Asia's Post-Crisis Regionalism: Bringing the State Back in, Keeping the (United) States Out Author(s): Paul

Bowles Source: Review of International Political Economy, Vol. 9, No. 2 (May, 2002), pp. 230-256 Published by: Taylor & Francis, Ltd. Stable URL: . Accessed: 02/10/2013 21:05
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Reviewof International PoliticalEconomy 9:2 Summer 2002:230-256

RJ outledge
Taylor &FrancisGroup

Asia's post-crisis regionalism: bringing the state back in, keeping the (United) States out
Paul Bowles'
University of Northern British Columbia ABSTRACT The Asian financialcrisishas significantlychangedthe way in which regionalism in EastAsia is takingplace. Priorto the crisis,regionalismin the area was noted for its relativelack of formalinstitutions;many analysesstressed the role of private businesses in fostering a 'regionaleconomy'. Post-crisis regionalismis being led by the state and encompassesboth monetaryand tradedimensions.The reasonsfor this changeare analysedand the regional policies of China and Japanexamined. The spur to post-crisisregionalism is argued to have been provided by a desire to limit the influence in the region of the US and the internationalfinancialinstitutions. KEYWORDS Regionalism;Asian financialcrisis; China;Japan. 1 INTRODUCTION The 1997 financial crisis has proved to be a turning point for regionalism in Asia.2 As Higgott (1998: 333) astutely observed soon after the crisis, 'the political manifestations of these events [the financial crises] will linger long after the necessary reforms have been introduced to return at least a semblance of economic normalcy to the region'. One significant political manifestation has been the emergence of a new form of regionalism in Asia as indicated by the emergence of regional monetary cooperation and by proposed sub-regional trade agreements, developments which signal sharp changes in direction for the region. Chameleon-like in its qualities throughout the past century, regionalism has been transformed once more; it has again demonstrated itself to be a flexible policy tool which can used to meet a variety of objectives, economic and political.3 It is the argument of this paper that regionalism in Asia after the financial crisis departs significantly from its pre-crisis incarnation. Specifically, an understanding of the post-crisis regionalism requires a state-centric Reviezv of International PoliticalEconomy
ISSN 0969-2290 print/ISSN 1466-4526 online C 2002 Taylor & Francis Ltd

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DOI: 10.1080/09692290110126100

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The contours of post-financial crisis regionalism are. Asia again lagged behind the rest of the world in terms of the formal political institutionalization of regionalism. aimed at restoring to Asia a greater degree of political power and autonomy vis-a-vis the rest of the world. not only for our understanding of 'the region'. the boundaries of the region do not coincide neatly with state boundaries. was therefore identified by economists and policy analysts based primarily on the activities of Japanese multinational corporations (MNCs) and of 231 This content downloaded from 112. a distinguishing feature of Asian regionalism for many scholars was precisely the fact that the 'region' itself was ill-defined (or capable of multiple definitions) and that the 'regionalism' that was taking place was the result of market-led. and in a number of sub-regions. but also for our analysis of the current phase of the global economy. and the US and the international financial institutions it controls. integration processes. regionalization in the Asia-Pacific region .has been driven by the private sector not by governments. for example. by state design. has argued: although the state has been instrumental in nurturing business growth. When regionalism re-emerged as a preferred economic policy in the 1980s and 1990s. Hence. 2 Oct 2013 21:05:20 PM All use subject to JSTOR Terms and Conditions . assumptions which underlay much visioning of the 'Pacific Rim' in the 1990s. a brief description is given of the characteristics and analysis of regionalism in pre-financial crisis Asia.204. the countries of Asia did not participate in the wave of regionalism which proved popular with other developing countries in the 1950s and 1960s. Indeed. The 'regional economy' in Asia.unlike the other major regions of the world . 2 ASIAN REGIONALISM PRIOR TO THE FINANCIAL CRISIS Embroiled in the military conflicts of the Cold War period.87 on Wed. rather than government-led. are untenable.BOWLES: ASIA'S POST-CRISIS REGIONALISM approach and an analysis of power relations in the global economy. In many ways the region's governments are still trying to come to grips with the rapid economic changes that swirl around them.142. The implications of this are profound.4 In the next section. in particular. As Stubbs (1995: 786). China and Japan. Section 3 analyses in more detail the emergence of a new post-crisis regionalism and examines the reasons for its emergence. Particular attention is paid to the motives of the two most significant powers in East Asia. The assumptions that regionalism in Asia should be analysed primarily in terms in private actors or that it is based on a benign interdependence between countries that span the Pacific. The implications of this regionalism for theoretical analysis of the global economy are discussed in the concluding section.

87 on Wed. too. Japan's policy with regard to foreign direct investment (FDI) changed critically during the post-war decades to one favourable to. Here. It was these business networks. The emergence of a hierarchical division of labour in the region fostered by Japanese MNCs was not a chance occurrence but one premised in no small part on Japanese policy. while the above analyses may underestimate the role of the state in promoting regional economic integration.142.REVIEW OF INTERNATIONAL POLITICAL ECONOMY overseas Chinese businesses. in particular. These activities were highlighted as operating on the basis of a series of 'networks' based on the production prerequisites of post-Fordism and the personal connections which facilitated and characterized much of the overseas Chinese diaspora. they do make the valid point that Asian regionalism was based on a lower level of formal 232 This content downloaded from 112. in fact. but the emergence of a 'Greater China' economic zone certainly owes something to their policies. FDI during the 1980s. with government policies playing secondary. play central roles in the story. These analyses tended to overstate the role of 'the market' in fostering integration in the region.204. 'Greater China' was identified as one such sub-region. As Naughton (1997: v) writes. 2 Oct 2013 21:05:20 PM All use subject to JSTOR Terms and Conditions . China's initial choice of venue for its four Special Economic Zones (SEZs) in 1984 was based on exploiting cultural. They present us with something of a paradox in that most of them accept that national economies can be described as 'developmental states' where governments play key roles in 'guiding the market' but where. ethnic and geographic links between the SEZs and the overseas Chinese communities in Taiwan and Hong Kong. it seems. The subsequent rapid growth of the four cities initially chosen as SEZs and the extent of the spread of investment into other parts of Guangdong and Fujian Provinces could perhaps not have been predicted by Chinese policy makers. a false one and is solved by a better appreciation of the role that the state played in fostering intra-regional trade and capital flows. inter-national and intra-regional integration are played out beyond the reach of the state. and supportive of. which led to the identification and integration of a 'regional economy'. especially small and medium-size family firms. The emergence of the 'China Circle' was not entirely an accident either in which states were only 'reactive'. reactive roles'. the impetus for economic integration was identified as largely business driven rather than state driven. For example. comprising of an international division of labour which integrated production in the southeastern coastal regions of China and companies in Taiwan and Hong Kong.6 Similarly. However. For example.5 This was also true at the sub-regional level. Such a paradox is. 'firms. the ability of Japanese (and other) MNCs to expand in this way was due in no small measure to the investment liberalization undertaken by host governments. rather than the existence of supra-national political institutions.

