Starting from the last issue, which featured V. Mikheev's article "NEA Economics: a failed (so far) unity", the magazine started publishing a series of materials devoted to the problems of economic integration of East Asian countries. Few people doubt the significant prospects of this process. However, experts view the forms, pace of integration, and role of individual countries and their associations in it differently. On the pages of MEiMO, we plan to organize a discussion of these and related aspects of economic integration in East Asia.

PLACE IN THE GLOBAL ECONOMY AND GROWTH RATES

In the past few years, both in the East and in the West, business and political circles, as well as in the economic press, have increasingly focused on the East Asian region (Japan; the four "new industrial countries" (NIS) - South Korea, Singapore, Taiwan and Hong Kong; the ASEAN states, China, North Korea, Mongolia). Geographically, it also includes the Russian Far East, and in a broader interpretation, obviously, the whole of Eastern Siberia.

International statistics for the East Asian region, however, only include Japan, the four NIS countries, the four leading ASEAN countries (Thailand, Malaysia, the Philippines, Indonesia), and China. This approach is maintained in this article. Objectively, this group of countries still plays a major role in the region's economic development. It is thanks to it that East Asia is now rightly regarded as one of the three main world centers of production, trade and investment, along with North America and Western Europe. Moreover, its positions in this triangle in a number of important parameters are noticeably and steadily increasing.

Thus, East Asia has firmly taken a leading position in the production of a wide range of key products - not only consumer electronics (as originally), but also the electronic information complex, or, to use the generally accepted term in the world, IT (information technology) products, as well as transport engineering, composite materials, etc. In this regard, the latest data obtained from the survey of the leading Japanese economic center "Nihon Keizai Shimbun" is very revealing (Table 1). For most of the products under consideration, attention is drawn primarily to the rapid and significant growth of China's share. South Korea and Taiwan are strengthening their positions in some commodity markets. The ASEAN countries are also increasing their share in a number of products, but in most cases they are struggling to maintain their positions, retreating under the Chinese onslaught. Japan's share tends to be either stable or declining, sometimes noticeably.

The share of East Asia (excluding Japan) in world exports and imports, which was only about 5% in both cases in 1970, rose to 19% and 16% in 2000, respectively. If you add Japan, the combined share of the region is 27% and 21% ¹ . East Asia's share of global accumulated foreign direct investment increased from 1.5% in 1980 to more than ^{14% in 1999.2}

At the moment, we can say with a reasonable degree of confidence that the consequences of the 1997-1998 "Asian crisis", which dealt a heavy blow to the economies of key countries in region ³ , have been largely overcome and their economic growth potential has been restored. Data from the post-crisis period 1999-2001 show that, although growth rates in the NIS and ASEAN countries have fallen below pre-crisis levels, the overall East Asian economy, despite prolonged stagnation, remains relatively stable.

(c)2003г.

TSELISHCHEV Ivan Sergeevich, Doctor of Economics, Professor.

¹ See Tsuse hakuse 2001. Tokyo, 2001. p. 22; JETHRO, Boeki hakuse 2000. p. 453.

² See Tsusho hakuse 2001, p. 22 (excluding Japan).

³ Primarily South Korea, Thailand, Malaysia, Indonesia, and the Philippines; to a somewhat lesser extent, Hong Kong, Singapore, and Taiwan.

page 43

Table 1. Shares of leading manufacturing countries in global production, %

¹ Forecast. Compiled by: Nihon Keizai Shimbun. 13.08.2002.

page 44

Table 2. Economic growth rates (East Asia, North America, Western Europe), GDP growth, %

¹ South Korea, Taiwan, Hong Kong, Singapore ² . Thailand, Malaysia, Philippines, Indonesia ³. USA, Canada, Mexico ⁴ . Germany, France, Great Britain, Italy ⁵ . Average growth rates predicted by leading international and financial organizations.

Sources: Naikakufu, Sekai keizaino te:Ryu:. Spring 2002. p. 72; Keizai kikakute. Nanji sekai keizai hokoku, 2000, pp. 48, 94.

