Who Benefits From Regional Economic Integration?: The Case of ASEAN

Who Benefits From Regional Economic Integration?: The Case of ASEAN

Ina Kayser (IST University of Applied Sciences, Germany)
Copyright: © 2018 |Pages: 19
DOI: 10.4018/978-1-5225-4032-8.ch005

Abstract

This chapter analyses ASEAN as an example of regional economic integration throughout the decades. ASEAN was founded as a means of stability in a region with great threats to regional security. Its member states could hardly vary more in terms of economic impact, political systems, and culture. Nonetheless, ASEAN became one of the most vibrant economic regions in the world following its own ASEAN Way. This chapter analyzes the shift from a security-focused functional community toward a successful economic cooperation. Since its formation, ASEAN's development was driven by its rhetorical strength rather than the actual implementation of measures. Nonetheless, as of today, ASEAN managed to partly overcome this rhetoric dilemma, becoming the third largest market worldwide.
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Background

The discussion on regional economic integration is well established in economic literature and does not provide a distinct meaning of the concept of integration, reaching from dimensions of social integration to international cooperation and trade integration (Balassa, 1961). Balassa (1961; 2011) provides a framework to cluster the stages of economic integration which is well established in academic literature. He proposes a differentiation in free trade area, customs union, common market, economic union, monetary union, fiscal union, and the hitherto non-existent complete economic integration. A free trade area removed tariffs and quotas internally and has national tariffs retained against other countries. An example is NAFTA. A customs union additionally has common external tariffs such as Mercosur. In a common market, a free movement of production factors, goods and services is possible. An example is the EU before the European Monetary Union came into place. The economic union aims at the harmonization of some national policies and transfers decision making for some national policies to a supranational level, such as the competition policy in the EU. A monetary union has a single common currency as well as a single central bank (as the European Central Bank in the EU). Moreover, a fiscal union aims at harmonizing taxes, which is the case to some degree in the EU as well. Finally, a political union has an entire democratic body at supranational level. This form of regional integration is not existent to this date. Contrastingly, Tinbergen (1954) merely postulates the distinction between positive and negative integration. Thereby, positive integration promotes common policies and economic institutions to actively enable integration whereas negative integration aims at reducing trade barriers and thus passively strengthening integration. Given that increased economic integration most likely will imply both positive and negative integration, Balassa’s view delivers a more detailed approach to cluster certain stages of integration and is therefore the basis of this research.

After the growing influence of communism in Vietnam in the late 1950s and the fading power of the Southeast Asia Treaty Organization (SEATO) (Goodman, 1996), some of the relatively young East Asian countries were in fear of their recently obtained independence. The absence of a regional power comparable to the People’s Republic of China (PRC) or Japan and the regional location between the Soviet Union and the United States (US) as global superpowers triggered the wish for regional unity and stability. The leading motivation of the founding nations of ASEAN was to form a unitary voice that would be heard and recognized internationally. The urge to achieve collective strength pushed the focus on regional differences in the background.

The issues of individual vulnerability and the potential for regional states to lose their only recently gained sovereignty were emphasized by the spread of internal communist uprisings that made the shift of Vietnam into the system of the Soviet Union even more intimidating for the smaller South East Asian states.

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