EAI Asia Security Initiative Working Paper No. 21

Author

Seungjoo Lee is a professor of political science and international relations at Chung-Ang University (Seoul, Korea). Professor Lee received his Ph.D. in political science from the University of California at Berkeley. Professor Lee has previously taught at the National University of Singapore and Yonsei University. Professor Lee is the co-editor of Northeast Asia: Ripe for Integration? (2008) and Trade Policy in the Asia-Pacific: The Role of Ideas, Interests, and Domestic Institutions (2010). His recent publications appeared in various journals such as Comparative Political Studies, The Pacific Review, Asian Survey, and Korean Political Science Review. His current research investigates the changing nature of East Asian regionalism, the evolution of global FTA networks, and the transformation of the East Asian countries’ developmental strategies in the age of globalization.

I. Introduction

East Asia as a region is underinstitutionalized compared to Europe and North America, and since the 1990s, various observers with different theoretical underpinnings have asked why this is so. First, highlighting the lingering impact of the security system created in the early Cold War period in East Asia, neorealist explanations argue that although economic interdependence rapidly increased in the post–Cold War era, the hub-and-spoke bilateral security system centered around the United States has still retarded the formal institutionalization of East Asian regionalism (Acharya 1991; Hemmer and Katzenstein 2002; Aggarwal and Koo 2007). In this view, the interests of the United States as an offshore player have broadly defined East Asian regionalism’s contours (Crone 1993; Grieco 1997). In deference to U.S. preference, East Asian countries have largely chosen a regional forum with wide geographic scope and weak institutionalization, creating an “organizational gap” in the region (Calder and Ye 2004).

Second, noting the widespread presence of production networks in the region, another group of scholars contends that East Asian countries have largely preferred informal networking in the region rather than transforming highly advanced economic regionalization among them into a formalized regionalism (Doner 1997; Katzenstein 1997). With this backdrop, Japan has been content with “leadership from behind” in the face of neighboring countries’ suspicions regarding the Japanese initiative in building up regional institutions.

Third, constructivist explanations argue that the weak institutionalization of East Asian regionalism has to do with East Asia’s peculiar legal culture and underdeveloped concept of community (Kahler 2000). In the case of ASEAN, for instance, the norm of noninterference is a persistent obstacle to deeper institutionalization of that organization (Jones and Smith 2007; Haacke 2003). It is said that whether East Asian countries will be able to institutionalize regional cooperation hinges upon their ability to “internalize and localize” concepts and norms of community imported from Western countries (Acharya 2004).

Whereas prior explanations have aptly pointed to the primary nature of East Asian regionalism, it is also undeniable that East Asia has demonstrated a greater appetite for the formal institutionalization of regionalism since the first part of the new millennium. After its accession to the World Trade Organization (WTO), China has turned to East Asia to promote regionalism for economic and strategic reasons.

Responding to this Chinese initiative, Japan has been anxious to fortify its regional institutional leadership, although it has been ambivalent about whether and how to involve the United States. ASEAN, with long experience in building up institutions and self-confidence measures, has also attempted to reestablish itself as a central locomotive for institutionalizing East Asia.

It is particularly noteworthy that East Asian countries’ interest in the institutionalization of regionalism has grown under the changing regional landscape, such as the relative decline yet continued presence of the United States and the rise of China. Under these structural shifts, East Asian countries are actively forging regional institutions, showing no signs of hard balancing. A number of regional institutions have developed with different geographical scope and functional needs, particularly since the 1990s, while other institutions, such as Association of Southeast Asian Nations (ASEAN), Pacific Islands Forum (PIF), and Pacific Economic Cooperation Council (PECC), find their origins in earlier periods (see [FIGURE 1]). The Asian financial crisis was a major catalyst. ASEAN+3 (APT) was created in 1997 in the wake of the Asian financial crisis as East Asian countries were frustrated with the IMF’s (mis-)handling of the crisis with the backing of the U.S (Stubbs 2002). At the same time, the Asian financial crisis pushed East Asian countries to search for other institutional alternatives because they were not content with the inability of existing regional institutions such as ASEAN and APEC to deal with the crisis. The APT became a major institutional platform through which East Asian countries could sustain and enhance cooperation in a variety of areas, such as finance. In 2005, with the inclusion of new members such as India, Australia, and New Zealand, the East Asia Summit (EAS) came into being as an overarching institution to nurture common views on regional issues. While the EAS could be conceived as an institutional evolution from the APT, its creation was a reflection of Japan’s and other countries’ worries over the increasing influence of China in regional affairs.

The East Asian countries’ push for deeper institutionalization has taken place in specific issue areas as well. In trade, East Asian countries have actively undertaken negotiations for free trade agreements (FTAs) in the first decade of the new millennium. As of 2010, East Asian nations were involved in a total of 79 deals. Out of these 79, 33 FTAs are currently in effect and 5 FTAs have been signed. The five largest economies in East Asia have extensively engaged in multiple FTA deals over the last decade. Singapore, which is the most enthusiastic about FTAs in East Asia, has concluded 12 FTAs, of which 10 are in effect and 2 are signed. In addition, 5 more are under negotiation and 2 have been proposed.

[FIGURE 1] Institutional Architecture in East Asia

Source: Adapted from Dent (2007) and Asian Development Bank (2008).

In finance as well, in the aftermath of the Asian financial crisis, East Asian countries were successful in eliciting institutionalized cooperation for liquidity provision in the event of any future crisis by creating the Chiang Mai Initiative (CMI) in May 2000, or networks of bilateral currency swap agreements (Grimes 2006; Pempel 2006; Amyx 2008; Henning 2009). Although the CMI initially started with limited amounts of money and lending provisions congruent with IMF regulations, East Asian countries steadily expanded the CMI’s swap line to $90 billion by 2009. Subsequently, in May 2009, East Asian countries facing the global financial crisis once again succeeded in elevating the CMI to the Chiang Mai Initiative Multilateralization (CMIM). It is said that the CMIM, with a collective centralized reserve fund and a single contractual agreement, has the potential to become an Asian Monetary Fund (Kawai 2010).

What is the driving force behind these new dynamics of institutionalizing East Asia? I argue that the logic of institutional balancing explains East Asian countries’ heightened interest in regional institutionalization. The steady progress of institutionalization has been made possible because major countries in East Asia have become both interested in institutionalizing the region and tolerant of other countries’ preferences for regional institutions...(Continued)