Table 3. Economic growth rates of East Asian countries, GDP growth, %

¹ IMF forecast (according to source Sekai keizaino te:Ryu:. Spring 2002) ² . Forecast of the Asian Development Bank. Sources: Sekai kokusei jue, 2002/03. pp. 17,137-138; IMF Financial Statistical Yearbook, 2001; Sekai kezai-no cho:Ryu:. Spring 2002; Nanji sekai keizai hokoku, 2000. p. 94; Nihon keizai shimbun.

In Japan, it is growing faster than in North America and Western Europe (Tables 2, 3).

However, it is not just the quantitative parameters that are important. Of course, the relatively rapid and easier-than-expected recovery from the crisis, primarily due to the growth of exports in the wake of falling national currency rates, somewhat weakened the incentives for domestic structural reforms. Nevertheless, the East Asian countries have made some progress in this area as well. Progress is evident in such areas as reducing government spending, including subsidies to enterprises, privatizing companies and banks, easing the burden of non-performing bank loans, reorganizing companies and industrial and financial groups, and improving corporate governance. The most important catalyst for structural reforms was the increased penetration of European and American capital in the form of both direct and portfolio investments.

The restoration of growth potential, structural reforms, and the strengthening of East Asia's position in the global economy on this basis create a favorable background for intensifying efforts to create interstate economic unions in the region (although, as we will see below, a set of factors that stimulate integration in the region is not possible).-

page 45

Table 4. Shares of individual countries and regions in the foreign trade of East Asian countries, % of total

Source: JETHRO. Boeki hakuse. 1998 - 2001.

these processes are much more complex). The prospect of forming a region - wide East Asian Free trade Area (FTA) or, more broadly, the East Asian economic community is also beginning to be seen. The vast majority of countries in the region now link the future of their economies to increased intraregional integration.

INTEGRATION FACTORS

The most important factor in strengthening integration trends in East Asia is the growth of economic interdependence within the region, primarily in the NIS - ASEAN-China triangle, which includes the main emerging market countries.

Data from the table. 4 and 5 show that the countries of this triangle have significantly increased the share of mutual trade and investment ties in the 1980s and the first half of the 1990s, and their dependence on trade with leading industrialized countries and on the inflow of investment from there has relatively weakened. This trend is a direct consequence of the growth of the production and investment potentials of the triangle countries, the expansion of their domestic markets, and the deepening of the intraregional division of labor.

Table 5. Structure of direct investment in East Asian countries (by major investor countries and regions), % of total

Source: Urata Yu. Adziya Keizaino fukkatsu to Nihonno yakuvari (The Revival of Asian economies and the role of Japan). Japanese Center for Economic Research. 1999.

Especially noticeable, strange as it may seem at first glance, is the decline in Japan's share of both trade and investment. The weakening of its position in the region is a consequence of the increasingly pronounced structural weaknesses of the Japanese economy, in particular, numerous non-tariff barriers to imports and the passivity of the majority of firms in foreign investment. However, for Japan itself, the share of East Asia in trade increases markedly (Table 6).

In the first half of the 1990s, its share in Japanese foreign direct investment, especially in the manufacturing industry, also grew. The crisis of 1997-1998, however, changed the situation: since then, direct investment by Japanese firms in the region has remained sluggish, and the share of East Asian countries in their total volume has fallen (Table 7). However, based on the well-known plans of Japanese businesses in the field of foreign investment for the foreseeable future, this phenomenon can be explained by the following factors: it is temporary in nature. It is obvious that, in general, the thesis of strengthening intraregional economic interdependence is also true for Japan.

The second major factor driving the growth of integration trends is the growing concern that East Asia is lagging significantly behind the other two centers in terms of pace and depth of integration, which could negatively affect its economic prospects. Indeed, in North America, the NAFTA block (the North American Free Trade Agreement signed by the United States, Canada and Mexico) has been operating since 1994, and in the coming years, it is obvious that the FTAA mega-block (the American Free Trade Agreement) will be created, including both North and South America. In Europe, there has been a significant expansion of the EU, with a large group of CEE countries joining.