This 'vision' represented a victory for the pro-globalist thinkers and established for the institution a framework which stressed the interdependence of economies. a goal which was subsequently adopted at the APEC meeting held in Bogor. made particularly loudly by Malaysia's Prime Minister Mahathir. The initial response to the emergence of North American and European 'blocs' included calls. and contributing to. This idea was. in Europe and North America. proposed in 1991 and coming into effect on 1 January 1993. marked ASEAN's most ambitious attempt at regional economic cooperation since its formation in 1967 and.87 on Wed. Indonesia in 1994.8 In establishing this framework. were ever. the ASEAN Free Trade Area (AFTA). the ways in which the ideological construction of the 'Pacific Rim' was being pursued in the wider intellectual and policy community.of using regionalism to further integration into the global economy .BOWLES: ASIA'S POST-CRISIS REGIONALISM inter-governmental regional institutions and policies than were observed in other regions. operates by consensus and voluntary action (or inaction) rather than by legal stricture. APEC was simply following.was also central to Asia's most deliberate attempt at formal economic regionalism. at this level.11 The formation of AFTA. Asia lagged behind. APEC committed itself to 'open regionalism' and to the goal of establishing a free trade area in region by 2010 for developed country members and 2020 for developing country members. it is true. for an East Asian Economic Group. APEC's formation in 1989 owed as much to the perceived political need to ensure that trade across the Pacific remained open and to prevent the emergence of three closed blocs as to any substantive trade liberalization initiatives. Asia remained reluctant to join in. in 1993.7 This body is much looser in regulatory design that the other 'blocs'. 2 Oct 2013 21:05:20 PM All use subject to JSTOR Terms and Conditions . most notably. even if there has been a tendency to push the argument too far in that direction.204. While Europe was moving full speed ahead with the 'Single Market' project and the US was abandoning its traditional sole reliance on multilateralism as a route to free trade and signed free trade agreements first with Canada and then with Canada and Mexico. an Eminent Person's Group under the Chairship of Fred Bergsten to devise a 'Vision' for APEC which would justify its continued existence. and which minimized the differences between developed and developing country members. put ASEAN on a path which it had rejected several times in the 233 This content downloaded from 112.142.10 The idea of 'open regionalism' . As the fear of the emergence of three protectionist blocs receded. indeed. the mutual advantages which existed for all in trade liberalization.9 The boundaries of the 'region'. In this comparative sense.expanding. APEC formed. At the level of formal regional economic arrangements. however. the above analyses are right to stress the relatively greater role of the 'market' and relatively less importance of the 'state' in regional integration in Asia than elsewhere. stillborn and Asian countries settled for the different version of regionalism embodied in APEC.

particularly Japanese MNCs. regionalism in Asia in the early to mid-1990s was premised on the emergence of an economic region increasingly integrated by the activities of multinational corporations.87 on Wed. in this sense. as will be argued in the next section. a dimension which. Thailand. was to engage in trade liberalization. The formation of AFTA came after many of the ASEAN countries had struggled with the need to boost export earnings during the 1980s in response to the debt crises of the early years of that decade. Latin America and Africa. In addition. Thus. the East Asian NICs were also investing heavily overseas with the ASEAN-4 and China being favoured destinations. and by 234 This content downloaded from 112. 2 Oct 2013 21:05:20 PM All use subject to JSTOR Terms and Conditions . FDI as a percentage of GDP quadrupled in the ASEAN-4 between 1985 and 1990. As a result. the former Soviet bloc following the dramatic events of 1989-91. Japan's FDI grew at an annual average rate of 62 percent over the 1985-9 period. Having shifted to a strategy of FDI-sponsored export-led growth. To summarize. as well as to meet the needs of reconstruction in the Gulf and in the Soviet Union"12 by supporting the call for an ASEAN free trade area in 1991. following the advice of the international financial institutions. and to shift towards policies more conducive to export promotion. At the end of the 1980s there appeared to be a significant threat to this in the form of competition from China. A regional economic agreement was seen therefore as the best way of maintaining ASEAN's investment appeal and of fostering its continued integration into global trade and capital flows. ASEAN states were keenly aware of the need to ensure that ASEAN as an investment site remained competitive. also had political motives.204. albeit at their own pace rather than collectively. individual countries adopted policies more favourable to FDI in an effort to attract the foreign capital needed to spur continued industrialization.REVIEW OF INTERNATIONAL POLITICAL ECONOMY past. Regional projects typically contain a political dimension. particularly the threat of investment diversion to Mexico. the potential investment-diverting effects of greater European integration in 1992. and in particular the fear of investment diversion. from the indebted countries of Asia. At the same time. has come fully to the fore. the formation of AFTA was in large part a response to the changing external environment.-3 The spur to create AFTA also owed something to ASEAN's desire to remain relevant in the face of the rise of APEC and. These policies were fortuitous in that Japanese firms were expanding rapidly overseas in response to the massive appreciation of the yen which followed the Plaza Accord in 1985. The response of the ASEAN-4 (Indonesia. The increasing concern about possible investment diversion is clear from the joint communiques of the ASEAN ministerial meetings with the ASEAN foreign ministers responding to the 'increasing competing demand for capital and investment resources from Eastern Europe. and the NAFTA. Malaysia). the Philippines.142.

and the general malaise of 'crony capitalism' was to blame. the 'region' was more spatially ambiguous with APEC acting as a loose consortia of countries notionally acting to preserve open trade across the Pacific. as the money which poured into the region equally quickly poured out. Hong Kong. 2 Oct 2013 21:05:20 PM All use subject to JSTOR Terms and Conditions . However. their lack of regulation.BOWLES: ASIA'S POST-CRISIS REGIONALISM the network capitalism epitomized by the Chinese diaspora. The use of trade and investment liberalization agreements to promote integration into the international economy was supplemented with the domestic liberalization of financial markets with the result that financial capital also poured into ASEAN and other Asian countries in the 1990s. At the level of formal regional economic institutions. and Vietnam. an arrangement premised on the need of ASEAN countries to remain competitive in attracting investment in the changed post-Cold War international political economy.2 bn and the Philippines US$1 bn.142. The most concrete form of regional economic arrangement was provided by the AFTA.the IMF .18 It is clear that one of the critical actors in the drama .1 The Crisis and the IMF The events of the Asian financial crisis are well known and will be summarized only briefly here.17 For others. Thailand US$17. By the time the dust had settled. and led to a crisis which profoundly altered the economic landscape in Asia and which has changed the basis for regional economic cooperation. For some. Indonesia received US$ 40 bn.16 While the facts of the crisis are well known. The 'contagion' spread to other countries in the region including the Philippines. Malaysia. the weakness of domestic financial institutions. Indonesia. although even in Asia state policies played important roles in shaping the kind of regional economic integration that took place.87 on Wed. this was to lay the seeds for the financial crisis of 1997. and called upon the IMF for technical assistance.204. This process was undoubtedly a more private-sector-driven process than that in evidence in other regions. South Korea.saw the 235 This content downloaded from 112. The Thai government decided that it could no longer defend the currency.15 The main focus in this section will be on the response to the crisis and the implications of this for our understanding of regionalism in Asia. announced a managed float. The Asian crisis was triggered by the decision of the Thai central bank to float the baht on 2 July 1997. financial panic provides the most plausible explanation with the irrational behaviour of foreign investors to blame for the sudden dramatic reversal in capital flows to the region. the causes of the crisis remain disputed. the IMF had instituted the largest bailout in its history with the US$ 54 bn loan to South Korea.14 3 ASIA'S POST-FINANCIAL CRISIS REGIONALISM 3.

