East Asia: An Ever Closer Union?

East Asian integration has been mainly an informal “market-driven” process with weak institutions. The proliferation of global and regional risks requires a much more intensive approach, but it is unlikely that countries in the region would move towards a European Union-style model with more active institutions and shared political power. But for the preferred “bottom-up” integration to deepen, led by business and civil society, political leaders must resolve historical enmities that could hamper closer cooperation.


“We must look at the big picture and not let the baggage of history deter us.”

- Najib Tun Razak, Deputy Prime Minister of Malaysia

“We should make an effort to better understand each other’s history and customs to increase mutual understanding. If we hang on to the past, we are only impeding each other’s progress.”

- Yun Jong-Yong, Vice-Chairman and Chief Executive Officer, Samsung Electronics, Republic of Korea; Co-Chair of the World Economic Forum on East Asia


Whenever East Asian leaders gather to talk about regional integration, the European Union model invariably comes up in the discussion. A single market with a single currency – at least for a good part of it; common policies and standards; centralized administrative and legislative institutions though without the fusion of ultimate political power and sovereignty. This is not what Asians want, so the accepted wisdom goes.

Asia’s integration gambits have been lowest-common-denominator efforts supported by weak institutions. Perfunctory ministerial meetings and summits have driven the process. As in ASEAN, the stress has been on cooperation, abstract goals such as peace and amity, and “non-intervention”, any hint of “Community” building dismissed as premature.

At the World Economic Forum on East Asia, participants challenged that traditional passivity. Could the region aspire to something more? To be sure, forging a common Asian or even East Asian identity would be as difficult if not more so than for other regions. Europe took decades to get where it is today. And even then, attempts to create a constitutional underpinning for the European Union have stalled, revealing how many young Europeans now value their national identities over a regional one.

Crises of course have a way of forcing mindsets to change. The financial meltdown of 1997-98, 9-11 and the terrorist attacks in Bali and elsewhere, the outbreaks of the SARS virus and avian flu, and cross-border problems such as the haze from forest fires in Indonesia and maritime piracy on the Straits of Malacca – all these challenges have highlighted the deficiencies of the region’s minimalist approach to integration. The emergence of China as a trading powerhouse and investment magnet has raised the stakes.

As these pressures of globalization and competition have mounted, Asians have begun to question old notions. With global and regional risks multiplying, requiring global and regional solutions, the implication for East Asia’s integration is clear: the good-fences-good-neighbours model is unsustainable.

But the region is still trying to figure out how to turn the neighbourhood into a community. Overlapping regionalization options have proliferated in recent years, from ASEAN and its flexible formats to last year’s East Asian Summit that excluded the US. The ASEAN Free Trade Area (AFTA) is forging links with India, China and the rest of North Asia, while APEC is keeping alive its grand vision of free and open trade and investment among its 23 members, which together account for about half of global trade, by 2010 for developed economies and 2020 for developing ones. The number of bilateral free trade arrangements across the region has increased as the Doha Round of global trade talks have flagged.

That meeting participants identified the need to address the absence of regional institutions to discuss energy, security and environmental issues as a top priority for the region when APEC and ASEAN have long offered such forums indicates a lack of awareness. “We have not been effective in communicating the work we do,” Ong Keng Yong, Secretary-General, ASEAN, Jakarta, acknowledged. Added Tran Trong Toan, Executive Director, APEC Secretariat, Singapore: “We don’t shout out loudly about what we have.”

Yet the participants’ selection was also a telling rebuke of integration performance so far. When it comes to regional economic integration, said Hellmut Schutte, Dean, Asia Campus, INSEAD, Singapore, “we have to be honest: for 40 years, ASEAN hasn’t been very successful. We are seeing the end of ASEAN. The year 2020 will not be a target [for industrialization]. ASEAN will be buried beforehand.” An extreme view perhaps, but indicative of the frustration among some participants and the urgent need for more intensive communication among East Asian countries.

But EU-style integration cannot be forced, some panellists warned. The soft-institution approach with weak monetary integration would prevail, Indonesian Trade Minister Mari Pangestu predicted. Because of its “honest broker” role between the major economies of North Asia and India, “ASEAN will be in the driver’s seat.” East Asia, Pangestu reckoned, would continue to pursue “market-driven” integration, what Sadako Ogata, President, Japan International Cooperation Agency, Japan, called the “bottom-up” approach. Business, civil society, and other “non-state actors” will push regionalization forward through the multitude of cross-border commercial and cultural connections and exchanges that take place every day. Indeed, for Asia’s growing number of globally integrated enterprises such as Samsung, borders are already meaningless.

There is still a role for governments in pushing integration forward, said Najib Tun Razak, Deputy Prime Minister of Malaysia. Common challenges such as maritime piracy and migration require cooperation. Migration, for example, will have to be part of the solution to the problem of ageing demographics in Japan. “We must look at the big picture and not let the baggage of history deter us,” Najib concluded.

Yet heightened tensions between Japan and its neighbours Korea and Japan, as well as concerns about potential conflict on the Korean Peninsula and across the Taiwan Strait, could easily derail the East Asian integration train. “We should make an effort to better understand each other’s history and customs to increase mutual understanding,” said Yun Jong-Yong, Vice-Chairman and Chief Executive Officer, Samsung Electronics, Republic of Korea, and a Co-Chair of the World Economic Forum on East Asia. “If we hang on to the past, we are only impeding each other’s progress.”