There are no multilateral integration associations in East Asia today. It is expected that the AFTA (ASEAN Free Trade Area) will be launched in 2003. At the bilateral level, the agreement entered into force in January 2002

page 46

Table 6. Shares of individual countries and regions in Japan's foreign trade, % of total

Source: Sekai boeki hakuse; Nihon tokei geppo. 2002. N 8.

Table 7. Geographical structure of foreign direct investment in Japan, % of total

Source: Keizai eran, 1982; 1992; 1997; 2002.

about the Japan-Singapore FTA ⁴ . In general, neither the scale nor the dynamics of integration here are comparable to American and European ones.

The third factor of East Asian integration is the rapid strengthening of China's economic position and the resulting breakdown of the existing growth mechanism in the region. The well-established figurative definition of this mechanism is "a flock of flying geese". Let us briefly recall its essence. The leader, "leader" of the pack is Japan. The second row is made up of Asian "tigers"; the third - the four largest ASEAN countries; the fourth - China; the fifth - Vietnam, Laos, etc.Each previous row seems to pull the next ones along through technology transfer and know-how, direct investment, and ensuring export markets. At the same time, those industries that were key in the country or countries of the previous series yesterday are now naturally transferred to the countries of the next one. The previous series goes further, developing production of a higher technological level. This ensures dynamic development of the entire region.

China's rapid economic growth, accompanied by structural modernization of its economy, has disrupted this orderly order. China, firstly, turned out to be the most dynamic economy in the world at the end of the XX - beginning of the XIX century; secondly, it firmly established itself in the second place after the United States in terms of attracting foreign investment; and thirdly, it very consistently maintained its policy of encouraging R & D, high-tech industries, and industries with a high share of added value. This allowed the country with more than a billion people to quickly become a global manufacturing center (or, as it has now become fashionable to say, "world factory"), capable of producing a wide range of products on a huge scale: from labor-intensive to high-tech. Figuratively speaking, from T-shirts to computers. As a result, the outlined scheme of switching industries from one row to another was disrupted, and China firmly took a special place in East Asia as the second, along with Japan, the largest economic power in the region.

In other East Asian countries, this process is perceived in two ways. On the one hand, a lot is said about the Chinese challenge and even the threat, a threat in a purely economic sense, even if we leave aside the military and political aspects. For example, the growing negative trade balance with China is becoming an increasingly serious problem for the ASEAN countries. Furthermore, ASEAN is clearly losing out to China in the fight to attract new investment. Moreover, a number of Western and Japanese companies are shutting down production in the ASEAN countries and moving it to China.

The latest data on attracting foreign investment in the first half of 2002 indicate that

⁴ This is the first free trade area agreement signed by Japan. It became possible as a result of a change in the concept of Japanese foreign trade policy. Until recently, the concept was based on the fact that Japan should participate in the liberalization of world trade only within the framework of the GATT / WTO. Now it is officially stated about its interest in agreements on free trade zones. South Korea, Mexico, Chile, etc. are being consulted on this issue at various levels.The possibility of bilateral agreements with Thailand and the Philippines is being considered.

page 47

the fact that in a number of countries the situation is becoming almost a failure. Foreign direct investment in the top six ASEAN countries (the above five countries plus Brunei) is estimated at $ 6.5 billion, which represents a 60% decrease compared to the same period last year. At the same time, in Malaysia, the reduction was 80%, and in Indonesia and the Philippines-a little more than 70% (data on approved investment projects). In China, the amount of direct investment from January to August 2002 amounted to $ 34.4 billion, an increase of 25.5% over the same period (data on actual projects) ^.5

In Taiwan, the phrase "China is a black hole"has become commonplace. The reason is that China is absorbing an increasing amount of Taiwanese not only capital, but also human resources, which objectively leads to a weakening of the island's economy (according to available data, 500 thousand Taiwanese now live and work in China permanently). Similar problems are becoming more pronounced in Hong Kong after its transformation into a"special administrative region of China".

