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Economic Union in Asia: A Partner or Competitor for the European Union?

Por: | 19 de agosto de 2013

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By Marcin Grabowski, Jagiellonian University in Krakow

The Association of Southeast Asian Nations (ASEAN) decided to create an ASEAN Economic Community and the East Asian Summit (EAS; comprising ASEAN countries plus China, India, Australia, New Zealand, Japan, and South Korea) has considered the creation of a Comprehensive Economic Partnership in East Asia (CEPEA). Those developments have raised concerns among some Europeans. A particular concern is whether those two economic communities will present opportunities or threats to the European Union (EU). Others wonder whether those communities will follow the EU’s pattern of development. This article briefly describes the current state of regional economic integration in East Asia and the possibility of problems, from a European perspective, arising from such actions in East Asia.

The EU is an advanced political and economic integration group of 27 countries and forms the largest economic unit in the world with a gross domestic product (GDP) of approximately US$ 15 trillion, followed by the U.S. with a GDP of more than US$ 14 trillion and China with a GDP of more than US$ 11 trillion. European integration started with the Treaty of Rome establishing the European Coal and Steel Community in 1952 and culminated with creation of the EU under the 1993 Treaty of Maastricht. The EU operates as a common market system; that is, it allows free movement of goods, services, capital and labour among members. Among some EU countries, integration has also resulted in a common currency, the Euro. However, the EU has also been a source of difficulty, as some EU members (for example Greece) could not fulfil the EU’s convergence criteria. Regardless, the EU is now a legal entity and has achieved the highest level of economic and political integration in history.

There are several stages by which economic integration can be classified. Under the economic integration theory of economist Bela Balassa, the stages of economic integration include: free trade areas in which there are no internal trade barriers; customs union in which there is a common external tariff; common market in which there is free flow of goods, services, capital and labour; monetary union in which there is a common currency and unified monetary policies; and economic union in which there is full harmonization of economic policies. Another aspect of economic integration is related to the “optimum currency area” theory of Robert Mundell, who noticed that countries that join a monetary union lose their monetary policy tools, but, as a result, those countries can operate in a harmonized economic environment. Regardless, as recently seen in the EU, economic harmony has its difficulties and creation of a common, unified response may not be possible when countries do not agree on economic policies. Thus, integration is still a problem within the EU — will there be such an issue in East Asia?

East Asia encompasses several overlapping and potentially competing organizations that can be characterised by a variety of economic and political aspects. For example, ASEAN, created in 1967 as a response to communist influences in the Southeast Asia. There were five Southeast Asian countries at ASEAN formation; currently all Southeast Asian countries but Timor Leste are members. ASEAN expanded in the 1990s and initiated closer economic cooperation, finally deciding in 2003 to create an ASEAN Economic Community. The current ASEAN total GDP is approximately US$ 2.6 trillion, well below that of the EU (US$ 15 trillion). The ASEAN Economic Community is at an integration stage that is between a customs union and a common market. ASEAN has expressed its willingness to cooperate with Europe by modelling itself on the European form of economic integration. Based on such willingness, the EU should use this opportunity to cooperate with ASEAN, as the success of ASEAN will be beneficial for Asian stability, which, in turn will produce economic opportunities for the EU.

The EAS is a trade-related forum held annually since 2005 among 18 countries. The joint GDP of the current 18 current members is approximately US$ 42 trillion, significantly greater than that of the EU. On that basis, the EU may react anxiously. However, such a large economic structure can increase the stability of the East Asian region. Moreover, the creation of CEPEA, although still not past the concept stage, would be helpful if it helps the formation of an economic relationship with the EU. Such a relationship would help balance the EU’s economic influence in the East Asia region with that of the US. The achievement of a high level of economic integration within East Asia may be difficult, but there are suggestions (including one promoting a common currency) that such a higher stage can be reached.

Although the EU is unique, the development of similar unions among Asian countries that are modelled on the EU, should be treated as a positive opportunity for the EU — positive, as it would result in a more competitive world economy and an increase in economic development in Europe. Moreover, unifying Asian countries and their economies is an opportunity for Europe because it increases regional stability and permits the development of additional socio-economic partnerships. The United States is currently taking advantage of these positive opportunities (evidenced by the US joining the EAS in 2011). To enhance the integration of the EU into the world’s economy, the EU should alter its Asian policy so that the EU also takes advantage of these opportunities. Only then will the EU not be seen as afraid of a strong, unified Asia; instead, they will benefit from it.


Marcin Grabowski
Jagiellonian University in Krakow

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