However.2 bn. the IMF intervened in Asia both at the macroeconomic and structural levels.e. first of all. a total adjustment of US$ 123. However. 2 Oct 2013 21:05:20 PM All use subject to JSTOR Terms and Conditions . Critics argued that the tightening of state budgets would inevitably worsen the recession brought about by the crisis and it did. in the view of many in Asia. the IMF also asked for the curtailment of government budgets (achieved mainly through the reduction of social programmes. This involved.2 per cent of GDP respectively. The recognition that these policies were not bringing about the desired effects (exchange rates continued to slide. only Korea had run a budget deficit . a tight monetary policy. To stop currency depreciation and restore confidence. Thailand. in the ASEAN4 and South Korea the change in the current account went from a cumulative deficit of US$ 54 bn in 1996 to a cumulative surplus of US$ 69. (1999) noted. As Table 1 shows. the outflow of capital worsened and output fell more than projected).204. the IMF prescribed its traditional austerity medicine. However. These fiscal measures have been criticized since none of the countries in question was particularly profligate in the spending. i. for example. by and large. the typical ones that characterized IMF interventions in the past. Thailand and Indonesia had run average budget surpluses of 2.REVIEW OF INTERNATIONAL POLITICAL ECONOMY cause of the crisis as emanating from essentially domestic factors which required the tried and trusted methods associated with the stabilization and structural adjustment programmes which the IMF and World Bank had been applying to other developing countries since the early 1980s. since 1993. As MacLean et al. In fact. For example. went from having a current account deficit equal to 8 per cent of GDP in 1996 to a surplus 236 This content downloaded from 112. an increase in interest rates and the adoption of strict limits on the growth of the money supply.142. the cost has been high in terms of the development objectives of the countries concerned and have been achieved almost entirely through deflation.3 and 1. exacerbated by the policies of IMF had been done as economic crisis followed the financial crisis and brought with it unprecedented output declines after a decade or more of rapid growth.6 bn was due to increased exports.1 per cent of GDP and this only in 1996.2 bn in 1998. In order to cover the carrying costs of the financial bailout. led the IMF to modify some aspects of its programme. the damage caused by the financial crisis and.6 billion of this adjustment was due to a fall in imports and only US$ 6. The policies recommended at the macroeconomic level were. the scrapping of large public infrastructure projects and the elimination of subsidies). the restriction of domestic demand caused by the financial crisis and the IMF imposed austerity measures was sufficiently large to cause a dramatic decrease in imports and thereby lead to a turn around in the trade balance.equal to 0. and the perception that they might trigger social unrest. a full US$ 116.87 on Wed. as Table 1 indicates.19 A noticeable recovery in output and the trade account has taken place since the depth of the crisis.

banks.7 Thailand -4.6 28.5 90. For example.4 -54.0 Philippines -23. the IMF also pushed for changes in the labour laws to make redundancies easier although it is difficult to argue that this was necessary to solve the financial crisis and was seen as having more to do with engineering a 237 This content downloaded from 112.4 -116.6 of 12 per cent of GDP just two years later .9 13.0 1.6 Malaysia -7. the IMF encouraged the dismantling of national monopolies.5 58.9 36. the enforcement of capital adequacy standards and the adoption of Western accounting practices and disclosure rules. the elimination of tariffs and non-tariff barriers to trade.term development costs of import reductions. Bank closures in the midst of financial panic.7 Indonesia -4.4 -20.3 63.a staggering change brought about almost entirely by collapsing imports. and the opening of the financial and insurance sectors to foreign investors. the IMF pushed for the closure of insolvent .2 9. contributed to recession by making it impossible for many companies to obtain even working capital. invited even greater panic. In South Korea.BOWLES: ASIA'S POST-CRISIS REGIONALISM Table 1 Externaladjustment(US$ bn) Current Account 1996 1998 Adjustment 1996-8 MerchandiseImports 1996 1998 Adjustment 1996-8 -14. 14. As Bhagwati (1998: 9) noted: 'Economists have usually advised the exact opposite in such depressed circumstances: restricting foreign access to a country's assets when its credit.7 5.9 144.4 44.9 29. To the short-term decreases in living standards implied by the drop in imports must be added.3 31.6 123. while the hasty enforcement of capital adequacy standards.2 31.3 -2. Under the second category. however. Under the first category. but not that of others. The policies undertaken by the IMF at the structural level were especially criticized in Asia.9 78. the sale of state assets to the private sector. therefore. the longer. simply illiquid . 2 Oct 2013 21:05:20 PM All use subject to JSTOR Terms and Conditions .142.204.2 63.and.3 40.0 Korea Total adjustment Source: Ferguson (2000).87 on Wed.7 11.5 -27. countries were pressured into accepting greater foreign ownership even though this ran counter to much of the literature on 'firesale FDI'. in conjunction with the general credit squeeze. has dried up'.1 -12.1 4. in some cases. Policies under his heading can be divided into two categories: (1) those designed to reform financial systems and (2) those aiming to open up the economies of the crisis countries. These policies of 'intrusive' or 'deep' conditionality went well beyond what could be justified by economic theory alone.

The proposal was rejected. was initially proposed by Japan at the height of the crisis. it is not surprising to find that this has led. The Wall Street-Treasury complex was not easily convinced of the error of its ways.87 on Wed. Before embarking on the analysis.2' Despite the immediate rejection of this plan. 3.20 This view was not restricted to leftist critics either.22 As with all regional integration initiatives. These forms of cooperation are explained fully below. One manifestation of this resentment is that Asian countries have embarked on a new path of regional economic cooperation incorporating both monetary and trade dimensions.204. and by China which continued to oppose Japan's leadership aspirations in Asia. by the US as potentially undermining the role of the IMF and as being potentially too lax on conditionality. in Higgott's (1998) words. more attuned to the needs of Asian economies and less bent on imposing Anglo-American style capitalism on the region. by the IMF itself. 2 Oct 2013 21:05:20 PM All use subject to JSTOR Terms and Conditions . that the Asian crisis proved the superiority of American free market capitalism over Asia's 'managed capitalism'. the focus is on the broad contours of the newly emerging regional arrangements followed by an in-depth analysis of the two leading countries in the region. however. China and Japan. In the following discussion. Bhagwati (1998). in triumphant mood. This received support from some of the countries in Southeast Asia who were shocked by the initial refusal of the US to support Thailand in its crisis and by the spectre of IMF conditionality. and its leading exponents added insult to Asian injury by declaring.2' In the face of these policies and perceptions. individual member countries may have varying motives for participating.REVIEW OF INTERNATIONAL POLITICAL ECONOMY transition to Anglo-American style capitalism than with solving South Korea's crisis. As Bello (as quoted in Higgott 1998: 345) noted at the time 'never has the IMF's connection to its principal stockholder been displayed so prominently'. the failure of other regional institutions such as ASEAN and APEC to play any significant role in 238 This content downloaded from 112. The perception that the IMF was acting to protect the interests of Western lending institutions and to open Asian markets for Western firms at the expense of Asian workers and the sovereignty of Asian countries was widely held in the region. however. a prominent neoliberal economist. also argued that what he termed the 'Wall Street-Treasury complex' had got it all wrong in pushing for speedy capital account liberalization in Asia. to the 'politics of resentment'.2 The regional response The idea of establishing an US$ 100 billion Asian Monetary Fund (AMF). it is important to first recognize that the degree of enthusiasm for the new regional mechanisms and the intensity of the 'politics of resentment' do vary by government in the region.142.

the ten ASEAN countries plus China. involving all of the major countries of this region. in May 2000. Japan implemented the Miyazawa Plan which made available $30 bn to countries in the region.24 China's 1994 devaluation of the renmenbiwas seen as a contributing factor to the current account deficits run up by the ASEAN-4 and South Korea. after the initial rejection of the AMF. It is quite possible therefore. providing a mechanism to meet the aims of an AMF but avoiding the more politically difficult task of establishing a formal institution which 239 This content downloaded from 112.e. 2 Oct 2013 21:05:20 PM All use subject to JSTOR Terms and Conditions . a regional network of foreign currency swaps aimed at enabling Asian countries to address any future currency crises themselves without resort to the IMF was agreed. Japan and South Korea) and a 'Vision Group' has been formed to advise on the future role and evolution of this group. the willingness of the Japanese government to allow the yen to depreciate in the wake of the crisis led to accusations that Japan was more interested in maintaining its own competitiveness than in solving Asia's problems.25 As Bergsten (2000a) has noted.BOWLES: ASIA'S POST-CRISIS REGIONALISM responding to the crisis. of course. a cooperation between central banks in the region. perhaps even probable. more concerted regional initiatives have nevertheless more recently appeared.204. the East Asian Economic Group has held summit meetings for three consecutive years under the ASEAN+3 rubric (i. international institution. and the widespread resentment at the imposition of conditions by a Washington-based.142. As Higgott (1998: 336) notes 'Japanese capital created overcapacity in the region without fulfilling the role of a market of last resort to absorb it'. closer monetary and trade ties are now being actively fostered in the region. It should be noted that a regional response was neither guaranteed nor perhaps even probable. This development. Subsequently. deficits which played a key role in triggering currency flight in 1997. that regionalism would simply become a spent force under the dual weight of the financial crisis and the tarnished images of possible regional leaders. is now being forged. Japan rather belatedly began to pump money into the region but was partly blamed for the crisis in the first place. a new regionalism. Following rejection of the initial Japanese proposal for an AMF. constitutes a de facto AMF. Although China pointed to its maintenance of the value of the renmenbiduring the crisis. the IMF. On the assumption that regional initiatives require a sufficiently powerful and/or respected regional leader. geographically well-defined and located in East Asia. Furthermore. US controlled. there were continuing cross-strait tensions with Taiwan. this has not happened and. Interestingly. it continued to have less than cordial relations with its ASEAN neighbours on other issues such as the Spratlys and. Japan's capitulation in the face of US pressure over the initial proposal for an AMF did not enhance its leadership claims and neither did its continuing domestic economic malaise. candidates for this position in post-crisis Asia were not conspicuously evident.87 on Wed.

history is now argued to be repeating itself with Japan showing a similar interest in regional liberalization initiatives in response to the frustrations over the slowness of the Millennium Round in Seattle a decade later. why did China oppose the proposal for an AMF in the immediate post-crisis period but support the currency swap arrangement some three years later? And what. the use of yen loans and other economic issues.87 on Wed. much as the US was argued to have departed from its sole reliance on the multilateral trade track in frustration at the slow pace of the Uruguay Round in the late 1980s. Thus. However.26 While details of the expanded plan are still vague it is clear that Asia has the resources to finance such an initiative with the collective reserves of the ASEAN+3 countries being over $800 bn (over twice those of the Eurozone countries and close to ten times those of the US).204.5 bn. In analysing the emergence of Asia's new monetary regionalism.REVIEW OF INTERNATIONAL POLITICAL ECONOMY might encounter US opposition. This measure. do the reasons for this change of position tell us about Asian regionalism now? The second issue concerns the emergence of proposals for regional trading arrangements. without whom a broad regional project would be difficult to sustain. These include studies being conducted examining the possibility for a North East Asian regional trade agreement between Japan.29There have also been important bilateral trade negotiations between Japan and Singapore and between Japan and South Korea. if anything. two important issues remain in need of further analysis and which require a closer examination of the motives of the two major powers in the region. adopted by the finance ministers of the ASEAN+3 countries. expands the network of bilateral regional currency deals previously agreed between Japan and Thailand and between Japan and South Korea which had provision for loans of up to $7. as these two countries are the only members of the OECD which are not members of a regional trade agreement (if APEC is excluded from such a designation) and represents a sharp reversal of Japan's previous exclusive reliance on multilateral trade agreements. In advancing such an 240 This content downloaded from 112. there have also been initiatives to create free trade pacts in the region spearheaded by Japan.142. and in South Korea's for that matter. The first issue is simply a lacunae in the existing literature. namely. proposals which analysts such as Bergsten (2000a) and Noland (2000) have attributed mainly to Asian frustration at the ineffectiveness of trade liberalization through APEC and the uncertainties facing the new Millennium Round of the WTO after the debacle in Seattle.27 Officials from Japan's Ministry of Finance will also be stationed in Thailand and Vietnam to provide advice on international debt management. 2 Oct 2013 21:05:20 PM All use subject to JSTOR Terms and Conditions .28 At the same time as these developments in 'monetary regionalism'. namely Japan and China. China and South Korea. the disenchantment with the IMF and the US has been widely recognized and accepted. This represents a considerable departure for Japanese trade policy.

and made its first financial contributions to IMF packages since 1949. Although China was not directly affected by the Asian financial crisis. and which has sufficient foreign exchange reserves (in excess of US$ 200 bn) and capital controls to ward off any speculative currency attacks. The second part of the strategy for demonstrating its international responsibility was the pledge not to devalue the renmenbi.BOWLES: ASIA'S POST-CRISIS REGIONALISM analysis. the Chinese leadership decided to maintain the exchange rate and to inject 241 This content downloaded from 112. China opposed the initial proposal for a Japan-led AMF. which initially opposed the creation of an AMF for fear of Japanese domination.This undoubtedly had some domestic advantages.87 on Wed. To this end. and Sino-Japanese relations. why should China.204. threw in its lot with the IMF. indirectly the crisis posed significant challenges for China and its response to the crisis offered some opportunities. needed to be accompanied by an economic growth rate of at least 8 per cent p. in the leadership's view.a. a responsibility which it hoped would be recognized and acknowledged by a strengthening of Sino-US relations. now back an Asian only currency swap arrangement? To understand this requires an analysis of the shifting sands of wider SinoU. The immediate challenge was how to respond to the crisis affecting neighbouring countries.S. there is no doubt that the 'no devaluation' policy also had risks in that the painful process of state owned enterprise reform had begun and.30 Thus. 2 Oct 2013 21:05:20 PM All use subject to JSTOR Terms and Conditions . 3.3 China's changed position on 'monetary regionalism' Let us first consider China's position. China committed US$ 4. However. in order to prevent a potential social backlash.142. China's weak state-run banking system was sitting on deposits in excess of 500 trillion yuan and any devaluation which might spark a run on the banks could have potentially serious consequences for economic and social stability.31 Furthermore. The policy of maintaining the value of the renmenbimade such a growth target difficult to meet in the light of falling regional trade volumes and depreciating currencies in competitor economies in ASEAN and South Korea. China sought to establish itself as a bulwark for stability in the region and as a 'responsible' member of the international community.5 bn to the operational budget of the IMF to support financial packages to Thailand and Indonesia. China's response was to provide financial resources to the region through the IMF and to pledge not to devalue the renmenbi. Hong Kong had just been returned to China and the leadership in Beijing was keen to provide economic stability in the new 'Special Administrative Region'. Nevertheless. it is implicitly being argued that the monetary and the trade dimensions of the latest round of Asian regionalism are essentially caused by different factors and are responding to quite different external forces. This assumption needs careful examination.In both of these ways. Put simply.