The Chinese factor is having a growing impact on the economies of both Japan and South Korea. Especially in Japan, the influx of cheap Chinese imports and the transfer of a significant part of industrial production to China are causes for concern, primarily due to the huge - compared to Japan, according to various estimates, twenty to thirty - fold - gap in the cost of labor. On the pages of the Japanese economic press, in the speeches of representatives of business and political circles, the idea is increasingly being expressed that it is time to compete with China on an equal footing, and not treat it as a developing country.

Thus, all or almost all countries in the region are aware of the Chinese challenge. There is, however, another side. Today, the economic situation and prospects of both Japan and other East Asian countries depend to a great extent on how much they will be able to strengthen various ties with China: in particular, to expand exports using the opportunities of the Chinese market, and to increase their competitiveness by transferring part of the production and technological processes to China. Hence, there is an objective need to create one or another variant of a regional economic association that includes China. In addition, the inclusion of China in a regional association may be the best answer to the Chinese challenge. This approach is increasingly supported in East Asia.

TOWARDS INTEGRATION: COURSE OF EVENTS

Until the second half of the 1990s, the question of creating an East Asian economic association was practically not raised. Among the main reasons - they are also the main difficulties on the way to integration - there are significant (more significant than in America and Europe) socio-cultural and historical differences between the countries of the region; the difference in the levels of their economic development and a whole tangle of difficult, if not puzzling, political problems, difficulties, including psychological ones, are not quite clear. Not to mention the territorial issues in Japan's relations with China and South Korea; the uncertainty and instability of the situation on the Korean peninsula; tensions between China and Taiwan; territorial disputes in the South China Sea around the Spratly and Paracel Islands, etc.

There is a different kind of obstacle. In America and Europe, the main role in promoting integration processes belongs to the leading economic powers. In East Asia, however, Japan is not ready for such a role either politically, psychologically, or, in many respects, economically (the latter is due to the preservation of a wide range of inefficient industries and firms that are not prepared to compete in a single regional market). Therefore, the role of the initiator of integration should be assumed by someone else, and his task, among other things, is to actively involve Japan in this process as the economic leader of the region. In fact, the ASEAN countries have assumed this role.

The American factor should also be taken into account. Until recently, the United States was very wary of the idea of forming an East Asian regional grouping. The emergence of such a system was perceived in Washington as a threat to their own economic and political interests, especially since some East Asian leaders (most notably Malaysian Prime Minister Mohammed Mahathir) were fond of rhetoric that, if not openly anti-American, then at least emphasized the unacceptability of the American model and value system for East Asia. In addition, the United States feared that East Asian integration could weaken the role of APEC, an association that has been assigned a key place in its Asia-Pacific strategy.

Anyway, when at the turn of the 1980s and 1990s M. Mahathir proposed the creation of the East Asian Economic Group as a forum for intergovernmental consultations within the region, this idea failed primarily because of the US opposition.

⁵ See: Nihon keizai shimbun. 17.09.2002.

page 48

In the second half of the 90s, however, such a unique forum as "ASEAN plus three", APT (three are Japan, China and South Korea) was born. In fact, it has become a new and more advanced version of the idea of an economic group. And in this form, it has become virtually impossible to object to it, since ASEAN, as an association, has the right to use and uses a variety of forms of dialogue with its main partners, and APT is only one of them.

APT holds annual high-level meetings. They also include the Japan - China - South Korea trilateral summits. Outside the APT, that is, without the invisible presence of ASEAN, trilateral contacts between these countries still seem difficult due to the complexity of their political relations. Thus, in East Asia, the main multilateral contacts on economic issues are carried out as if through ASEAN, which so far assigns this association a key role in integration processes.

