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Davidson, R. Globalization versus Regionalism in the Asia Pacific

In Michael K. Connors, Remy Davison, Jorn Dosch (eds.) The New Global Politics of the Asia Pacific, 2012: Routledge, Oxford, UK, pp. 176-203.

Rmy Davison
Ph.D. at the University of Melbourne Chair in Politics & Economics in the Department of Politics & International Relations at Monash University; Associate Director of the Monash European and EU Centre. a Global Conflict Expert for the United Nations

Notes:
One globalization or many? o Globalization and regionalism are interdependent and mutually reinforcing each other o Internationalization globalization International transactions: take place between nations (IR, IT, International economics) Transnational transactions: take place across nations Takes place on the sub-national level (TNCs, NGOs, ) Global transactions: actors engage in transactions national borders notwithstanding. The world is being conceived in planetary proportions o Globalization Difficult to define Various versions: Globalization of trade, finance, production, interpersonal networks, technology, communication, transport, culture and language Global must bridge multi-continental distances Globalization equal to Westernization, liberalization, Americanization, universalization? Erosion of state sovereignty a borderless world States resort to a strategic retreat to regionalism to reclaim control over global occurrences o Perspectives on globalization in IR Realist, Liberal, Neo-Marxist o Realist perspective on globalization Challenge Does globalization really go as far as the popular consciousness has it? Can the breakdown of the traditional national orders be described as globalization? Erosion of state power: exaggerated! Globalization doesnt go as far as liberals imagine Most international transactions still rely on the state. The global governance regime is also being steered by some powerful states Americanization rather than globalization Americanization of cultures and economies 1

simon.fiala@seznam.cz US hegemony (hyper-power) o the hegemonic stability theory: the hegemon is responsible for maintaining the global commons, providing of public goods; export of the ideological and economic system Liberal perspective on globalization The dominant neo-liberal paradigm Political and economic liberalism, democratization, raising of living standards Interdependence Sensitivity interdependence: the degree to which states are sensitive to abrupt changes in the international economic environment Vulnerability interdependence: states lack policy tools to regulate exogenous shocks Economic globalization (compared to economic interdependence): states unlikely to assert control over capital flows o Influences how the world order might be governed: traditionally dominated by the US, Japan and the EU, but nowadays shift to G20 Homogenizing effect of globalization a levelled playing field BRICs tend to view globalization as an extension of the American sphere of influence o Attempts to resist the neoliberal free-market ideology o But forced to make significant concessions (e.g. membership in the IMF and WTO) Neo-Marxist perspective on globalization Theories of dependency rearticulated to accommodate globalization in the aftermath of the 1997 AFC Wallersteins world-systems theory There is a single world-system, single economy Core, semi-periphery, periphery Uneven distribution of the benefits/costs of globalization High/low added value industries unevenly spread across the globe The emergence of the transnational capitalist class dominating the borderless world Critical perspectives on globalization Absolutely uneven rather than diffuse The new global economy differs little from the previous model (colonial) Internationalization of production doesnt suggest autonomy of global market forces Impacts restricted largely to the north, only some aspects perpetrating East Asia and South America o Central Asia and Africa totally left behind Financial sector dominated by the US, Europe and Japan o F500 companies pose a good indicator of distribution of the global wealth Internationalization of the communication and capital exists alongside, but does not displace the state 2

simon.fiala@seznam.cz Homogenization? Equalization? Universalization? Global integration? Hardly. Widening disparities between the global South and the North Costs and negative externalities experienced mainly by the South o The diffuse impact of globalization Globalization: a centripetal force driving states into a web of financial and economic interconnectedness Industrialized wealthy countries have perhaps more opportunities to opt out, but are not immune; costs of non-participation rise o Yet the loss of autonomy applies mostly to weak states E.g. China drawn into the global trading regime Consequences of globalization vary along the lines of the levels of development Measuring globalization: mission impossible Level of openness of markets used to measure the impact on living standards The WB: does global poverty actually decrease or increase? The discussion is not about impacts of globalization overall. It must be focused on specific impacts in varying contexts E.g. the growth of China vs. the AFC and the underdevelopment of Southeast Asian countries Developed countries set standards for peripheries that those must meet in order to be included in the world financial and trading regimes. Often accepted even though they have destructive impact on the local economies and societies States remain crucial actors of globalization, but at the same time some countries have to abandon national sovereignty in order to be able to function within the system Erosion of state sovereignty o Massive flow of capital o Pressures to liberalize markets o Global civil society and TNAs o Regionalism Regionalism in the Asia Pacific o Definition of region Nye: regions consist of a limited number of states linked by a geographical relationship and by a degree of mutual interdependence and can be differentiated according to the level and scope of exchange, formal organization and economic interdependence 184 o Southeast Asia: historically weak regional interconnectedness, scarcely going beyond external economic ties. Recently a remarkable shift to regionalism o The growth of regionalism A response to globalization Economic insecurity Exogenous shocks, AFC Intense competition in the world markets Security dimension to regionalism long developed (NATO, SEATO, ASEAN) 3

