The Politics of Economic Regionalism: Explaining Regional Economic Integration in East Asia

The Politics of Economic Regionalism

Author(s): Kevin G. Cai

ISBN: 978-0-230-57654-4

Publisher: Pallgrave Macmillan Ltm

Year: 2010

Price: $84.00

Reviewed by Babyrani Yumnam, Ph.D. student in Sociology, Binghamton University, State University of New York, United States.

What led to economic regionalism in East Asia? Was it purely economic interests or political motivation that led the East Asian nation-states to intensely pursue regionalism during the mid-1980s? What factors facilitated or prevented a successful model of East Asian regionalism? How is it different from other forms of regionalism such as that in Europe, Latin America or Africa? Kevin G. Cai’s book is a comprehensive assessment of the why’s, what’s and how’s of East Asian economic regionalism.

Tracing the historical development of the region, particularly during the post-World War II and post-Cold War years, Cai looks at these periods as the formative years of East Asian economic regionalism. The relative decline of US hegemony, increasing interdependence within the inter-state system, and rapid growth of countries like Germany, Japan and the East Asian NIEs weakened the influence of liberalist ideology on national economic policies, thereby making the 1980s a prime period for emergence of economic nationalism. From the 1950s throughout the 1960s and 1970s, these conditions gave rise to the substantially transformed global economic order of the 1980s and 1990s. The new economic order that emerged was no longer based on US-led multilateralism but influenced by a multi-polar structure of “global governance” (p.63), especially the growing influence of the EU, a fast-growing China and possibly India too. He however maintains that the US continues to play a dominant role in the world-economy, though no longer hegemonic. Early developments in the 21st century highlight further diffusion of power as embodied in the emergence of institutionalized alliances like the G20, (G8)+5 and proposals for formation of the L-20. In addition, Cai also notes the growing inequality/disparities in the distribution of the benefits of globalization as a simultaneous development of the emergent global economic order.

Based on these historical developments in the world economy as well as their theoretical interpretations (economic nationalism, liberalism and Marxist political-economy theories such as the Dependency and World-systems theories), Cai’s analytical framework starts with two questions: why do nation-states move towards regionalism, and why does it take different forms in different regions? He identifies four assumptions bearing relation to the “global/structural, regional and national factors” (p. 32) and uses them to plot variables on a regionalism-multilateralism continuum. The factors he takes into account are: (1) regionalism is dependent on both external (economic competitiveness in the global economy, decline of hegemonic power, increasing regionalism elsewhere) and internal (domestic economic interests, national economic policies) imperatives, (2) existing regional and national conditions (economic, political and historical) influence the levels and forms of regionalism, (3) these differences in national and regional conditions give rise to different forms of regionalism in different areas/regions, and  finally, (4) these forms of regionalism are never constant and may evolve into another different form, depending on those factors cited above, but not limited to them. For Cai, the “synthetic” analysis (p.37) that emerges from the dialectics between these factors illustrate and explain the conditions under which regionalism developed during the 1980s and whether it was either hard-closed or soft-open (italicized in book).This graphic model, therefore, is not an exclusive one.

Thus, depending on these factors, different regionalist patterns picked up, particularly after mid-1980s in Europe, North America, Latin America, Africa and East Asia. In East Asia, there was a growing concern over economic regionalism and protectionism in Western Europe and North America (the largest markets for East Asian manufactured goods). Meanwhile, increases in intra-regional trade (particularly between Japan, China, Hong Kong, Taiwan and South Korea) and FDI flows, development of economically complementary regional production networks based on comparative advantages, and a growing consciousness of cultural unity led to institutionalization of regional economic relations. This intra-regional integration came to be seen as an alternative to the dependency on the European and American markets. Cai is optimistic that the emergent new regionalism, based on complex interdependence in the post-hegemonic world order, could be the new means for “global governance”, thereby supplementing multilateralism in minimizing conflict between states and establishing a multilateral system of “global liberalization” (p.72) As a “mid-way” (p.90) approach, this new regionalism could help nation-states to enhance their economic competitiveness, while at the same time, reducing the negative effects of economic regionalism. However, he also points out the factors that prevent the successful organization of the region i.e., politically sensitive issues between China and Taiwan, North Korea-South Korea divisions, a possible China-Japan power struggle, unpleasant experiences of Japanese colonialism, and above all, the lack of a regional hegemonic power due to which there is a proliferation of bilateral trade agreements. Also important is the region’s continued dependence on external markets and US’s military presence in the region.

For Cai, the difference between European regionalism and East Asian regionalism is that the latter developed under the historical conditions of the post-war and post-Cold War years and therefore do not have the tradition as well as experience of institutionalized regional integration. Again, the EU is a supranational regional governance framework while the regional groupings in East Asia, for example ASEAN, are regional inter-governmental cooperations organized around certain operational principles. Thus, at best, East Asian regionalism remains a soft-open (un-institutionalized and non-discriminatory) model of regional integration, motivated and driven mainly by economic factors; in East Asia, geo-politics remains separate from geo-economics.

Kevin Cai’s book takes off from where his earlier book ‘The Political Economy of East Asia: Regional and National Dimensions’ (2008) ended. His earlier observation of East Asia’s growing economic prowess, relative decline of US hegemony and emergence of heightened regional cooperation in East Asia is wonderfully extrapolated in this book. The intent of his analysis is to provide an understanding of East Asian regionalism, and also serve as a directive for decision-makers in East Asia to try and change the course of regional integration that is still evolving.

However, the framework he developed suffers from a basic lacuna – that of deducing the historical conditions (that influenced regionalist tendencies) to causal relationships between variables. This gives a reductionist character, despite the argument that these variables are in a dialectical relationship, to an otherwise well-documented argument. Secondly, the argument that increasing globalization intensified inter-state economic interdependence and contributed to unequal distribution of international “public goods” (p.17) would have been a richer one had he also taken into account the processes of capital movement and production relocation from industrialized core nation-states to peripheral nation-states where cheap labor is in abundant supply. The lack of this argument stems from the discussion of world-systems theory only in narrow methodological terms i.e., in terms of the unit of analysis as compared to that of economic regionalism or liberalism. Also, Cai does not say much about how the world-systems theory provides a perspective on interpreting economic regionalism.  Finally, his optimism about the potential of East Asian regionalism to change the geopolitical balance in the world economy seems to be a little over-enthusiastic when seen in the light of the region’s continued and deepening dependence on American and European markets and reliance on US military presence.

Nevertheless, Kevin Cai’s book is an important contribution towards understanding the current developments in the region, more so since the region has been projected as the next locus of power to emerge from the current economic and leadership crises in the world-economy. It would be of immense help not only to scholars and researchers who have special interest in economic regionalism but also for policy/decision-makers, as was Cai’s aim in writing this book.

Reference:

Cai, Kevin G. 2008. The Political Economy of East Asia: Regional and National Dimensions. London: Palgrave Macmillan.