In November 2000, at the APT Summit in Singapore, it was decided to form a working group to study the creation of a region-wide East Asian free trade zone. At the next meeting of Heads of State and Government in 2001 in Brunei, the group did not present any concept of regional unification, but announced that work was continuing. ASEAN has also put forward the idea of formalizing the summit meetings as the East Asia Summit.

The Singapore Forum also discussed possible major regional projects. Chief among them is the construction of the Trans-Asian Railway from Singapore to Kunming (southern China). The idea of an East Asian "information belt" connecting the most technologically advanced cities from Kuala Lumpur to Seoul was also put forward.

At the same time, according to available information, the Japanese side has taken an extremely cautious position regarding the region-wide economic unification and avoided supporting the idea of an East Asian summit.

Obviously, it was the difficulties with creating a region - wide grouping that forced us to try out another option: creating ASEAN associations with each of the three countries - China, Japan, and South Korea-separately (while maintaining the prospect of forming a region-wide association in the future). The breakthrough occurred along the ASEAN - China line. In November 2001, the two sides announced their intention to establish a free trade area within ten years, and formal negotiations were initiated in 2002. The goal looks quite achievable.

This turn of events seems to have taken Japan by surprise. In order "not to miss the train", the Japanese side launched the initiative of "all-encompassing economic cooperation between Japan and ASEAN", which was launched by Prime Minister John Kerry. Koizumi voiced in Singapore in January 2002. Its main provisions are as follows.

Japan-ASEAN relations should develop in a spirit of open partnership. The basic principle of this relationship is to " move forward together." There are three key areas of cooperation. The first is Japan's assistance in the implementation of economic reforms by ASEAN countries, including taking into account the experience of current structural reforms in Japan itself, and the second is global problems, primarily the fight against poverty and the prevention of military conflicts. The third is cooperation "in the name of the future" (a very vague formulation that implies the development of a wide variety of contacts, in particular youth, cultural, etc.).

Among the specific proposals formulated by the Prime Minister are a trip of the Japanese government's special working group on ASEAN countries to study the possibilities of cooperation between universities; declaring 2003 the " Year of Japan-ASEAN contacts "and organizing a series of events in this regard; holding a joint conference on economic development strategy within the framework of the joint"East Asian Development Initiative". They also talk about the joint work of experts designed to fill the idea of "all-encompassing economic interaction" with concrete content. At the same time, the possibility of creating a free trade zone is also meant.

However, unlike China, Japan did not dare to make clear its intention to create such a zone with ASEAN ^.6 In this regard, in Japan itself, the Dz initiative. Koizumi is often criticized as vague and hastily prepared-just to keep up with China.

In reality, Japan's position on economic cooperation in East Asia is determined by several reasons. First, there is clearly no political will to actively promote the idea of regional integration. The Government is primarily concerned with internal problems,

⁶ At the same time, Japanese government circles seem to be keeping in mind the possible scenario of the formation of a region-wide free trade zone, including Japan, China, South Korea and all ten ASEAN countries, with the subsequent inclusion of Hong Kong and Taiwan, and earlier than in 2010 (information from Kyodo News Agency). See: Daily Yomiuri. 14.04.2002.

page 49

It seeks to postpone the adoption of serious decisions on East Asian integration until later. The word "indifference"is the most accurate description of public sentiment in this regard.

Secondly, the problem of liberalizing imports of agricultural and marine products is extremely sensitive (or at least is presented as such). So far, the desire to protect the national producer prevails here, especially since it is not very competitive, but it is very successful in the field of political lobbying. As a result, there were voices in Japanese government circles suggesting that the possibility of free trade agreements leaving agriculture out of the equation should be explored. Recently, however, the Ministry of Agriculture, Forestry and Fisheries has stated the opposite: no exceptions should be made when creating a free trade zone.

