East Asian Community taking root

As regional economies turn to same page, Japan and China must mend their ties

Chairman, Japan Center for Economic Research

Asian leaders who gathered in Tokyo in May invariably called for speeding up efforts for regional economic integration toward the eventual goal of forming an East Asian Community. The occasion was the 12th International Conference on "The Future of Asia," on May 25-26, organized by Nihon Keizai Shimbun Inc. The conference also highlighted the frosty relations between Japan and China as a major regional worry needing a quick resolution.

A new chapter is opening in East Asia's history. It is about opportunities for exploring specific steps toward creating an East Asian Community, a community that is truly Asian and not a copy of the European Union. Momentum is clearly building.

Yet, potential roadblocks to greater East Asian economic integration have surfaced as well. A decade ago, an obstacle came from outside the region. When the Asian financial crisis of 1997 inspired Tokyo to advocate an "Asian Monetary Fund," it was the U.S. that crushed the concept. This time around, ironically, the enemy comes from within - Japan's feud with China and South Korea, due largely to turf battles over regional hegemony or face-saving maneuvering, cast a pall over intra-regional endeavors.

It was only in 2001 that countries in East Asia officially began embracing a regional community. An expert panel called the East Asia Vision Group that year urged East Asia, then a simple collection of nations, to morph into a true regional community in which countries share agendas, expectations and fate.

A breakthrough came in Kuala Lumpur in December 2005, when the Malaysian capital hosted the inaugural meeting of the East Asia summit. Serious discussions on launching an East Asian Community took place among heads of state and governments of the 10 members of the Association of Southeast Asian Nations, the three non-ASEAN members of the ASEAN+3 (Japan, China and South Korea), and three non-East Asian countries (India, Australia and New Zealand).

The hallmark event in Kuala Lumpur offered a fresh reminder that times changed from 1990 to 2005. In 1990, Mahathir Mohamad, then Malaysian prime minister, proposed the creation of an East Asia Economic Group, only to see it buried under feverish opposition from Washington, which charged that the concept was racially discriminatory and exclusive. In 2005, an idea for a community emerged as the centerpiece of discussions at the Kuala Lumpur summit, without the U.S. expressing any visible displeasure.

East Asians

If East Asian awareness is developing among the peoples of the region, one indication came from Malaysian Prime Minister Abdullah Badawi when he used the expression "East Asians" during this year's Future of Asia conference. An East Asian Community should comprise East Asians and be built by East Asians, he said - a reference that seemed to sink in naturally and without causing any mental blocks in the hearts and minds of the attendees.

"Asia is one" may sound pleasing to the ear. In fact, however, it has long been said that the region was never "one," that Asian countries were all separate "ones." If any sense of unity among East Asian countries was to emerge at all, it had to wait until expanded intra-regional trade and investment dramatically promoted interdependence.

Mutual dependence got an additional impetus from the Asian currency crisis of 1997, which led regional economies to tighten ranks and cope with the stormy headwinds by marshalling all the resources they had. The crisis came as a wake-up call to East Asian economies that had basked in euphoria over an "Asian economic miracle" created by a quarter century of high growth.

The U.S. and Western European countries sat idly by as the Asian financial crisis deepened, driving regional countries into an economic debacle. Not even a pittance of financial help came from those Western industrialized countries. The International Monetary Fund did no better. The "Band-Aid" prescription the IMF forced on the regional economies in the midst of the crisis did not help.

The crisis in the end had to be dealt with by ASEAN+3 members themselves, the regional countries that shared the same sense of alarm. It was their coordinated self-help endeavors that brought the financial chaos under control and put the region back on a high-growth track. As the countries joined forces to cope, they developed a sense of unity, and from that, confidence from a job well done.

While building a regional community is no easy task, this year's Future of Asia conference turned attendees' attention to what may seem a roundabout but in reality is a down-to-earth, functional approach - launching cooperation from areas of common regional concern, such as energy supply, environmental protection and currency stability.

Discussions on improved foreign exchange regimens brought conferees to the topics of introducing an Asian Currency Unit and fostering the Asian bond market.

It would be safe to say that market forces will continue to lead the integration process in Asia. A sum of constructive achievements as induced by the workings of the markets - notably direct investment and trade - should bring about a deepening regional interdependence.

During the imperialistic eras in world history, gunboats led the way for commercial fleets. In today's Asia, investment is leading the way for expanded trade, thereby resulting in steps toward effective integration of regional economies.

The remarkable thing is that, of East Asia's total trade, intra-regional commerce now accounts for more than half, a level greater than for the North American Free Trade Agreement (NAFTA) bloc and coming close to that of the EU. Such deepening interdependence in trade is increasing the awareness that it is about time the region moved toward creating a formal community.

Bickering giants

Meanwhile, conferees could not help but cast a wary eye toward Japan's chilly relations with China and South Korea, above all the frosty ties between Tokyo and Beijing, the two biggest regional powers.

The Sino-Japanese relationship already extends beyond ordinary bilateral confines. Countries in East Asia, deeply worried over the fallout of their soured relations, are pressing Tokyo and Beijing to heighten their realization and sense of responsibility as regional powers.

Titles of speakers, names of companies, etc., were correct as of the time when the forum was held.