to offload its economic problems onto other countries.36 China continued to promote its own role in solving the crisis and in using the opportunity to enhance its claims for greater international recognition. expected some breakthrough on China's WTO accession process. to lead to a rehabilitation of China as a 'responsible' member of the international community and to an enhanced regional and international role.87 on Wed. but he overlooked the role of China. together with its support for the IMF.S. The reasons for US reluctance drew upon analysis from elsewhere in the region in arguing that the U. however. As Wang Menkui.33 The continued depreciation of the yen provided China with another opportunity to contrast its policy of responsible exchange rate management with that of Japan which was accused of failing to 'shoulder its responsibility as a major power'. China's role in was..32 China's feeling that its 'constructive strategic partnership relationship' with the US ought to be reaping more rewards in terms of international recognition was given chance for further expression and correction in June 1998. It was in this month that the Japanese yen slid to a sevenyear low against the US dollar prompting fears of a new round of financial turmoil in Asia. at the APEC Summit in Vancouver 1997. Japan's non-intervention could be understood simply in terms of it wishing. Japan and the US were forced to intervene to support the yen although not before concerns were expressed about why the two countries had taken so long to undertake such an intervention. This recognition. in the calculations of the Chinese leadership. the United States has not fully recognized the importance of China.204. For example. In the multipolar development of 'one 242 This content downloaded from 112. Chinese academics argued that: in its strategy to solve the Southeast Asian financial crisis. China's image as a major power has become even more prominent . indicated: Through the crisis. undervalued..142. Director of the State Council's Development Research Centre. 2 Oct 2013 21:05:20 PM All use subject to JSTOR Terms and Conditions . at a press conference in Vancouver. would gain by being able to buy up Asian enterprises with over-valued dollars. It was also the month that President Clinton made an official visit to China. Clinton suggested a three-point plan to solve the crisis.34 In the end. appears to have been slow in coming. On 24 November last year. The stability which China's 'no devaluation' policy brought to the crisis economies in the region. which had not been affected by the crisis. when the Chinese side at least.REVIEW OF INTERNATIONAL POLITICAL ECONOMY additional demand into the domestic economy through a massive infrastructure spending programme. was expected. in China's eyes.35 China did nevertheless have the pleasure of drawing President Clinton on his official visit into criticism of Japan's exchange rate policy. in China's eyes.

BOWLES: ASIA'S POST-CRISIS REGIONALISM superpower and many great powers'. the policy of seeking to strengthen the Sino-US relationship was soon to come to an end not because of economic issues but because of the US-led NATO war in Kosovo.37 Chinese sensitivities were assuaged at the December 1998 APEC Meeting where.38 Thus. The Cox Report and the 'demonization' of China in the US meant that China's 'responsible image' disappeared.204. economic policy economic recovery in the region . put simply. China joined others in the region as seeing the US as the main threat to its interests and China moved to view regional solutions as more valuable in this changed 243 This content downloaded from 112.40 The expected gains from this policy were not only economic . is still not powerful enough. by mid-1999 Sino-US relations had turned irrevocably for the worse. China's post-crisis policy had not reaped the political gains that it had hoped for. in contrast to the neglect of China's role by President Clinton in Vancouver a year earlier. a policy which it contrasted sharply with that of Japan.but also political in terms of an enhanced role and status for China in regional and international affairs. deeply worried the Chinese leadership. premised on the need to defend human rights in a sovereign state. This crisis has conspicuously shown that China has taken a step forward on the path to becoming a major power in the world structure. The bombing of the Chinese Embassy in Belgrade. These gains were slow in coming as China met with what it perceived as US indifference and a lack of understanding of the strains that the 'no devaluation' policy was placing on its economy while Japan and the US moved only slowly to resolve their exchange rate imbalances. 2 Oct 2013 21:05:20 PM All use subject to JSTOR Terms and Conditions . This war. for the year and half after the outbreak of the financial crisis China had followed a consistent policy of supporting the IMF (and its policies)39 and of maintaining a 'no devaluation' policy for the renmenbi. as one of the great powers. However.87 on Wed. Faced with this changed international situation. led to anti-US riots in China much as there had been similar riots in South Korea. The document used the English word "anchor" to describe the role played by China in stabilizing the Asian financial crisis'. Thailand and Indonesia against IMF/U.S. China had backed the wrong horse. China.142. Despite the expectations that the US would offer some WTO concessions this did not occur and it was left to Chinese Premier Zhu Rongji to visit the US in early 1999 to offer more concessions to kickstart the negotiations. the Chinese press reported that 'the "Kuala Lumpur declaration" fully affirmed the "mainstay" role played by China in stabilizing the Asian economy during this financial crisis. China did participate in the ASEAN+3 meetings but the main focus of its diplomacy was on promoting itself both inside and outside of the region as a major power that could be trusted and which acted responsibly. and the 'wrong map' explanation.

However. and Hong Kong and Taiwan regions is US$ 800 billion. The combined foreign exchange reserves of Japan. Asia-Pacific Economic Cooperation. a regional organization. China. there was much more to be gained by the small.87 on Wed. In reporting on the currency swap agreement. the Economic Daily reported the agreement in the following terms: In the past. and Sino-Japanese relations have begun to show the signs of improvement which make such a movement possible.142. .4 Japan's changed position on 'trade regionalism' With respect to the second issue. was one of the factors which many analysts had pointed to as constituting an emerging integrated regional economy led by the activities of businesses in the region. indeed. money that will definitely promote the economy in Asia if managed well. Thus. Compared with other parts of the world.REVIEW OF INTERNATIONAL POLITICAL ECONOMY context. Singapore and South Korea. the emergence of proposals for 'trade regionalism' in Asia. especially North America and Europe. Such a policy had been reasonably successful and. is only a forum. the financial crisis that devastated the region three years ago has made Asian countries realize the pressing need for working together. For example.42 3. 2 Oct 2013 21:05:20 PM All use subject to JSTOR Terms and Conditions . it is interesting to wonder why Japan. in pursuing a bilateral trade agreement with Singapore. as Noland (2000: 7) points out. Many Asian countries may still hold bitter memories of receiving loans from the International Monetary Fund .41 China had joined ranks and become a member of the Asia-only movement. there is the tricky question of the agricultural sector. To push this integration into the realm of formal free trade arrangements was a major initiative with debatable pay-offs. Should this be included with the risks that this might have of a political backlash from agricultural interests in both countries or should it be excluded at the risk. economy of Singapore by having improved access to the Japanese market than vice versa.204. the importance of economic co-operation was not fully realized. In the case of the bilateral discussions with South Korea. close to free trade. Japanese policy had for years been to support the overseas investment activities of its MNCs and to fashion a regional division of labour in Asia based on the so-called 'flying geese' model of economic integration. reached in May 2000. an initiator of many of these proposals. economic co-operation within Asia lagged in the past 10 years. . should embark upon such a path. of inviting WTO investigation of compliance with Article XXIV of the GATT?43Including China in with South Korea opens up even more problems with countries at vastly different levels 244 This content downloaded from 112. it lacks binding force. China's awakened interest in regional economic solutions was clearly shown.