And finally, the third reason. Today, the free trade zone is in no way limited to liberalization in the trade sphere alone. Each such zone is an economic community with free movement of goods and capital, more or less free movement of people, mutual recognition of standards, qualification certificates, diplomas, etc. In addition, interstate economic cooperation projects play an important role in this community. Within the framework of cooperation, developing countries seek assistance from industrialized partners.

Japan is one of the world's largest donors: in terms of official development assistance (ODA), it has been the leader for almost two decades and only recently moved to second place after the United States. However, when the domestic financial and economic situation is deteriorating, the state budget deficit has reached a critical value, and aid itself, as it turns out, is not always used effectively and often breeds corruption, there are growing demands to reduce ODA within the country, which is already being done by the Cabinet of Ministers of Ukraine. Koizumi. In these circumstances, the creation of an East Asian association that would result in an increase in aid, or at least an increase in demands for such an increase, is unacceptable.

Hence the extremely cautious position and ambiguity in the question of what is preferable for Japan: a free zone with ASEAN as a whole, including, of course, the poor member countries, or bilateral free trade zones with leading countries, primarily with Thailand and the Philippines.

On this basis, fundamental differences were revealed between the Japanese Foreign Ministry and the Ministry of Economy and Industry. The latter gives preference to a broad free zone with ASEAN as a whole. The Foreign Ministry's line is to give priority to bilateral agreements and complement this by strengthening various contacts with ASEAN as an association.

In September 2002, following a meeting of the Japanese and ASEAN Economic Ministers in the capital Brunei, it was announced that they had reviewed and approved a report prepared by experts, which contains a partnership concept that includes "certain elements of a possible FTA". These elements were said to appear "as soon as possible within ten years" ^.7 At the same time, it was noted that there is a need to take into account differences in the levels of economic development and the existence of sensitive conditions regarding the opening of markets. - I. Ts.) of sectors. In November 2002, the report was approved at a meeting of the leaders of Japan and the ASEAN countries during the APT summit in Phnom Penh.

In any case, the fundamental issues of the Japanese side's strategy and tactics in the field of East Asian integration remain largely undeveloped, which not only complicates practical steps on the part of Tokyo, but also confuses its partners. Nevertheless, Japan is willy-nilly becoming increasingly involved in the process of regional integration, and its activity in this area will undoubtedly grow (albeit involuntarily) as the integration ties of other countries in the region, primarily with the participation of China, strengthen.

Finally, South Korea, another major APT participant, has also expressed interest in establishing a free trade area with ASEAN.

As a result, a certain East Asian model of the integration process is beginning to emerge. It looks like this. ASEAN plays a key role. In the medium term, the ASEAN-China free Trade Area is being formed; Japan and South Korea cannot afford to be left out, and therefore the ASEAN - Japan and ASEAN - South Korea structures of close cooperation are being formed after it. There is a very high probability that these will eventually also be free trade zones. At the same time, a number of Japan's bilateral trade zones with individual ASEAN countries are being created. The Japan-South Korea zone will probably appear even earlier.

We should add that it is also possible to create free trade zones outside the framework of this scheme. So, they start - however, exclusively in English-

⁷ See: Daily Yomiuri. 14.09.2002.

page 50

At the international level, there are consultations on this issue between Japanese and Taiwanese experts, in connection with which China has already expressed serious concern to the Japanese side.

In China itself, there is also a search for various options. Attention was drawn, in particular, to an article published in the Japanese press by Hu Angan, a senior researcher at the China Center for the Study of the Country's Situation, which develops the idea of creating a Japan-South Korea-China-Hong Kong free trade zone ^.8

A whole network of multilateral and bilateral free trade zones is likely to form in the region, which together will essentially form a single East Asian economic area. In the longer term, it is possible to form an East Asian economic community with its own institutional structure on its basis. However, even if such a community is created or not, the formation of a single area will have a huge stimulating effect on the economies of the countries of the region and will significantly affect the balance of power in the entire world economy. The scale of the area is indicated at least by the fact that its population is 2 billion people.

⁸ See: Nihon keizai shimbun. 15.02.2001.

Permanent link to this publication: