East Asian EconomicIntegration StrategyEast Asian EconomicIntegration Strategy

April 2008April 2008

Kyung Tae LEEKyung Tae LEE

1

EU ASEAN N. E. Asia NAFTA

1952 2005 1985200

51991 2005 1994 2005

FunctionalIntegration

1.67 5.0 1.33 2.0 1.33 2.33 2.67 3.00

Socio-culture 2.33 5.0 2.33 3.67 2.0 3.67 3.67 4.33

Political-Security

4.67 4.33 3.33 3.67 1.33 2.33 4.0 3.0

Institutional 2.67 5.0 2.0 3.0 1.0 2.0 2.33 2.67

SUMAvg.

2.84 4.83 2.25 3.09 1.42 2.58 3.17 3.25

Comparison of the Regional IntegrationRegional Integration IndexComparison of the Regional IntegrationRegional Integration Index

Souce: “Political-Economy APPROACH TO North-East Asian Integration“ KIEP, 2008.

2

Comparison of the Regional IntegrationComparison of the Regional Integration

• N. E. Asia and ASEAN lag behind EU and NAFTA in overall integration

N. E. Asia is a bottom laggard, particularly in political-security dimension

But both N. E. Asia and ASEAN moves faster than NAFTA

• N. E. Asian economic integration is driven by market-oriented trade and investment

• N. E. Asia falls four behind in institutionalizing the integration process

3

N. E. Asia : Stumbling block → Building BlockN. E. Asia : Stumbling block → Building Block

• Institutionalize Free Trade & Investment

Japan-China FTA is a Stumbling block

Use Korea – Japan, Korea – China FTA as building blocks

K–J FTA, K–C FTA negotiation is likely to start in 2009

Japanese reaction is of our interest

• Upcoming 1st C-J-K Summit meeting needs to discuss C-J-K FTA

Upgrade ongoing trilateral joint studies to include government officials

4

AFTA and NEAFTA Leads to EAFTAAFTA and NEAFTA Leads to EAFTA

• ASEAN and N. E. Asia share the Driver’s Seat

N. E. Asia with 90% of total east Asia GDP should assume the of co-drivers

Provide stronger impetus to add momentum for accelerated move towards EAFTA

5

Three pillars of Integration : Simultaneous DriveThree pillars of Integration : Simultaneous Drive

• FTA, Monetary Cooperation, Sectoral Cooperation

These three pillars work together to build trust for real gains of the integration

Multilateralize CMI → Asian Monetary Fund ↑ Regional Surveillance

Develop regional capital market (ABZ) → de-dollarize FX transactions → Foreign Exchange rate stability

Develop regional capital market (ABZ) → de-dollarize FX transactions → Foreign Exchange rate stability

6

Three Pillars of Integration : Simultaneous DriveThree Pillars of Integration : Simultaneous Drive

• Multilateralize development assistance → East Asian Marshall Plan

• Substantiate energy and environmental cooperation talk-shop into tangible cooperative scheme

• Region-wide and harmonious efforts for behind-border barriers elimination

7

Open RegionalismOpen Regionalism

• Aim at comprehensive and higher-level liberalization

Go beyond the existing bilateral FTAs in the region

• Continue to have FTAs with countries outside the region

• Building block for FTAAP

8

Path-Finder ApproachPath-Finder Approach

• All of the ASEAN?

ASEAN plus three?

ASEAN plus six?

• Economic gains : the more the numbers,

the greater the gains

• Feasibility : Path-finder approach is more desirable

• Political games : No optimum solution, Just discard it

Thank you!Thank you!

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