BOWLES: ASIA'S POST-CRISIS REGIONALISM of economic development and with different political systems. Hughes (2000: 235-40) has noted that: policy makers in Japan do not seem to see the [developmental] state model as a total write-off. in (1) the benefits which regional economic arrangements might have in terms of spurring regional economic growth within the context of Japan's long standing support for a developmentalist structuring of the regional economy. it notes that this has been the outcome of existing regional agreements such as the EU. I suggest. More fundamentally.87 on Wed. 2 Oct 2013 21:05:20 PM All use subject to JSTOR Terms and Conditions . In initiating regional trade liberalization. NAFTA and the MERCOSUR. Clearly. is actually a clearly undesirable policy. the trade initiatives predate the Seattle conference. A more convincing explanation for the trade initiatives is to be found. Commenting on reactions to the Asian financial crisis. Consider first how Japan's support for regional trade agreements may be consistent with its longer-term strategy. and (2) equally importantly. Export growth can be restarted through economic stimulus packages in Japan and continued growth in the USA. The Report further argues that the Asian economies continue to be integrated with Japan supplying the capital goods for 245 This content downloaded from 112. the place of regional free trade initiatives must be analysed within the wider context of Japanese economic policy objectives. and Asia's. As a recent (then) MITI Report (2000b: ch. trade liberalization has been an important policy goal of Japan but this has been conditioned by its pursuit of the developmentalist model in which free trade is not presumed to be the most desirable policy in all circumstances and. there are many stumbling blocks on the road to trade agreements in the region and Japan's decision to travel down this particular road is in need of explanation. in a non-insignificant number of cases. but even more importantly through the promotion of the intra-regional exports which accounted for so much growth in the region prior to the currency crises and which could sustain growth long term. For one thing.142. its commitment to liberalization has always been practical and strategic rather than ideological. while Japan has always been a central supporter of the multilateral trade liberalization process. disappointment following the fallout of the failed Seattle WTO talks is not convincing. the question that must be asked is whether this also implies a rejection of the developmentalist view. That is. It is in this context that Japan's turn to bilateral trade agreements must be understood. That is. The key to recovery is still the basic model of the developmental state in the region and export growth on the demand side. increasing Japan's (and Asia's) political bargaining power at the international level. The answer that the explanation is to be found in Japan's.204. bilateral and regional trade agreements are seen as key mechanisms for increasing intra-regional exports. 3) indicates.

helping to place Japan on a recovery trajectory. the policy of forging a regional division of labour with Japanese capital and technology at the centre of the integration process remains consistent with Japanese policy over the past two decades although the means of achieving it have now broadened to include regional trading agreements as an important post-crisis vehicle. approximating the familiar 'flying geese' pattern. 1999: 46) that: Japan should seek to deepen intra-regional exchange and understanding in Northeast Asia. 2 Oct 2013 21:05:20 PM All use subject to JSTOR Terms and Conditions . As the Japanese economy has recovered. This pattern of regional integration. The shift towards bilateralism can be seen. as a change of policy mechanism but not necessarily of policy objectives. MITI's White Paper on InternationalTradefor 1999 (published before the Seattle meetings) gives an important clue to this. 3) view.. 3) notes that 'Japanese exports to East Asia recovered more quickly than exports to other regions [and].142. and consequently stimulating Asian exports to Japan. for example pushing regional trade toward recovery due to regional specialization within East Asia. The deepening interdependence between Japan and East Asia through trade has therefore helped to accelerate recovery from the currency and economic crises..REVIEW OF INTERNATIONAL POLITICAL ECONOMY Asian industrialization (with capital goods comprising between 40 to 60 percent of East Asia's imports) and the market for Asian exports.87 on Wed. in MITI's (2000b: ch. boosting Japanese exports. The new interest in regional trade initiatives therefore stems from a desire to maintain the momentum of this 'virtuous circle' and to continue to forge deeper patterns of regional economic specialization. it is argued.204. has helped. especially those from Japanese affiliates in Asian countries whose exports back to Japan now constitute 30 percent of Japan's total imports.. imports from Asia have recovered more rapidly than those from other regions'. 246 This content downloaded from 112. the only area in the world which has shown little interest in regional cohesion or integration. to restore economic growth in both Japan and the rest of East Asia following the financial crisis. that: the Asian recovery set in motion a virtuous circle. The Report (2000b: ch. It argued for the creation of a Northeast Asian trade bloc and recommended (MITI. therefore.44 With respect to the broader issue of promoting regional arrangements as a way of increasing bargaining power within the global economy. The implications of this are. applying itself with greater vigour to the development of regional cohesion and presenting a model to the world which will contribute positively to the strengthening of the multilateral trading system. Further this stimulation of East Asian export activities has produced considerable synergy.

noted that 247 This content downloaded from 112. p. and consensus on a free trade agreement between Mexico and EU. That is. Japan. wishes to enter this game. p. and (3) the desire to strengthen influence over other regional groupings and negotiating power with these.2. moves to conclude a free trade agreement between Mexico and MERCOSUR. p. operating without membership of a regional trade agreement. the information technology agreement adopted by the WTO in Singapore in 1996 was based on a similar agreement adopted under US pressure in APEC a few months earlier.BOWLES: ASIA'S POST-CRISIS REGIONALISM The key point here is the last part of the sentence referring to the presentation of 'a model to the world'.9) on the grounds that: recently. Japan has signalled that it. Further evidence can be found in the September 2000 Report of the Joint Japan-Singapore Study Group. as noted.204.2.2). regional agreements have increasingly been used as the point of departure for multilateral negotiations. The importance of regional economic arrangements as having political pay-offs is also evident from MITI's subsequent analysis. is unable to play and must stand by as the US and Europe 'strengthen [their] influence over other regional groupings' (MITI. For example. Examples include the Free Trade Area of the Americas (FTAA). Thus. too. 2000b: ch. the existing regional agreements have formed the basis of negotiation for some parts of multilateral agreements. This Group (2000a: ch 1. 2000b: ch. Factors behind this new trend are as follows: (1) further promotion of free trade liberalization through the creation of frameworks beyond traditional regional groupings. found itself debating on other's chosen ground. Japan had none and. Here Japan's 'multi-layered' approach is justified (MITI. interest has emerged in trade liberalization beyond traditional regional frameworks. The need to develop its own 'model' of regional arrangements to 'present to the world' was therefore an important factor in persuading Japanese policy-makers of the need to go down the potentially tortuous path of bilateral and regional trade agreements. (2) promotion of access to extra-regional markets. Many of the provisions of the ill-fated MAI had as their starting point chapter 11 of the NAFTA. set up in December 1999 to look at a possible FTA between the two countries.142. Multilateral negotiations have in important ways been directly shaped by regional agreements. namely the strengthening of links between regional groupings.87 on Wed. as a result. the Trans-Atlantic Free Trade Area (TAFTA) between the US and the EU. Such agenda setting mechanisms clearly benefit the US and Europe both of whom have reams of legal text to call upon as a result of their existing regional arrangements. 2 Oct 2013 21:05:20 PM All use subject to JSTOR Terms and Conditions . designed to link the US and Latin America.9).

Furthermore.142. will continue to have preponderant advantage.8). In the face of this. whether of states or of corporations. they have also helped to promote policy reforms. 2 Oct 2013 21:05:20 PM All use subject to JSTOR Terms and Conditions . These can subsequently be adapted for global use. in consort with other Asian countries. while others leverage on them to obtain more secure and favourable access to important markets. economic power. It is all too clear that such a utopia remains far from being upon us. strengthening their solidarity and advancing their common interests. Thus. Some countries see such agreements as strategic alliances.45The intention to use a bilateral agreement as a springboard for multilateral negotiations is again in evidence with Japan. p. in which the interests are balanced and disputes adjudicated fairly under benign rules that are impartially applied and effectively enforced upon all. weaker states must band together regionally. serving notice that they wish to play a larger role in determining the rules which govern the global economy. Again the importance of FTAs as bargaining tools with other countries/regions is evident. the Study Group (2000a: ch 1. 248 This content downloaded from 112. Until it arrives. especially the US Enhanced regional initiatives offer Asia the potential of countering these interests. a long.3) argued that 'FTAs can be a testbed for new and innovative models of rules governing economic activity. 'the rules of the game' reflect the interests of those who wrote them and favour the powerful rather than establish a level playing field. rules which have to date relied excessively on the US and Europe for their formulation. post-crisis Asian regionalism is the response to this. p. Severinto (1999) who argued that: a new world order has not yet arrived.204. In some cases. that the existing international institutions and the balance of power within the global economy leave Asia vulnerable to the interests of the West.87 on Wed. if ever. the view has emerged. long time from now. The Study Group therefore deliberately proposed an approach that went beyond traditional free trade agreements and which could influence the WTO in areas 'where either there are no rules yet in the WTO or the existing WTO rules can be further improved upon' (2000a: ch 3. This was expressed forcefully by ASEAN Secretary-General Rodolfo C. stemming directly from the experience of Asian countries in the wake of the financial crisis. In other words.REVIEW OF INTERNATIONAL POLITICAL ECONOMY there are different motivations for the pursuit of regional economic integration. FTAs can therefore provide positive complementary pressure for the evolution of WTO agreements'.

