EAI Fellows Program Working Paper Series No.29

Author

Yves Tiberghien (Ph.D. Stanford, 2002) specializes in comparative political economy (Japan, Korea, China, and the European Union) as well as in international relations (global governance, globalization). Much of his work centers on the tensions between the pursuit of prosperity (the market) and the pursuit of democratic legitimacy.

His first book, Entrepreneurial States published by Cornell University Press in the comparative political economy series, and related articles focused on the way political leaders transformed the incentives of global capital markets into strategies of structural reforms. The result has been a variety of pathways in which countries, such as Japan, Korea, or France have reformed the post-war social contract. The book identified the crucial role played by political entrepreneurs, depending on degrees of political autonomy available to them.

Yves has been working on the puzzle of post-hegemonic advances in global governance and international law. The resulting edited book, written with Julian Dierkes, Minerva’s Rule: Canadian, European and Japanese Leadership in Global Institution-Building (forthcoming, now under review) focuses on the role played by key “Minervian” (ie, neither Mars nor Venus) powers in advancing international institutions in the fields of global environment, human security, cultural diversity, and human rights. His most recent research project focuses on the role of China on the shifting global power and governance in the next decades. See the research section of this webpage in detail.

Yves has also written several pieces on the process of corporate and financial reforms in Japan in the wake of the collapse of the bubble in 1990. In his article "Navigating the Path of Least Resistance: Financial Deregulation and the Origins of the Japanese Crisis" for example, he argues that the Japanese government chose to deregulate its financial policy, which produced the least internal political resistance, and by which the government can respond to the international pressure, but it resulted in the unpredictable bubble economy because the deregulation was without appropriate readjustment and monitoring.

His new project, "Globalization, Inequality, and Political Realignment: The Emerging Clash Between Structural Reforms and Rising Inequalities in Japan" focuses on the effects the globalization on widening economic inequality in Japan. In this project, he examines whether, how and when the inequalities have been widened as the result of the globalization, and traces the ramifications of the subsequent government's economic policies in response to it, and further the public-government interactions concerning the inequality problems.

 
This paper was submitted to "EAI Fellows Program on Peace, Governance, and Development in East Asia" supported by the Henry Luce Foundation based in New York. All papers are available only through the online database.

Abstract

This paper focuses on the crucial efforts to reform global governance and rebalance the relation between global markets and institutions through the post-2008 G20 Leaders Summit. The paper introduces a framework to analyze the G20 game through three concentric circles: a first circle of risk management and economic problem solving; a second larger circle of global institution-building; and a third circle of power transition between OECD countries and emerging power (primarily from the US to China).

To analyze these battles, the paper focuses on the roles played by the three Northeast Asian countries in the G20: China, Japan, and South Korea. What are the sources of China’s, Korea’s, and Japan’s preferences and behavior toward the G20 process? And what explains the weak degree of coordination among the three nations, despite some similarities in interests derived from fundamental balance of payment positions and creditor positions toward the US?

The paper analyzes the domestic sources of policy-making toward the G20 in each of the three countries and emphasizes two key variables: the domestic balance of power between bureaucratic actors (and related coalitions); and the autonomy of central political leadership. The paper argues that North East Asian regional cooperation so far is under-developed due to the politicization of the agenda and the lack of will to act on underlying convergence preferences. But the potential for coordination around shared interests is great in the coming years.

Updated Outline

1. Context- Global Governance

2. The G20 game: three concentric circles and a triadic core

3. Weak Regionalism: the Gap Between Underlying Preferences and Official Positions

4. Thematic Review: Objectives, Constraints, and Domestic Forces in each Country

5. Tactical Positioning: Seoul 2010, Paris and Nanjing, 2011

Introduction

The world stands at a critical juncture. Global markets have expanded to unprecedented levels and now encompass an unprecedented number of actors. Global trade, global production networks, and global finance have now reached a scale, degree of complexity, and speech of change that they have become harder to model or predict. The global financial crisis of 2008 and the ensuing global economic crisis have revealed the acute need for global coordination at the top. Global markets require global institutions that operate within a larger anarchic international system. Today, the future of the global economy is plagued by uncertainties about the necessary underlying structure of global governance. We have reached a time of paradigm shift when both the norms and the institutions that have sustained global economic forces for fifty years are running out of steam and in need of a major upgrade.

In this context, the new G20 Leaders Summit has emerged since November 2008 as the most systematic effort since 1971 to rebalance the relation between market and governance and to establish an integrated structure of global governance. It has also become the key focal point of a new geopolitical “Great Game”. At stake is not just the long-term sustainability of both the global financial and global trading systems and the balance between these two systems, but also the distribution of gains among nations and the transition of power from the US (and to a secondary extent Europe and Japan) to China and other emerging powers (India and Brazil).

This explains the surprising ability of the G20 process to exert such a gravitational pull over international relations in 2010. Suffice it to witness the intense diplomatic maneuvers in the two months leading to the Seoul Summit of November 2010. For example, the Beijing Summit between Russia and China, the October trip of Chinese Prime Minister Wen Jiabao to Europe, followed by the highly strategic visit of Chinese President Hu Jintao to Paris and other European countries early November, of US President Barack Obama’s journey to India, Indonesia, and Japan in November all had significant focus on the G20 process. While the US was shoring support among India, Indonesia, Japan, and possibly Korea for its effort to force China to move on its currency, China was developing a strong strategic link with European powers as way out of the US coalition. Every summit was abuzz with hints of great bargains and coalition building with an eye to the G20 summit. The Seoul Summit was particularly salient, because of the strategic ability of Korea to act as a mediator between the US, China (and Japan) and between developed and developing countries, thus enabling the G20 process to move forward in a creative and vigorous way (Alexandroff 2010; Kirton 2010; McDonald 2010; Sohn et al. 2010).

This paper focuses on a crucial piece of the G20 search for global governance: a better understanding of the roles and preferences played by the three key Northeast Asian actors: China, Japan, and South Korea. Naturally, the three countries have a very different standing in the G20 big game. China has emerged as a global giant with the potential to replace the US as the preeminent global economic power around 2025.

Its size and its ambitions are global by nature. For that reason, the US has toyed with the idea of a strong G2 condominium since the years of Hank Paulson as US Treasury Secretary. Yet, because such a condominium reduces China’s options and makes it vulnerable to the still dominant US power, China has consistently refused getting locked into the G2 model. It is in part this refusal that gave the opening for the upgrade of the G20 in late 2008. As for Japan and Korea, they occupy a more similar position of middle powers with an anchor in the OECD, even though Japan can muscle much more financial power and owns almost as much US debt as China. Neither Japan nor Korea can aspire to global domination. Both thrive more as part of larger coalitions that can include the US, or Europe, or possibly China. As part of the OECD, they have powerful linkages to the rest of the OECD and great know-how, particularly Japan. Yet, as part of the East Asian economic sphere, they have deep economic ties and interdependence with China...(Continued)