Newly Emerging Economic Order in Northeast Asia
and KoreaㆍChinaㆍJapan
Economic Cooperation
by
Choong Yong Ahn
President
Korea Institute for International Economic Policy
Email Address: [email protected]
Phone: (82)(2)3460-1100~2, Fax (82)(2)3460-1111
1. Globalism and Regionalism hand in hand
<Table 1 : Number of FTAs>
‘55-60
‘61-70
‘71-80
‘81-90
‘91-95
‘96-2000
01-03.05
New
3
3
15
10
34
91
28
Cumulative
3
6
21
31
65
156
184
Source: WTO CTA
1
2. (Bergsten,
TRIPARTITE
REGIONALISM
2000)
1) EU: Euro and preparing for final stage of full integration
2) NAFTA: Expanding to FTAA by 2005
3) East Asia: Newly emerging cooperation movement
• ASEAN +3 framework
• Korea + China + Japan framework
4) Northeast Asia: Renewed attention as a Natural Economic Territory
(Scalapino 1991, 2002)
5) Purpose of the paper: Korea - Repositioning in the wake of rapidly
changing economic map in Northeast Asia
2
3. What Factors Caused the Northeast
Asian “Integration Movement?”
1) Asian Financial Crisis (1997) and follow-up Chiang Mai Initiative (2000)
2) China emerging as world economic power and accession to WTO
3) Mutual learning from development and restructuring experiences
(Ahn 2000)
4) FTA proposals among regional economies:
Korea: • Proposal of East Asian Free Trade Area
• Launching official Korea-Japan FTA study and subsequent negotiations
Japan: Japan-Singapore economic partnership (FTA +) and FTA proposal
with rest of ASEAN
China: China-ASEAN proposal within next 10 years
3
3. What Factors Caused the Northeast
Asian “Integration Movement?” (continued)
5) The largest “Cyber Economic Zone” is soon to be created
• Korea: highest penetration ratio in broadband Internet access
• China: IT sector is expected to grow 30% per year
• Japan + China + South Korea + Taiwan
6) Inter-Connected Ecological Economies
Without addressing regional environmental problems properly,
regional economies in Northeast Asia are likely to face “sheer survival
issues.”
4
4. Deepening Intra-Regional Trade and
Investment
1. In the absence of a formal free trade treaty, intra-regional trade
and investment are on the rise by sheer market drive.
-Geography and Trade (Krugman, 1991)
2. Intra-regional trade intensity of Northeast Asia: Comparable to
levels seen in NAFTA or the EU.
3. Northeast Asian dynamism is likely to come from the creation of
intra-regional demand due to the limits of the U.S. market.
4. Intra-regional capital flows (greenfield FDI and portfolio investment)
are on the rise.
5. WTO rule-based China is likely to trigger another surge of FDI to
China from neighboring economies.
5
Table 2: Intra-regional Trade Intensity Index for Selected
Regional Groups
Regions/Ye
ars
1980
1985
1990
1995
1996
1997
1998
1999
2.6
2.3
2.3
2.1
2.2
2.2
2.3
2.4
3.0
2.9
2.8
2.3
2.4
2.4
2.6
2.5
ASEAN-10
5.1
6.1
4.6
3.8
3.8
3.8
4.3
4.1
NAFTA
2.1
2.0
2.1
2.4
2.4
2.3
2.3
2.3
European
Union-15
1.5
1.6
1.5
1.7
1.7
1.7
1.6
1.7
MERCUSOR
6.6
4.9
9.7
13.3
14.4
14.0
14.2
14.7
East Asia15 including
Japan
Emerging
East Asia14
Note: (a) The trade intensity index is defined as (Xij/Xi.)/(X.j/X..) where Xij represents exports from region i to
region j, Xi. represents total exports from region i, X.j represents total exports from the world to region j (or total
imports of region j), and X.. represents total world trade. In the table, the index is defined only for countries
within the same region, so that i=j.
(b) East Asia-15 includes Emerging East Asia-14 and Japan.
(c) Emerging East Asia-14 includes ASEAN-10, China, Hong Kong, Korea and Taiwan.
Source: Masahiro Kawai (2002) in Look Japan, July, “Regional Economic Cooperation in East Asia—Early Days,”
p. 15, Look Japan, July
6
Table 3: Share of World Trade by Major Economic
Region
Region
1985
1990
1995
2000
EU
54.5
41.1
38.5
35.2
APEC
22.7
39.9
43.6
47.1
NAFTA
11.6
18.0
18.2
22.1
8.5
13.5
13.3
15.5
10.1
20.2
23.8
27.4
2.0
4.5
6.6
6.0
8.1
15.7
17.2
18.2
United States
East Asia
AFTA
Northeast Asia
Source: IMF (Various issues), Direction of Trade Statistics Yearbook.