For anti-globalists it offers the prospect of the erosion of sovereignty and the levelling down of social and environmental standards as global corporations gain greater power at the expense of ordinary citizens and their elected representatives. This is also evident from MITI's (1999: 32) analysis: Because the Asian currency crisis shares more of the characteristics of 1990s-style currency crises. as 'a crisis of globalisation'. Important as these issues are. the usual measures will be inadequate in preventing a recurrence. which are generally sparked by massive capital movements. as has been advanced in this paper. 2 Oct 2013 21:05:20 PM All use subject to JSTOR Terms and Conditions . Certainly. then there a number of important implications. our attention here is focused on the implications of Asia's post-crisis regionalism for our understanding of the dynamics of the contemporary international political economy. the monetary regionalism of the post-crisis period can be seen exactly in this light. One concerns whether the regional initiatives now underway in Asia will reach fruition or whether external opposition from the US or internal rivalries between Japan and China will intensify and thereby threaten to derail the regional project. as Price (2000) has argued. It is a story of 'markets' gaining at the expence of 'states'. as an attempt by nation states to re-regulate global finance. consideration of new international financial system reforms (taxes on capital inflows and outflows. For pro-globalists this offers the prospect of a more efficient global allocation of resources and of more effective constraints on interventionist and arbitrary state action. The widely preferred term of analysis to describe the contemporary world has been that of 'globalization'. which lack the resilience and flexibility of developed countries. Rather. Seen through this lens. While these two groups may disagree about the desirability of the changes. the Asian financial crisis can be interpreted. 249 This content downloaded from 112. and is premised on an Asia-only vision of economic cooperation forged to counter the power of the US and Europe.204. etc.87 on Wed. Asia's post-crisis regionalism is qualitatively different from that which preceded the crisis. It is about states losing too much power to international financial markets and about the attempts of nation states to regain lost controls.142. it can be summarized for our purposes as an analysis of the world which views the current phase of international capitalism as being qualitatively different from earlier phases and as being characterized by a shift in power from nation states to transnational economic actors and forces. a development which has already been noted by Bergsten (2000a). While this has spawned an entire academic and popular industry.BOWLES: ASIA'S POST-CRISIS REGIONALISM 4 CONCLUSIONS If.) should be promoted in order to open the way for stable real economy development in developing countries.46Another issue concerns the emergence of a 'three bloc world'. they agree on the basic dynamics at work.

NOTE S 1 I am grateful to the Social Sciences and Humanities Research Council of Canada for the funding which made this research possible. I am also grateful to Osvaldo Croci. 250 This content downloaded from 112. Regional and international regulations are therefore necessary to strengthen the ability of states to confront destabilizing global market forces. In this analysis. form part of the analysis presented here. 2 Oct 2013 21:05:20 PM All use subject to JSTOR Terms and Conditions .) has preferred the term 'globalism' to 'globalization'. South Asian countries do not. most notably the US but also Europe. this analysis is interesting precisely for its conceptualization of the problem as one of insufficient state power. This theme is developed further by Petras and Veltmeyer (2000) who prefer the term 'imperialism' to 'globalization' as a more accurate description of the contemporary world. a phase in which some states have lost power to markets but in which. particularly in the case of developing country states. for example. the use of international financial institutions as tools in the hands of these powers and the market-opening strategies of the imperialist powers that are the focus of attention. However. For consistency. a central reason why it is necessary to bring the state back in to the discussion is precisely because power relations between states are critical to understanding that an important part of Asia's postcrisis regional project is to keep the United States out. It also refers more broadly to the need to locate the state centrally in any analysis of the dynamics of the current phase of international capitalism. 3 For discussion of the ways in which regionalism has been adapted to meet different objectives see.142. crucially. Satoshi Ikeda and Brian MacLean for their comments on the paper. That is. it is not the interdependence of economies and the erosion of state power vis-d-vis markets which are the relevant points of reference but the continued domination of global markets by the major powers.REVIEW OF INTERNATIONAL POLITICAL ECONOMY Aside from the support for international capital taxes. stressing that globalism is an ideology. Lawrence (1994).204. this is not the only analytical framework on offer. one that is based on neoliberalism and the Washington consensus as integral parts of US foreign policy. Laxer (n. therefore.87 on Wed. 2 'Asia' refers here to the countries of East and Southeast Asia. the term 'Asia' is therefore used in the same way that it has typically be used in analyses of the 'Asian financial crisis'. The subtitle of this paper refers not simply to bringing the state back in to the analysis of regional integration in the Asian region.d. some states have not.47Asia's post-crisis regionalism also finds resonance with this analysis in the sense that regionalism is being forged to prevent the US and the international financial institutions from exercising their power and shaping Asian economies in their interests as they did in the aftermath of the currency crises.

has argued (2000b: 23) that 'the most striking changes in the world trading system. Mexico. Vietnam. was based on the use of gravity models of trade which analysed regional trade bias and ignored state sponsored initiatives all together. 6 For a discussion of the changing of FDI role in Japan's economic policy see. Bowles and MacLean (1996a). 13 This is further confirmed by official pronouncements at the time. 7 On the differences between APEC and the EAEG as conceptions of the 'Asian region'. Roubini <http://www. East Asian countries are getting together to make their own economic arrangements'. South Korea. Peru and Russia have also joined bringing membership to 21 'economies'. 2 Oct 2013 21:05:20 PM All use subject to JSTOR Terms and Conditions . Singapore's Prime Minister Goh Chok Tong commented that 'unless ASEAN can match the other regions in attractiveness both as a base for investments and as a market for their products. indeed. (1999). 14 It is estimated that private capital flows to the ASEAN-4 plus South Korea went from a net inflow of US$ 93. Papua New Guinea.. 12 Quoted from the Joint Communique of the ASEAN Ministerial Meeting (1991). 28 January. see Cumings (1993) and Woodside (1993). they will probably come from the host of sub-regional trade agreements now being busily negotiated by Japan. the US and the six members of ASEAN).edu/ globalmacro/>. 15 For the most comprehensive set of materials on the financial crisis. p. derived from trade data alone. (1992). and its ideological underpinnings.stern. Hong Kong. 9 For an analysis of this process.BOWLES: ASIA'S POST-CRISIS REGIONALISM 4 The importance of this emergence has also been remarked upon by Fred Bergsten. 17 See Radelet and Sachs (1998). New Zealand. Japan. For example. see Higgott and Stubbs (1995). such as the Free Trade Area of the Americas or an expanded European Union. Taiwan. investments by multinational companies are likely to flow away from our part of the world to the S[ingle] E[uropean] M[arket] and NAFTA'. For an example of this type of analysis. Chile. See MITI (1999: 3). especially in the short-run. 10 APEC's originally had 12 members at its formation in 1989 (Australia. the Asian Development Bank and by other countries. the World Bank. For an analysis of how Krugman's 'crony capitalism' hypothesis emerged and became the dominant explanation of the crisis see MacLean (1999). see Frankel (1991).8 bn in 1996 to a net outflow of US$ 6 bn in 1997. 22. South Korea. 8 For discussion of these characteristics as typical of regionalism during the late 1980s-mid 1990s see Bowles (2000). are not likely to flow from the World Trade Organisation or the proposed mega-regional arrangements. Instead. there has been an intellectual appeal to viewing 251 This content downloaded from 112.The discussion here draws upon MacLean et al. 5 Some of the evidence in favour of the emergence of a regional economy. Singapore. Director of the Institute for International Economics in Washington D. regions were viewed as 'natural'. Quoted in the Straits Times. writing from a different perspective. 16 The financial package put together involved loans made by the IMF.142. For a critique of this approach see Bowles and MacLean (1996b). for example. 18 See Krugman (1998). Virtually unnoticed by the rest of the world. who. see the website put together by N.C. Canada. 11 This discussion of AFTA's origins draws on Bowles (1997). Since then China.204.nyu. Singapore and other countries in East Asia.87 on Wed. In general.

