EPIK Journals Online
Economics of Community Building (Vol. 1 Iss. 02)
Financial Community Building in East Asia: The Chiang Mai Initiative
2010 EPIK Young Leaders Essay Competition Award-Winning Work (1st Prize)
Author: Yoon Jin Lee, Harvard University
Released Date: August 2010
Introduction:
During the turmoil of Asian Financial Crisis 1997-1998, when Japan contributed a quarter of the emergency package for Thailand while the U.S. pledged nothing, the Japanese government assessed that an Asian Monetary Fund would be conceivable. The Asian Monetary Fund (hereafter, AMF) that the Japanese Ministry of Finance envisaged was a $100 billion fund with a regional financial surveillance system and emergency loan facility. Yet, when Japan delivered the AMF proposal officially, in November 1997, American and Chinese opposition quickly shot the idea down on the basis that such a fund would be unnecessary with the IMF in place.
Nonetheless, since the passage of Chiang Mai Initiative in May 2000, when Finance Ministers of thirteen ASEAN+3 (ASEAN plus China, Japan, and Korea) countries agreed to establish a network of bilateral currency swap arrangements, the level of financial cooperation has been growing rapidly in East Asia. Though it is commonly understood that shared experiences from the shock of Asian Financial Crisis is what motivates financial cooperation in East Asia today, constructivists go further and claim that a new regional identity – born from those shared experiences – is what drives community building efforts in East Asia’s financial domain. Some system-centered international relations theorists argue that hegemonic rivalry between China and Japan is what propels the initiative forward, while others stress that examination of individual actors is critical in solving the cause of increasing financial cooperation. But which actor, among multiple regional parties, is key? This paper finds that China’s self-interests and proactive attitude towards community building in East Asia has been the primary catalyst of regional financial cooperation.
Another equally important step in understanding the past decade of community building in East Asia’s financial realm is its evaluation. Many critics of the initiative point out the fact that only Indonesia took advantage of Chiang Mai Initiative, when the latest global financial crisis hit East Asia in 2008. In fact, Japan, Korea, and Singapore have arranged temporary, bilateral currency swap deals with the U.S. Federal Open Market Committee. So is Chiang Mai Initiative truly “Much Ado About Nothing”, as John Ravenhill coins East Asian regionalism? By scrutinizing the reasons behind non-utilization of Chiang Mai Initiative, and by inspecting long-run financial indicators of a sample of ASEAN+3 countries, this paper finds that Chiang Mai Initiative is more of a symbolic significance, which nevertheless promotes regional financial security, constructive and balanced integration of China into the region, and union of Northeast Asia and Southeast Asia into one East Asian region – dispatching powerful international repercussions. This paper also briefly provides some suggestions to make the initiative truly effective.
The rest of this paper is organized as follows: Section 2 briefly outlines the progress of Chiang Mai Initiative over the last decade; Section 3 investigates several factors driving forward the financial community building in East Asia; Section 4 evaluates the outcome of financial community building efforts; and Section 5 concludes.
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Key Words: Chiang Mai Initiative, China, Japan, Korea, ASEAN, U.S Interest
How to Successfully Integrate China into the World Economy: China-Specific Safeguards and its Future Implications
2010 EPIK Young Leaders Essay Competition Award-Winning Work (2nd Prize)
Author: Mimi Ahn, Yonsei University
Released Date: August 2010
Introduction:
On 12 March 2010, the WTO Dispute Settlement panel was established as a response to China’s request on the claims against the U.S. and their imposed safeguard measure exclusively towards certain Chinese tires. Normally, “safeguard” under the WTO refers to a trade protectionist measure for other Member states to either apply higher tariff or higher quota only for the Chinese imports. China-Specific Safeguard (hereinafter CSS) is a much narrower protectionist measure in which it allows other Member states to apply the terms specifically to the Chinese imports. CSS was part of the agreement made between China and the WTO Members which can be found in Section 16 of the Accession Protocol of China.
The dilemma here is that while international rules exists for the purpose to treat states fairly, in fact, applying the same rules to states with different conditions can be problematic. This paper seeks to find the proper application of economic trade law to enhance the global community building. In other words, how can it be interpreted in such a way to justify, what it seems so blatantly discriminatory, that CSS does not create trade diversion or bias against the Chinese imports? The proper analysis in the legitimate usage of such country-specific trade law is of vital importance as it is the trend of the international community to expand the role of states with notably different economic conditions such as the BRICs.
The paper will be divided into three sections. First, it will present the precedence of such ad hoc escape clause of Poland that is similar in trait with the CSS. It will then provide descriptive analysis by comparing the WTO Safeguard Agreement and GATT Article XIX with the CSS. This section points out that the kind of ad hoc escape clause has been practiced under the WTO before and that the implementation of such safeguard is largely dependent upon the interpretation of the applicable domestic laws. Second part of the paper will closely look at the current dispute between U.S and China. This part will especially pay more attention to the U.S. procedural methods of how they reached conclusion to implement the protection measure and how the U.S. International Trade Commission (hereinafter USITC) is designed in favor of the domestic protectionism. Third section of the paper will suggest alternative ways to approach CSS by applying the EU trade remedy policies as an example. The distinction between the USITC and EU trade law will clearly indicate the need for U.S trade law to come to conformity with the WTO and EU trade law.
This paper will thus argue that a country-specific measure will not necessarily result in trade distortion and that the matter of whether the existence of CCS brings adverse effect to trade or not will be largely dependent on how each Member’s domestic trade law is designed in a way to assess the requirements for implementing CSS.
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Key Words: China-Specific Safeguard, ad hoc escape clause, tire dispute between U.S and China