simon.fiala@seznam.cz Economic dimension to regionalism since the 1980s Increasing realization that individual states cannot deal with the demands of inflation, debt, current account deficit and investment; incapable to react to shocks and crises In the world: o Europe: 1986 Single European Market o America: 1994 NAFTA o Closed regionalism Lack of coherence and cooperation in economic regionalism in E. Asia o But realization of the need of integration East Asian Regionalism The situation is ripe Economic growth: by 1995 East Asia accounted for 31% of the worlds output (EU 30%, NAFTA 24%) Groupings: First-tier NICs: South Korea, Taiwan, Hong Kong, Singapore Second-tier NICs: Thailand, Indonesia, the Philippines, Malaysia The socialist states: China, Vietnam, NK Japan Developments: The rise of China (Worlds no. 2 economy by 2010) Indias emergence The old and new regionalism The old regionalism: 1950s - 1960s Minimalist customs union model Formal agreements, institution building The new regionalism: 1980s Market-led (the politics follows markets) Complex economic interdependence Placing institutional and legal frameworks onto an already established market structures Open and closed regionalism Open regionalism E.g. APEC = External liberalization by trade blocs Reduction of barriers to trade to members and non-members alike o But why to pay the transaction costs? Free riders Concept of reciprocity There are benefits unavailable to the outsiders Usually a custom union or a free trade area Closed regionalism Preferential trade only within a block; third countries face tariffs and quantitative restrictions EU, NAFTA, AFTA 4

simon.fiala@seznam.cz Rationale: to protect regional industries until they become competitive while granting companies a larger market without having to pay full costs of competing globally Approximates the debate between laissez-faire and developmental capitalism o Expansionist regionalism The EU expansion SAARC SAFTA APEC Concept: Free Trade Area of the Americas (FTAA) - defeated Instead: CAFTA Dominican r., Costa Rica o The threat of blocism Analysts in the 1980s and 1990s: the world would break into three blocks: NAFTA, EU, East Asian yen block Eased security environment led to a more open world order Regional trade, financial and dialogue forums o The Asian Development Bank (ADB, 1966) 31 61 members A smaller version of the WB Dependent on member states contributions, makes revenue on international bonds markets Dominated by Japan important vehicle of Japanese economic strategies Proposals for: Asian Monetary Fund (AMF) Northeast Asian Development Bank (NEADB) o ASEAN (1967) The main driver of the regional cooperation in the Southeast Asian region o Asia Pacific Economic Cooperation (APEC, 1989) Links several free trade areas together: AFTA, NAFTA, CERTA (Australia + NZ) + Some countries in Latin America and the former Soviet bloc Open regionalism Non-discriminatory trade and investment policies with accordance with the WTO MFN principle A huge vision, but failed due to the US aggressive foreign policy, Northeast Asian countries unwillingness to liberalize agriculture and internal problems (missing commitment to reciprocity) After 9/11 turned into a security forum by the US o The East Asian Economic Caucus (EAEC) proposal Proposed in the 1990 by a Malaysian PM Including China and Taiwan, excluding Australia and NZ Closed regionalism Translated partially into ASEAN+3 o AFTA (1992) and AANZFTA Open regionalism with exceptions AFTA targets postponed to the year 2020 due to the creeping protectionism

simon.fiala@seznam.cz Maintained loose rules: the withdrawal of gov. support of some public enterprises, regional investment cooperation, reducing the influence of crony capitalism Probably hasnt boosted inward investment AANZFTA extension to Australia and NZ common market envisioned by 2015 o ASEAN+3 (APT, 1997) ASEAN, China, ROK, Japan Soft regionalism dialogue, rather than hard institution building China maintaining a considerable leverage, Japan thwarting the process (balancing against China) ASEAN effective in brokering conflicts arising from great power rivalry in the region Failing in ameliorating the difficult strategic milieu of the East Asian region Envisioned as an East Asian dialogue forum, unwittingly gave China an entre into geopolitics of Southeast Asia Instead of contributing to establishment of common East Asian identity it serves as a vehicle of state interests o The Asian Monetary Fund (AMF) proposal Proposed in 1997 in APT, supported by Japan Initial capitalization of USD 17bn A result of ASEAN members dissatisfaction with IMFs SAPs Vision: A system of central banks controlling speculation banking activities, stabilizing East Asian financial markets offering loans with less conditionality than the IMFs SAPs being subordinate to the IMF (IMF remains the lender of last resort) Blocked by the US, failed because of APT members deteriorated relations Some pieces implemented on bilateral basis ASEAN Swap Arrangements: a currency stabilization programme IMF reformed in response to hints of states attempting to leave it behind Reserves of CMI enhanced, CMI multilateralized CMIM Asian countries are wary of the IMF-US treasury nexus and are seeking to undermine Washingtons dominance o The East Asian Summit (EAS) Proposed by Australia in 2008 as a pan-Asian Pacific bloc with stronger judicial and economic institutions than available within ASEAN or APEC largely failed Disagreement between Japan and Australia on inclusion of the US The US and Russia invited in an apparent attempt to balance China in the region looks somewhat unpromising Bilateralism: A challenge to regionalism o In 2001 in Doha the formerly predominant G3 faced with stern opposition by emerging economic giants mobilizing G22 Collapse of the negotiation in Cancun 2003: G3 and G22 deadlocked on market access, agriculture and subsidy issues Attempts to revive Doha rounds throughout the decade failed Proliferation of PTAs in the situation of the blocked multilateral process 6

simon.fiala@seznam.cz o Advantages and disadvantages of bilateral PTAs with relation to both RTAs and MTNs Advantages: Easy determination of areas intended for liberalization Problematic issues may be left out Entry costs are lower A major disadvantage: power asymmetry e.g. the disadvantageous FTA between the US and Australia Australia forced to accept range of provisions while the US took the liberty to unilaterally exclude articles from the agreement; may cost Australia up to AUD50bn and 200 000 jobs, aggravated the trade deficit The WTO multilateral trading systems popularity is decreasing, countries increasingly turn to bilateral trade initiatives