McNally (1998). Zhongguo Tongxun She. when Presidents Bill Clinton and Jiang Zemin took the extraordinary step of commenting in a bilateral setting on the deficient management of the yen and Japan's economy'. see Hughes (2000). In other contexts. See also Gill (1999) who argues that 'the Asian crisis has been a means for the United States to strengthen its strategic interests worldwide'. Hong Kong. Long Yongtu. See. Currency Will Not Be Devalued'. for example.. As Hughes (2000: 233) notes. Federal Reserve Chairman Alan Greenspan's (1998) comments. Renmin Ribao. Ta Kung Pao. For discussion of Japan's role in the crisis. 8 January (1999) as in FBIS-CHI-99-008. 'Japan's sense of humiliation was . 29 April (2000). that there might be differences between those countries in Southeast Asia and that of South Korea in North Asia. 2 Oct 2013 21:05:20 PM All use subject to JSTOR Terms and Conditions . The social and political risks attached to a devaluation were acknowledged by Li Ruihuan. Hong Kong. 252 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 This content downloaded from 112. Nihon KeizaiShimbun. For a country specific analysis of South Korea see. See Ferguson (2000) for a useful compilation of statistics on the financial crisis in Asia and on the relative magnitudes of the crises in Asia and Latin America.REVIEW OF INTERNATIONAL POLITICAL ECONOMY the Asian crisis as caused by a single dominant factor. 4 November (1998). See 'China's Policy on Asian Financial Crisis .. on the grounds that this is most relevant for analysing the regional arrangements discussed below. Japan now supports a 'region of financial stabilisation' and that 'the appointment of Japanese officials in Thailand and Vietnam are the first moves to establishing the knowledge network that will be required for this scheme to mature into an IMF equivalent'. See Bergsten (2000a) and Dieter (2000). The analysis is restricted here to state-level responses to the crisis. This raises the interesting possibility that any such Northeast Asia bloc could eventually join up with AFTA thereby creating a full East Asia bloc. As an example of such triumph see. based on his/her interviews with Japanese officials at the Ministry of Finance. A referee has contributed that. Wen Wei Po. Hong Kong. See 'CRI Interview With Long Yongtu on WTO'. See.Interviewing Dai Xianglong. for example. 3 June 1998 as in FBIS-CHI-98-154. For discussion of working-class responses see. See 'IMF to send Finance Advisors to SE Asian Nations'. This overlooks the fact that crises may have different causes in different countries and. For opposition to the AMF see Noland (2000). 27 January (1999) as in FBIS-CHI-99-027..87 on Wed. Governor of the People's Bank of China'. 29 July (1998) as in FBIS-CHI-98-225. as seen by both Japan and other countries. See 'Japan Should Shoulder the Responsibility of a Major Power'. Nihon Keizai Shimbun. as in FBIS-CHI-98-313. other levels of response might be more appropriate to analyse. 2 July (2000). Haggard and Mo (2000). 'E Asia Nations to Agree to Swap Currency Reserves'.. See 'Beijing: Stability is First Priority.204. for example. in particular. The position of Taiwan does. I am grateful to the referee for passing on this information. however. compounded during the US-China summit . a member of the CPC's Central Committee Political Bureau. for example. See 'Article on Sino-US Financial Cooperation'. China Radio International. remain ambiguous.142. This expectation was noted in an interview by China's chief WTO negotiator. Wang Dajun (1998).

204. In recent years. Beijing. Wang Mengkui Analyzes Its Pros and Cons. 11 October (1998). Besides." rather than as an "international financial organisation that is helping us". This not only indicates that the United States hopes to maintain the momentum of improvement and development in Sino-US relations. which had been at a crossroads. this was interpreted in the press (Hasegawa. 14 May (2000). the United States has begun to realize that in order to deal with any major problem within the Asian region. I saw many civilians in the ROK donating their gold rings. 40 China's diplomatic efforts also included a framework for long-term cooperation between China and Thailand.87 on Wed. 57 percent gave a dissatisfied response concerning the IMF's ROK-related activities over the last year. ('China's Policy on Asian Financial Crisis . 1999) found that 'over half of the people have a negative view of the IMF. which have produced positive results. Now.Senior Official Zhang Yan on '98 APEC Kuala Lumpur Conference'. an article by Li Zhengxin (1998) argues that 'President Jiang Zemin's successful visit to the United States last year caused Sino-US relations. Saying China Will Not Change All Its US Dollars Into Euro'. namely that while 'structurally' adjusting its Asia strategy.. US President Clinton will also make a visit to China. these were not the same members of the public interviewed one month later by a survey team in South Korea.BOWLES: ASIA'S POST-CRISIS REGIONALISM 37 See 'China Makes Preparations for Introduction of Euro. to make a directional change . 39 China's central bank Governor Dai Xianglong declared in November 1998 that Thailand and South Korea had 'adopted and properly implemented many of the reform measures recommended by the IMF. 1 January (1999).Interviewing Dai Xianglong. contrast the visits of senior Chinese leaders to Japan.) Presumably. In particular.S. p. 38 See 'Subject of Talks Brought About by Financial Crisis . policy as a result of the Asian crisis is also highlighted in Chinese press articles at the time of President Clinton's June 1998 state visit to China. 2000) as indicating that 'China desires cooperation between the two nations in order to survive the century as a major economic power capable of challenging 253 This content downloaded from 112. over half consider it inappropriate and humiliating'. This poll (Chong Chae-yong. When Chinese Premier Premier Zhu Rongji visited in October 2000. the United States is elevating China's status in its Asia-Pacific formula . as in FBIS-CHI98-294. for example perceiving it simply as "an international organization representing the interests of advanced countries. however. 2 Oct 2013 21:05:20 PM All use subject to JSTOR Terms and Conditions . 41 Economic Daily. This is why the conditions in these two countries are turning for the better'. Governor of the People's Bank of China'.. 4 November 1998. Moreover. but also that there is a deeper consideration. eight months later. Ta King Pao.142. Hong Kong.. Concerning our government's diplomacy with the IMF.. The Asian financial crisis has further strengthened this realization of the US government'. 42 As an example of this improvement. In December 1998 President Jiang Zemin's visit was punctuated with the Premier informing his hosts of their need to acknowledge and apologize for their wartime atrocities in China. For example. it is first necessary to have China's understanding and co-operation. In Japan. the first time such a framework had been established with an ASEAN country. See Chongkittavorn (1999). Ta Kung Pao. Shijie Zhishi. as in FBIS-CHI-98-313. the governments' actions have won the understanding and support of the public. 33. this long-standing thorn in the side of improving Sino-Japanese relations was apparently downplayed. The presumed increased importance of China in U.

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