ASEAN lies at the core of the new East Asian arrangements and has provided them with their template. Although South-East Asia has always been the poor relation in the region (in 1999, for example, the GDP of the North- East Asian economy was more than nine times that of ASEAN), [887] it would have been impossible for North-East Asia to have played the same role because the latter remains too divided, riven by the animosity between Japan and China, and to a lesser extent that between South Korea and Japan, as well as distracted by the disputes over Taiwan and the Korean Peninsula. As a result there is nothing like ASEAN in North-East Asia: such formal multilateral arrangements are almost completely absent. An important consequence of these various developments has been the effective exclusion of the United States from economic diplomacy in the region. This has never been China ’s stated aim, [888] but, intended or otherwise, it is what has happened in practice. The centrality that APEC enjoyed in the mid nineties, and in which the US was a key player, [889] now seems a distant memory. The marginalization of the US is also manifest in the Chiang Mai Initiative, first agreed in 2000 on the proposal of the Chinese, [890] which involves bilateral currency swap arrangements between the ASEAN countries, China, Japan and South Korea, thereby enabling East Asian countries to support a regional currency that finds itself under attack. The agreement was a direct product of the Japanese proposal for an Asian Monetary Fund during the Asian financial crisis, [891] which was strongly opposed at the time by both the United States (on the grounds that it would undermine the IMF) and China (because it came from Japan). China has since swallowed its opposition – no doubt in large part due to the strengthening position of the renminbi – while the United States, weakened by the IMF debacle in the Asian financial crisis, has not resisted. [892]
If ASEAN has provided the canvas, it is the diplomatic involvement and initiative of China that has actually redrawn the East Asian landscape. In effect, China has been searching out ways in which it might emerge as the regional leader. [893] Underpinning its growing influence has been the transformation in its economic power. This has been the real driver of change in East Asia, the force that is reconfiguring the region. Unlike the European Union, where economic integration followed politics, in East Asia economics has been the dynamo of change, with political change following in its wake. [894] In North-East Asia, intra-regional trade – even in the absence of formally binding agreements – now accounts for 52 per cent of the total trade of the five economies (China, Japan, Taiwan and the two Koreas), a situation that has been achieved in little more than a decade; the equivalent figure for the European Union is 60 per cent, which it took half a century to reach. [895] Between 1991 and 2001, world trade increased by 177 per cent, whereas intra-regional trade in East Asia, despite the Asian financial crisis, increased by a staggering 304 per cent. By far the most important reason has been the growth of China, whose share in intra-regional trade almost doubled between 1990 and 2002. [896] With the emergence of the first Asian tigers in the early sixties, followed by the later examples, including China itself, the East Asian economy used to be seen in terms of ‘flying geese’, with Japan in the lead and the others flying in formation behind. [897] But with China ’s economic rise during the 1990s, Japan ’s role as the most important economy in the region is rapidly being challenged by China. Between 1980 and 2002, while China’s share of East Asian exports increased from 6 per cent to 25 per cent, Japan’s fell from 50 per cent to below 30 per cent; similarly, while China’s share of East Asian imports over the same period increased from 8 per cent to 21 per cent, Japan’s fell from 48 per cent to 27 per cent. [898] Even at the peak of its economic power, Japan’s role was always limited by the fact that it steadfastly refused to open up its economy to exports from its neighbours (other than those from its own foreign subsidiaries) – or, indeed, to the rest of the world – so its influence was largely exercised by a combination of its own foreign direct investment in Japanese overseas subsidiaries, imports from those Japanese subsidiaries and Japanese exports to the region. In contrast China ’s influence, because it has chosen to have an extremely open economy, is far more multifarious – as a market for the products of the region, as an exporter and as a multifaceted investor.
Figure 24. Growing importance of Chinese market.
