralism is also given. Is regionalism the shortest route to multilateralism and if so, should not the ends justify the means? EAEC would have an easier path towards becoming a reality if this is so. There would be less opposition against EAEC from nonmember countries if regionalism is indeed not a zero-sum game where one region's gain from increased cooperation results in losses for the rest of the world. It becomes obvious at the end of the exercise that whatever problems EAEC faces are political, and not economic ones. In the real world, political decisions often outweigh economic rationale, hence, the crux of the matter is how EAEC proponents manage to convince the world that it will remain outward-looking while increasing economic cooperation within the region. The rest of the world needs to be assured that although EAEC may have the clout to stand on its own, it would surely not revert to protectionism due to the open nature of the economies in it. Thus, regionalism in East Aria in the form of EAEC will only be a means of making formal the ties that are already in existence in the region and not be the route to Fortress Asia.