PROSPECTS FOR EAST ASIAN INTEGRATION

Abstract

The topic of economic integration has never failed to capture the interest of economists. Ever since the idea was first introduced, it has sparked off a string of debates on the pros and cons of having countries to come together to form a grouping. Nevertheless, the large number of integration efforts in the world today is sufficient evidence of its advantages. The European countries were the first group of nations to form an institutionalised trade bloc. It started with a lower level of formalised integration known as a free trade area to the status of an economic union. NAFTA is the next biggest trade bloc with United States as the core member. With such a trend towards the formation of trade blocs, there arises the concern of increasing protectionism. Such fears are not unfounded as the European Union (EU) has shown that it is largely an inward looking bloc, which has earned it the name of "Fortress Europe". Thus, this leads us to consider whether it is time for the East Asian region to form an institutionalised economic bloc by itself to guard against protectionism. The suggestion for the East Asian Economic Grouping/Caucus (EAEG/EAEC) in 1990 substantiated this concern. However today, it has become obvious that this suggestion of a grouping for the region would not work. Many analyses have been done, using data for the seventies and eighties (even till 1990) to assess the regions' viability to form such a grouping. Thus, this academic exercise seeks to review the current status of the East Asian region, using information up till the mid-nineties, to reassess the viability for further economic integration, to the extent of a formalised framework. East Asia is the most populous and dynamic region in the world. It has always been the focus of attention due to its remarkable record of high growth for the past few decades. While the region is growing, natural economic integration is also taking place. Thus, the objective of this academic exercise is to ascertain the degree of integration among the East Asian economies through analysing the various indicators ( especially on trade and investment). More importantly, it is to explore the forces that give rise to the current state of cohesiveness, and to assess the prospects for further integration of the region. The discussion begins with an introduction of the various East Asian economies included in this exercise and which shows the areas of diversity and similarity among them. This is followed in Chapter 2 with the review of related concepts on economic integration and various works done on the region’s interdependence based on trade. Chapter 3 and 4 examine the level of integration the region has attained. Chapter 3 looks at existing and proposed regional efforts, some of which have a broader focus than others. Chapter 4 is an analysis of the trade and investment patterns of the region. Trade interdependence is measured using the general trade observation method and more importantly, the adoption of the intraregional trade dependence index that has seldom being employed in other works. Thus, from these analyses, the level of integration can be ascertained. In Chapter 5, the prospects for further integration are discussed. This is followed by the conclusion in Chapter 6. As the East Asian region continues to grow, further integration could be expected and it will always involve the debate on whether if the process needs to be institutionalised. Such decisions ate hinged not only on economic factors, but also, political and even social factors.