Asia Regionalism:Politics, Institutions and MultilateralismC. Randall HenningInstitute for International Economics and American UniversityPresentation for the Seminar “Thinking Globally, Acting Regionally: Asian Economic Integration,” at the Annual Meetings of the Asian Development Bank, Hyderabad, India, May 4, 2006.
Overview: • Political prerequisites for regional integration in Asia. • Role and importance of institutions. • Relationship between regional and multilateral cooperation.
Aspirations for political integration do not explain European regionalism. • Economic projects received greater support than political projects • Interstate violence became “unthinkable” a long time ago • Enlargement motivated by other factors
Analysis of political motivation should Carefully distinguish between: • ambitions for political union, • desire to avoid security conflict and war, and • political agreement on economic measures and the institutions necessary to implement them. • Example of the creation of the European Monetary System.
Lessons for integration in Asia: • Regional integration cannot take place in the face of interstate violence. • Ambitions for political integration are not necessary. • Political agreements on the economic measures and institutions are necessary. • Good news for East Asia.
Networks versus Institutions: • Network approach to regionalism • CMI demonstrates limits of networks • Networks perform some useful functions for regionalism • But they cannot perform most of the key functions of institutions
Specifically, networks cannot: • Provide information broadly • Monitor compliance of member states with agreements • Define cheating • Approve retaliation • Facilitate issue linkages • Broker agreements among member states • Adjudicate conflicts among networks
Neoliberal institutionalism (Kahler 1995) stresses the importance of • Delegation • Issue linkage • Domestic politics
Lessons for Asia: • Networks alone are not sufficient. • Stronger institutions are also necessary. • Networks and institutions are complementary • Governments should focus on delegation, domestic politics, and Pareto-improving cross-issue bargains. • Secretariat and a “Council”.
Criteria Financial arrangements should be deemed consistent with multilateral arrangements when they: • create no substantial conflict with members’ obligations under the Articles of Agreement; • are at least as transparent as the financial and monetary rules and operations of the IMF; • adopt and apply sound rules of emergency finance; and • lend on sound conditionality.
Procedures and principles Members states should agree: • to report and disclose the details to the IMF. • to submit their arrangements for review bythe Executive Board. • that regional financial facilities shall not undercut IMF conditionality • that regional financial regulation and private-sector involvement must be consistent with stabilization efforts of the IMF.
Soft form: Code of conduct • Hard form: Amendment to the Articles of Agreement
Equitable for ASEAN+3? -- CMI would pass the test, with transparency -- Applies to other regions as well -- Benefits for East Asia a. Simplifies intra-regional bargaining b. Alleviates external suspicions c. Legal cover for sound arrangements.