7
Table 4: East Asian Trade by Economic Region
(Unit: Million US$ and %)
1985
1990
Ratio
Value
1995
Ratio
Value
2000
Region
Value
Ratio
Value
EU
79,967
11.6
219,699
15.0
369,287
14.0
421,249
13.4
NAFTA
195,568
28.5
349,990
24.0
551,507
21.4
630,312
20.1
East Asia
256,406
37.3
588,477
40.3
1,320,876
51.2
1,369,675
43.7
World
687,129
100.0
1,430,969
100.0
2,577,935
100.0
3,137,322
100.0
Source: IMF (2001), Direction of Trade Statistics Yearbook 2001.
8
Ratio
Table 5: FDI Matrix among Major Economic Regions or Country
Inbound FDI (%)
1986
East Asia
Outbound FDI (%)
East Asia
Sub-total
Sub-total
ANIEs
ASEAN4
China
Japan
America
EU
World
Total Value (US$ million)
ANIEs
Japan
ASEAN
U.S.A
China
27.8
26.6
0.8
0.3
25.8
15.8
11.4
100.0
5.9
4.4
0.5
0.8
35.8
29.6
15.4
100.0
17.2
15.9
0.1
0.1
30.3
11.1
11.7
100.0
61.7
61.1
0.6
0.0
10.7
16.8
6.9
100.0
6.1
6.1
n.a.
n.a.
51.9
12.6
-
21.3
0.0
60.1
-
5,889
1,876
2,137
1,875
940
34,091
Inbound FDI (%)
1996
East Asia
Outbound FDI (%)
East Asia
Sub-total
Sub-total
ANIEs
ASEAN4
China
Japan
America
EU
World
Total Value (US$ million)
ANIEs
Japan
ASEAN
U.S.A
China
37.1
34.6
2.4
0.1
6.3
3.5
2.2
0.6
20.6
17.9
2.6
0.1
71.6
69.6
2.0
0.0
6.4
6.6
0.1
0.3
2.0
2.0
0.0
n.a.
16.5
12.2
12.7
100.0
24.1
38.8
21.8
100.0
20.4
10.8
15.7
100.0
8.3
16.2
5.7
100.0
48.0
31.2
100.0
8.6
0.0
76.6
100.0
108,417
8,968
61,928
37,521
3,837
60,848
Inbound FDI (%)
2000
East Asia
Outbound FDI (%)
East Asia
Sub-total
Sub-total
ANIEs
ASEAN4
China
Japan
America
EU
World
Total Value (US$ million)
Source: JETRO White Paper
ANIEs
Japan
ASEAN
U.S.A
China
34.7
22.3
3.8
8.6
28.8
11.0
0.0
17.0
30.8
15.4
15.0
0.4
52.7
52.7
0.0
0.0
1.3
1.3
-
0.7
0.7
0.0
0.0
10.0
10.7
55.6
100.0
7.1
9.8
6.4
100.0
18.8
20.0
40.0
100.0
7.2
10.8
2.9
100.0
0.0
32.4
15.1
100.0
3.6
0.0
71.8
100.0
166,842.9
83,767.1
42,361.8
40,714
28,276
281,115
9
5. Regional Economic Cooperation in
Progress
1) Chiangmai Initiative
2) Asian Regional Bond Market
3) Various FTAs
•
•
•
•
•
•
•
AFTA
China + ASEAN
Japan + ASEAN
Japan + Singapore
Korea + Japan
Korea + Singapore
Korea + China + Japan FTA
10
5. Regional Economic Cooperation in
Progress (continued)
4) Trade Facilitation Measures
• e-APEC
• e-Customs
• smart border movement
5) Agricultural sector: Most critical component to create
economic integration
6) Safe Trade
• STAR
• Anti-terrorism measures
11
6. Promotion of “Northeast Asian
Economic Community”
1) Northeast Asia is last frontier of the 21th century global
economic dynamism
2) Win-Win framework
3) Benchmarking EU and NAFTA process
4) Mutual Trust Building
5) Inducement of North Korea into open door policy regime
6) Commitments of political leadership
12
References
Ahn, Choong Yong, “The Newly Emerging Economic Order in Northeast
Asia and Vision of Korea as a Business Hub,” Joint-U.S Korea
Academic Studies, Vol.13, 2003, Korea Economic Institute and Korea
Institute for Economic Policy.
Ahn, Choong Yong, “A Search for Robust East Asian Developments
Models after the Financial Crisis: Mutual Learning from East Asian
Experiences,” Journal of Asian Economics, Vol.12, No.3, 2001.
Ahn, Choong Yong, “Financial and Corporate Sector Restructuring in
south Korea: Accomplishments and Unfinished Agenda,” The
Japanese Economic Review, Vol.52, No.4, 2001.
Bergsten, F. “Toward Tripartite World”, Economist, July 15, 2000.
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