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What Drives Regionalism in East Asia—And Why It Matters

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Intellectual Property and Free Trade Agreements in the Asia-Pacific Region

Part of the book series: MPI Studies on Intellectual Property and Competition Law ((MSIP,volume 24))

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Abstract

The regional architecture of East Asia has been transformed in the years since the financial crises of 1997/1998. East Asia has become the most active region for the negotiation of preferential trade agreements (PTAs). Governments’ enthusiasm for PTAs in the decade after the financial crises has commonly been explained as a response to growing economic interdependence, and to the negative economic effects on domestic business of PTAs signed by other countries. There is little empirical evidence to support such assertions: by most measures, interdependence among regional states did not increase. PTAs were most often initiated by governments; business interests seldom lobbied actively for these agreements and made little use of them after they were signed. Rather, the agreements in this period were driven primarily by political-diplomatic concerns, not least rivalry between China and Japan for leadership in East Asia. With Korea’s signature of comprehensive PTAs with the EU and the US, however, a new economic dynamic in the region has been set in train.

J. Ravenhill: BSc. (Econ.) Hons, University of Hull; MA Dalhousie University; AM Indiana University; PhD University of California, Berkeley, FASSA. Director, Balsillie School of International Affairs.

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Notes

  1. 1.

    This apparently straightforward sentence masks several contentious definitional issues. ‘East Asia’ I use as shorthand for the countries that have participated in the three East Asia Summits (EAS) that had been held by the time of writing, plus Taiwan: the EAS participants were the ten member states of ASEAN (Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, the Philippines, Singapore, Thailand, and Vietnam), China, Japan, Korea, Australia, New Zealand and India. I define regionalism as inter-governmental collaboration between two or more states within a specific geographical area: the practice of the WTO is to regard any non-global trade agreement as ‘regional’ (those involving an industrialized economy are referred to the WTO’s Committee on Regional Trade Agreements)—a classification that includes bilateral agreements, and agreements between countries that are located in parts of the world that normally would be regarded as belonging to different geographical regions. The focus in this article is on regional economic institutions not those devoted to security issues.

  2. 2.

    For an overview of recent developments see Aggarwal and Urata (2006).

  3. 3.

    An example of the functionalist approach is provided by Mattli (1999).

  4. 4.

    Haggard (1997), pp. 45–46. See also Kahler (1995), p. 107; Solingen (2008), pp. 288–289.

  5. 5.

    Frankel (1991), pp. 5–20; Lincoln (2004).

  6. 6.

    Pempel (2008), p. 164.

  7. 7.

    MacIntyre and Naughton (2004), pp. 77–100.

  8. 8.

    Munakata (2006b), p. 29.

  9. 9.

    See, for instance, Kawai and Wignaraja (2007), p. 2.

  10. 10.

    Data from Kawai and Wignaraja (2007), Table 1.

  11. 11.

    Ravenhill (2008b), pp. 140–163.

  12. 12.

    Lincoln (2004), p. 48.

  13. 13.

    Ravenhill (2006), p. 653.

  14. 14.

    Athukorala (2009), p. 234.

  15. 15.

    The Plaza Accord was negotiated by the governments of France, Japan, the United Kingdom, the United States, and West Germany in September 1985. Governments agreed to intervene in foreign exchange markets to effect a depreciation of the US dollar vis-à-vis the Japanese yen and the Deutschmark.

  16. 16.

    See China Free Trade Network (2013) http://fta.mofcom.gov.cn/english/index.shtml, Accessed 18 October 2013. See especially China Free Trade Network, China, Japan and ROK launched FTA Negoti [sic], FTA News Release, 7 January 2013 http://fta.mofcom.gov.cn/enarticle/enrelease/201301/11454_1.html.

  17. 17.

    Author’s calculations from data in JETRO (2008).

  18. 18.

    Hew et al. (2007).

  19. 19.

    Kim and Lee (2008), Table 5.

  20. 20.

    Ogawa and Yoshimi (2008).

  21. 21.

    Milner (1997), p. 77. For the most comprehensive account of the competing interests to which governments must respond in negotiating regional trade agreements, see Grossman and Helpman (1995), p. 667.

  22. 22.

    Milner (1997), p. 77; Grossman and Helpman (1995).

  23. 23.

    Munakata (2006b), p. 108.

  24. 24.

    A variant of this argument suggests that a regional trade agreement will be particularly attractive to companies that either do depend or could depend on a regional market to realize scale economies: Milner (1997) and Chase (2005). Although attractive as a theoretical proposition, little empirical support has been offered for such arguments. In many industrial sectors, the introduction of numerically-controlled machine tools has facilitated more flexible manufacturing, making shorter production runs more viable. Similarly, economies of scope have substituted for economies of scale. The relatively small additional markets provided by the current PTAs involving East Asian economies render such arguments implausible in this region.

  25. 25.

    Baldwin (1993).

  26. 26.

    Johnson (1982), Deyo (1987), Amsden (1989), Wade (1990), Woo-Cumings (1999), Mackie (1988), and MacIntyre (1991).

  27. 27.

    Lee (2006), pp. 184–205.

  28. 28.

    Hsueh (2006), p. 170. See also Dent (2005), p. 385.

  29. 29.

    Nagai (2003), p. 279.

  30. 30.

    Chirathivat and Mallikamas (2004), p. 37.

  31. 31.

    Hoadley (2008), p. 111.

  32. 32.

    Oyane (2003), pp. 89–116 applies this perspective to the pursuit of regional trade agreements in East Asia.

  33. 33.

    Samuels (1987) and Noble (1998).

  34. 34.

    Processing plants that import components duty-free and export the assembled product to a foreign market (usually the United States in this instance).

  35. 35.

    Solis (2003), pp. 377–404.

  36. 36.

    Manger (2005), p. 806.

  37. 37.

    Ogita (2003), pp. 220–222.

  38. 38.

    Ogita (2003), p. 244.

  39. 39.

    Sekizawa (2008).

  40. 40.

    Ando (2007).

  41. 41.

    Munakata (2006b) provides the most detailed discussion; see also Krauss (2003), pp. 307–329; Ogita (2003).

  42. 42.

    Ogita (2003), p. 244.

  43. 43.

    Munakata (2006b), pp. 117, 121. Japanese companies did not face significant economic competition in Southeast Asia (and did not face PTAs that benefited competitors). Moreover, they were able to take advantage of various duty draw-back arrangements to import components duty-free where products were destined for export to third country markets.

  44. 44.

    See, e.g., Solis (2003).

  45. 45.

    Choi and Lee (2005), p. 15. See also Park and Koo (2007), pp. 259–278.

  46. 46.

    Munakata (2006a), p. 133.

  47. 47.

    Dent (2006).

  48. 48.

    For further discussion see Ravenhill (2003), pp. 299–317.

  49. 49.

    Freund (2003).

  50. 50.

    Roy et al. (2007), pp. 155–192.

  51. 51.

    The counterpoint to the argument that smaller countries make more concessions is that the large industrialized economies are already markedly more open than those of their developing country partners, and so they have fewer concessions that they can make on a preferential basis; moreover, although the less developed economies may make more concessions, the absolute value of their gains from an agreement, given the respective size of the economies, may be imbalanced in their favour.

  52. 52.

    World Trade Organization, ‘Regionalism: Article XXIV of GATT 1994 (2)’ World Trade Organization: A Training Package www.wto.org/english/thewto_e/whatis_e/eol/e/wto08/wto8_57.htm#note4, Accessed 15 September 2002.

  53. 53.

    Commission of the European Union (1998).

  54. 54.

    In a paper on Japan’s strategy on the negotiation of free trade areas, the Japanese Ministry of Foreign Affairs suggested that the ‘substantially all trade’ criterion ‘implies that countries must achieve a standard of liberalization that compares favorably to international standards in terms of trade volume’ and notes that the NAFTA average is 99 %, while the average for the FTA between the European Union and Mexico is 97 %. It makes no reference to coverage of all sectors. See Government of Japan and Ministry of Foreign Affairs (2002).

  55. 55.

    Ravenhill (2008a), pp. 129–150.

  56. 56.

    Nippon Keidanren (2009a) and Nippon Keidanren (2009b).

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  1. Balsillie School of International Affairs, Waterloo, Canada

    John Ravenhill

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  1. School of Law Faculty of Business and Law, Deakin University, Melbourne, Australia

    Christoph Antons

  2. Max Planck Institute for Innovation and Competition, Munich, Germany

    Reto M. Hilty

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Ravenhill, J. (2015). What Drives Regionalism in East Asia—And Why It Matters. In: Antons, C., Hilty, R. (eds) Intellectual Property and Free Trade Agreements in the Asia-Pacific Region. MPI Studies on Intellectual Property and Competition Law, vol 24. Springer, Berlin, Heidelberg. https://doi.org/10.1007/978-3-642-30888-8_4

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