With no clear leader and few strong incentives for deep integration, Asian cooperation for the foreseeable future is likely to be intergovernmental, with little pooling of sovereignty to create supranational institutions or agreements on common rules and disciplines.
As Asia’s weight in the world economy grows, however, its interests will also be served by a strong commitment to global institutions. Asia is unlikely to see the institutionalization or pooling of sovereignty that occurred earlier in Europe as the region lacks the same incentives for doing so. Tariffs on goods are now relatively low as governments have reduced barriers through spontaneous unilateral liberalization, but sensitivities remain to giving up some sovereignty necessary for deeper integration — even within Asean, the default leader. The China-Asean Free Trade Agreement, however, created incentives for other large economies to counter potential discrimination with similar deals of their own.
The future of economic cooperation is complicated. The recent global crisis revealed the vulnerabilities of continued reliance on export-led growth strategies and created, at least for a time, incentives to rebalance growth in economies throughout the region to rely more on domestic and regional demand. Reforms of previously protected service sectors will be needed, implying more emphasis in future trade agreements on competition policies, investment performance measures, technical barriers to trade, etc.
The Trans-Pacific Partnership might create further incentives, but those negotiations are quite complicated. The negotiating frameworks that are to be agreed to by November might provide a clearer basis for evaluating what the TPP will be able to achieve.
If services and investment liberalization proceed unilaterally, as was the case in goods, there is the danger pointed out by some commentators that writing rules to eliminate behind-the-border barriers will reflect power asymmetries (such as between the United States, European Union and Japan and smaller economies with which they have agreements) that could undermine accepted World Trade Organization rules. At the same time, China, India and Brazil are large enough to ignore such agreements — for now. When they reach the levels of development where their home-grown multinational companies produce more abroad, the rules will have been written and they will be rule-takers, which could further undermine the WTO’s future legitimacy.
With no clear prospect for leadership, Asean will continue to fill this role. The 2007 commitment to achieve an economic community by 2015 is visionary and ambitious, but the deep integration needed for a single market with goods, services, capital, investment and skilled labor flowing freely seems unlikely by that date. Even so, Asean is developing a framework for macroeconomic cooperation within which the Asean+3 is beginning to gain traction.
The record suggests sequenced integration in Asia. Thus the current level of institutionalization will see more consultation, greater transparency, more formalized arrangements and efforts to prevent policy reversals and crises, but they will not pool sovereignty.
More likely are efforts to better use scarce leadership resources in the continuing variable geometry in which the broadest membership meets, as with the Asia Economic Summit, to discuss strategic issues. With time and experience, it might also engage in setting and monitoring goals and targets if such are adopted, similar to the G20’s emerging role at the global level. To prevent crises, Asean+3 institutions would focus on surveillance and analysis among the systemically significant economies — with the view that as members gain more confidence in the process and in each other, the forum would be used for bargaining and closer policy coordination.
Asia’s rising weight in the world economy brings with it external expectations about its role in shaping the future world order. Will the region continue to cede leadership of the world trading system to the United States and Europe? Or will it use its increasing economic weight to shape the world order by, say, helping to conclude the Doha Round or building a Pacific-wide free trade area?
In macroeconomic surveillance and cooperation, the precedent has been set for cooperation through the Chiang Mai Initiative on fiscal stability cooperation. Europe’s recent experience with the European Financial Stability Facility has underlined the necessity for this kind of process, but that precedent has not yet been formalized.
Yet Asia’s growing economic weight and its strong interdependence with the rest of the world economy suggest that purely regional institutions are unlikely to accommodate its long term interests. A positive outcome would be Asian leaders and institutions emerging as champions of a stable and open global economic system in both word and deed. –Wendy Dobson, http://www.thejakartaglobe.com/opinion/asias-economic-institutions-need-place-on-global-stage/460880
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